Spring Cleaning for Your Finances
by SGL Financial
Our 2 Cents – Episode #130
Spring Cleaning for Your Finances
It’s the first week of March and we have spring fever on the Our 2 Cents podcast! Today, Steve and Gabriel are sharing some spring cleaning tips for your finances and diving a bit deeper into asset allocation. Plus, we have a couple other fun segments on the show, too!
- Gabriel’s Quote Picks of the Month:
- “The best way to teach kids about taxes is by eating 30% of their ice cream” – Bill Murray
- “The world is divided into two groups—the people who do things and the people who get the credit” – Dwight Morrow
- Spring Cleaning for Your Finances:
- Budget and cash flow review
- Consolidate financial accounts
- Review asset allocation to ensure alignment
- Organize insurances
- Reupdate your overall financial plan
- A Bit More on Asset Allocation:
- “Vanguard Sees Global Equities Trouncing U.S. Stocks Over Next Decade”
- An overview of these capital market assumptions and forward looking projections
- This prediction would mean a major shift in where growth will be coming from
- Why all this makes diversification so important
- Getting to Know Steve and Gabriel:
- Would you rather have a personal maid or a personal chef?
- What’s the worst haircut you’ve ever had?
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Podcast Transcript
Announcer: You are listening to Our 2 Cents, with the team from SGL Financial building wealth for life. Steve Lewit is the president of SGL Financial, and Gabriel Lewit is the CEO. They’re here to discuss all the latest in financial news trends, strategies, and more.
Gabriel Lewit: Good morning, good morning and welcome to March.
Steve Lewit: Yeah, it is March, right?
Gabriel Lewit: Yes, it is.
Steve Lewit: I thought today was February 29th.
Gabriel Lewit: All week long I’ve been adding dates to various tasks and things and follow up trackers and stuff that I use, and I kept doing 2-29 for like a call update. And it would throw all these errors in Excel, and I’m like, “What is going on here?” Oh, yeah. Oh, yeah. We have only 28 days in February, this year at least. So, yeah. So welcome to March, welcome to the show. This is Gabriel and Steve here with you from the studio.
Steve Lewit: From the studio at the office.
Gabriel Lewit: At the office, yes. And we do have a great view of a nice sunny day, believe it or not.
Steve Lewit: Yeah, 50 degrees. I’m excited about spring coming.
Gabriel Lewit: Actually, I have the great view. You have the view through the reflection of the glass.
Steve Lewit: Yeah, I can see it. I can see it.
Gabriel Lewit: You can see it, which is good.
Steve Lewit: Yeah.
Gabriel Lewit: But we hope you’re doing great, and we’ve got a good show lined up for you. So thanks for joining us. We’re going to go ahead and kick into gear here for you. So today we’re going to talk about a handful of different topics. Last couple episodes we did a little deeper dive into Monte Carlo, income planning, a handful of other unique topics there. So if you haven’t listened to those for any reason, make sure you go back and check them out. But we thought we would do a little bit of, again, a scattering here of different topics just to make today’s show a little bit more interesting.
Steve Lewit: Sounds good to me.
Gabriel Lewit: All right.
Steve Lewit: So, take us away.
Gabriel Lewit: Well, I know you know they are already too, so don’t spoil the thunder.
Steve Lewit: I will not say a word. It’s all yours.
Gabriel Lewit: We’re going to start off today with two quotes, just for a little bit of fun. I thought these quotes were interesting. Sometimes when I look up quotes, I think that there’re some good ones, some great ones, and some not so good ones. So I’ve got some fun ones here for you today. So this one’s from, you’ll know him, Bill Murray.
Steve Lewit: I like Bill Murray.
Gabriel Lewit: Groundhog Day?
Steve Lewit: Groundhog Day.
Gabriel Lewit: That’s what everybody knows him for.
Steve Lewit: One of my favorite pictures.
Gabriel Lewit: All right. He says his quote here, and it is financially related, so hang tight. “The best way to teach kids about taxes is by eating 30% of their ice cream.”
Steve Lewit: I love it. Yeah, or more. How about 50% of the ice cream?
Gabriel Lewit: Maybe 35% for federal and 5% more of the ice cream for state.
Steve Lewit: Yeah. And if you do that every year and just keep taking a bigger bite out every year.
Gabriel Lewit: I do that. Yes, every night when my kids have their dessert, I say, “I’m taking 30% for taxes.”
Steve Lewit: Right. Thanks, dad.
Gabriel Lewit: I just thought that was a good one.
Steve Lewit: Yep.
Gabriel Lewit: Okay. And then the second one I got for you today is, “The world is divided into two groups, the people who do things and the people who get the credit.”
Steve Lewit: Isn’t that amazing though?
Gabriel Lewit: Dwight Morrow. I’m not sure who Dwight Morrow is. It said he was an American businessman, but I thought those were two fun ones just to kick off our show here for you today, a chuckle.
Steve Lewit: Yeah. Well, that especially in politics, it’s like an old president could inherit a great economy that all of a sudden takes off and the new president gets all the credit, while all the work was done by the guy before him and stuff like that.
Gabriel Lewit: Oh, you’re trying to go into politics?
Steve Lewit: No, no, no.
Gabriel Lewit: I see what you’re doing.
Steve Lewit: No, no, no.
Gabriel Lewit: No, let’s not do that.
Steve Lewit: It’s just how credit gets pushed off to different people that may not necessarily have anything to do with what’s going on.
Gabriel Lewit: Yeah. And these shows that we produce, I mean, I put together these fantastic agendas. Producer Katie, definitely… I’m kidding. Producer Katie does a lot of work.
Steve Lewit: Hold on, hold on. Wait a second. This is more important. Did you notice the color of Producer Katie’s nails today?
Gabriel Lewit: I didn’t, but I can see them now. They’re bright pink.
Steve Lewit: Bright pink. She is headed to Mexico.
Gabriel Lewit: Oh, very nice.
Steve Lewit: So, she’s wearing Mexico-ish colors.
Gabriel Lewit: Actually, I really try not to take, I really make that a goal of mine because you see all the movies where the boss takes all the credit for the stuff that the other people doing the hard work does. And so I want to give Producer Katie big props here. She does a great job setting up and organizing the show here for us.
Steve Lewit: Absolutely. Thank you, Kate.
Gabriel Lewit: All right. Okay. So I thought we would start off today in the spirit of March 1 with a little bit of financial spring-cleaning.
Steve Lewit: I knew you were going to go there.
Gabriel Lewit: You knew it, y’all on the show probably knew it.
Steve Lewit: Yeah.
Gabriel Lewit: And it’s the time of the year to, well, my closet and my garage.
Steve Lewit: How about your garage? Yeah.
Gabriel Lewit: Both need extensive amounts of spring-cleaning. I’ve got a lot of old clothes that don’t fit me anymore, I’ve got to really chuck them out to the, not the recycle bin, but the clothes recycle bins you see all around where you donate the clothes.
Steve Lewit: And tell us why they don’t fit you.
Gabriel Lewit: Well, you know, because I’ve been very-
Steve Lewit: Because you’re a daddy. That’s why.
Gabriel Lewit: I’ve been very active and fit over the wintertime, right?
Steve Lewit: Yes.
Gabriel Lewit: That’s exactly why.
Steve Lewit: Especially the holiday season.
Gabriel Lewit: Yes. Okay. So let’s talk a little bit about financial spring-cleaning. So it’s the time of the year when if you haven’t, it’s a good time to take a look at a wide range of things related to your financial plan, setting yourself up for a great year ahead. And it’s also similar to your home, it’s a little bit of maintenance. If you leave your home unmaintained and just never get to it, it just gets dirtier and dirtier or more and more cluttered and less and less the way you want it to be. And your financial plan is very similar to that or your retirement plan. And so what we always recommend is a handful of things that you take a look at the start of the year and basically if you do these, you’re going to be in much better shape.
Steve Lewit: And you’ll have cleaner closets or cleaner financial account, financial? I don’t know how to make a good analogy here.
Gabriel Lewit: Well, you will have what I was saying, a better financial plan.
Steve Lewit: Okay, good.
Gabriel Lewit: Okay. All right. So one of the first things that you want to take a look at is one of my favorite things to talk about and other people’s least favorite things to talk about, which is budgeting. Okay. So dad, what would you recommend for updating your budget at the start of the year?
Steve Lewit: Yeah, what I do, Gabriel, is I go through my budget, but what I mostly do is I look for a lot of expenses that I don’t know that I have. So when I go through my credit cards and all of a sudden I’ll see a recurring expense for something I signed up for, a subscription, and I might have 200 bucks a month in subscriptions that I don’t know about.
Gabriel Lewit: Whoa.
Steve Lewit: And it’s like, “Where did they come from?”
Gabriel Lewit: “Where do they come from?” That’s a lot of subscriptions.
Steve Lewit: Well, like this year already, which I’ve looked at, I had a music subscription that I never used, which was 10 bucks a month. Then I had a subscription to two newspapers that were four bucks a month each that I never use. And what happens for me is I see stuff that I’m interested in, and then you get on the page and it says, “To read the rest of this page, you must subscribe for $4 a week,” or something like that.
Gabriel Lewit: The paywall.
Steve Lewit: The paywall. And I subscribe and then I forget to unsubscribe.
Gabriel Lewit: Yeah. That’s what they want, by the way.
Steve Lewit: Exactly, exactly.
Gabriel Lewit: And then even if you want to unsubscribe, they hide the unsubscribe button. You can’t even find it.
Steve Lewit: You can’t find it. And then when you get to the page, it says, then you got to go through, “Do you really want to unsubscribe?”
Gabriel Lewit: I had one where I finally found the unsubscribe link, and then I went to the page and it said, “To unsubscribe, you must call this number.”
Steve Lewit: Yeah, right. Give me a break.
Gabriel Lewit: So, I thought that was kind of funny.
Steve Lewit: The worst is The New York Times. I tried to, I’m telling you, I could not unsubscribe from The New York Times because that’s exactly what they did, because I had two different email addresses and I went and you got to call the number. You call the number, you can’t get a person, so you cannot unsubscribe from the darn thing.
Gabriel Lewit: Click here to unsubscribe on the website, which says, call the phone number. You call the phone number, nobody answers. It’s great.
Steve Lewit: It’s great, I love it.
Gabriel Lewit: Good business model, right?
Steve Lewit: That’s America.
Gabriel Lewit: All right. So why is the budget so important? Well, I harp on this a lot. The budget in your cash flow is the foundation of your plan. In other words, if you are spending, let’s say in your plan that you did last year, it says you’re spending $90,000 this year, especially if you’re in retirement and we’re planning your income base around this. And then the reality is, let’s say you’re spending $97,000 this year, but you don’t know it. So your budget that we’re using in your plan is 90, you’re really spending 97. The $7,000 difference times another 20, 25 years of retirement could be a huge swing in asset difference, right?
Steve Lewit: Absolutely, yeah.
Gabriel Lewit: So, it’s really important that whatever we use to project your plan, we’ve got a good confidence meter on that, that it feels really accurate. And unfortunately, the only way to do that is continually re-reviewing your budget from time to time. It doesn’t have to be every year, but it should be generally, I like to say every year in the spring as part of your financial spring-cleaning.
Steve Lewit: What I’m finding, Gabriel, is a lot of folks that we’ve planned for actually are not spending. When they actually add up their numbers, they’re saying, “Hey, I planned for 90 and I’m spending 75.”
Gabriel Lewit: That happens as well. And you know what comes from that? You actually can feel better knowing that you can spend more money.
Steve Lewit: Right, so-
Gabriel Lewit: Because you might think you’re spending more than you are, so you don’t do something else or buy this or go on this trip.
Steve Lewit: Exactly.
Gabriel Lewit: And then you come to learn that you’re actually spending less. So sometimes, anyway you slice it, a good comes out of this, even though I say the budget word and people look at me with like dread in their eyes.
Steve Lewit: It is, it’s a drudge. It’s a drudge sitting there for two hours and going through every line of your credit card and your bank statements.
Gabriel Lewit: I love it. It’s like my favorite thing to do.
Steve Lewit: That’s not your favorite thing to do.
Gabriel Lewit: Well, I do like a good glass of wine.
Steve Lewit: Yeah, you cannot convince me.
Gabriel Lewit: But I will put the glass of wine next to me while I’m doing the budgeting and it makes it a double win.
Steve Lewit: No, you cannot convince me or anyone listening in that this is one of your favorite things to do on any list.
Gabriel Lewit: I really enjoy it. I don’t know, I’m weird that way.
Steve Lewit: This is not my son.
Gabriel Lewit: Okay, let’s move on. Next item, how about consolidating financial accounts?
Steve Lewit: This guy’s an alien.
Gabriel Lewit: So, let’s say you’ve had a few little rinky-dinky accounts here and there over the last year. Who knows? You switched a job, you have this old one, you had this old IRA over there that’s not doing great. You’ve got your main one over here, you’ve got another one over there. It could be a good time for you to potentially consolidate these things together and reassess, while you’re doing that, you know what you’re invested in and make sure you’ve got that cleaned up and organized.
Steve Lewit: Yeah. How many people, Gabriel, do we meet that have 18 different bank accounts with different CDs?
Gabriel Lewit: My record is 24 different accounts, like 12 little IRAs and non-qualified.
Steve Lewit: Whoa. They gave me-
Gabriel Lewit: $10,000 here, $5,000 here, $30,000 there, $14,000.
Steve Lewit: Well, they gave me $50 to open the account.
Gabriel Lewit: I don’t know, yeah.
Steve Lewit: Give me $100.
Gabriel Lewit: All over the place.
Steve Lewit: All over the place.
Gabriel Lewit: But yeah, starting to pull those together, simplify. The question is really, what’s the point of having that many different accounts? Is it really worth the hassle of tracking all them? Not to mention the tax forms, guys.
Steve Lewit: Oh yeah. Right.
Gabriel Lewit: Many different accounts. I hate logging into different companies for tax forms, so the fewer that I have, the better. One of the advantages of consolidating and cleaning those up.
Steve Lewit: I like that one.
Gabriel Lewit: So that’s another good one for you.
Steve Lewit: It’s on the top of my enjoyment list.
Gabriel Lewit: Yeah, I’m sure it is. Okay.
Steve Lewit: With a glass of wine.
Gabriel Lewit: I think you’re making fun of me here.
Steve Lewit: Would I do that?
Gabriel Lewit: Yeah. So the next one is related, but then once you’ve consolidated those, or either way, looking at your asset allocation, now we do this of course for you if you’re a client of ours, but if you’re not a client of ours, your asset allocation can shift out of allocation, especially after years, like last year.
Steve Lewit: Oh, this is a big deal.
Gabriel Lewit: Yeah, you want to talk about that?
Steve Lewit: Well, if you look at the data, the data is always changing, so your asset allocation kind of has to understand that. Not that you’re trying to outguess the market, but I’ll give you an example. It’s projected now that international and small emerging markets will outperform the US over the next 10 years. I mean, that’s all over the place.
Gabriel Lewit: Yeah. And folks, we’re going to get into that actually as the second part of our show here in just a minute.
Steve Lewit: Oh, are we? I didn’t realize that. So did I blow it?
Gabriel Lewit: No, that’s totally fine, because that’s part of asset allocation.
Steve Lewit: Yeah. So you have to look at that kind of stuff because if you’re heavily in US growth and international is where the action is, you’re behind the game.
Gabriel Lewit: Well, even without thinking of new asset classes, which we’ll get into. If you have a certain, let’s say you had 50% stocks and 50% bonds last year in your portfolio, stocks went down more than bonds, bonds also went down, your portfolio may no longer look like a 50/50
Steve Lewit: Too much bond. Now you got a 40/60.
Gabriel Lewit: Well, it’s out of allocation because sometimes people know how to rebalance on their own, sometimes it’s done automatically, but a lot of times people don’t. And then their portfolio gets out of alignment, and then you want to do something called rebalancing. So that’s another thing to take a look at here as you’re going through your spring-cleaning checklist.
Steve Lewit: And folks, that’s called portfolio drift.
Gabriel Lewit: Drift, yes.
Steve Lewit: Where your portfolio starts one way and little by little it morphs into a different portfolio, more aggressive or more conservative than you really want it to be.
Gabriel Lewit: Yeah, exactly. Okay. Another one here is I like to think of it as organizing all your insurances.
Steve Lewit: Oh, I love that word. You are doing such exciting things for our clients.
Gabriel Lewit: Oh, gosh.
Steve Lewit: They’re so excited.
Gabriel Lewit: Well, let me ask you-
Steve Lewit: I can feel their enthusiasm coming through right now. Wow.
Gabriel Lewit: Let me ask you this. Do you get excited organizing your closet?
Steve Lewit: I actually do.
Gabriel Lewit: Oh, please.
Steve Lewit: I got all my shirts like by color.
Gabriel Lewit: So that’s how I feel about, I got all my categories, my financial categories by category.
Steve Lewit: Yeah, but it’s not top on my enjoyment list. I guess it feels good, but it’s not like, “Hey, I can’t wait to go home and do that.”
Gabriel Lewit: Do you enjoy cleaning out your garage?
Steve Lewit: I do. I can’t wait for someone to come and help me.
Gabriel Lewit: Your son in college, you mean your younger son in college?
Steve Lewit: Nobody’s coming to help.
Gabriel Lewit: Yeah. I think you’re implying me to come help you organize.
Steve Lewit: Oh God.
Gabriel Lewit: So yeah. I mean, I would agree with you. Those things aren’t on anybody’s-
Steve Lewit: But they’re important.
Gabriel Lewit: They’re important, yeah. And same with your financial plan. Folks, we get it. You don’t want to sit down on your Saturday here and organize your insurance. I don’t think you do, at least.
Steve Lewit: You don’t, but you have to.
Gabriel Lewit: But it’s good, right? And I’m going to throw another one on here. You mentioned subscriptions, but I’m going to put on things like your Comcast bill, because this is on my list to do because they keep raising. I don’t know what it is. I swear on my soul here. Like six, seven months ago I signed up, it was $95 a month, and my last two bills have been $180. And I get a message that says, “Your data’s slightly over.” $100 a month over? Come on. What is this stuff?
Steve Lewit: Yeah, electric bills I do not understand because all of a sudden, it’ll double.
Gabriel Lewit: Well, that’s energy costs right now.
Steve Lewit: And it might be because someone came to your house and read your meter or something like that? I don’t know.
Gabriel Lewit: Well, so you want to take a look at all these things, insurance costs or as you go through, we talk about, if you think haven’t done it in a while, it’s good to call up all the other insurance companies and pit them against each other because that’s their game. They raise rates and then they have new intro rates. And unfortunately you got to know how to play that game, keep your bills down, and yeah.
Steve Lewit: And it’s time-consuming and we want to go out and do other stuff. But by doing all the spring-cleaning, you’re talking about little bits of money every month, maybe $100, $200 a month, or you’re talking about over the long term, hundreds of thousands of dollars that should be in your pocket, that isn’t because you didn’t pay attention to it.
Gabriel Lewit: Yeah. And the last but not least spring-cleaning item we’re going to cover here today, because there arguably are more, but these are the big ones, is just reorganizing your overall financial plan.
Steve Lewit: Yes.
Gabriel Lewit: Which many of these other things we talked about flow into your asset allocations, your accounts, your budget is of course a huge one. And then taking that time to re-update your financial plan and your projections, what we call a plan tracker. So it’s kind of like your GPS signal. When you look at a map, you get that little dot that shows you where you are, people like that.
Steve Lewit: But it also shows you where the traffic jam is up ahead.
Gabriel Lewit: Yeah, but when you’re in a mall, it shows you the big dot. When you look at the map, you are here.
Steve Lewit: Oh yeah, you are here. Right.
Gabriel Lewit: People like that. That map without the You Are Here button is not very helpful. And so when you look at your plan, it’s exactly what it does. It shows you, “You are here and here’s where you’re going, and here’s the risks, the traffic jams along the way.” So that’s the benefit you’re trying to get out of here is a real time understanding of where you are as of this year. And the spring-cleaning time is a great time to do it.
Steve Lewit: Exactly. Yes, indeed. Well said.
Gabriel Lewit: So, if we can help you with that, of course, that’s part of what we do for you. As an SGL Financial client, we’re going to help guide you through those things and keep you on point there. But if we can’t help you and you’re not a client yet, you’re interested in working together, of course, give us a call at (847) 499-3330, and we’d love to talk with you.
Steve Lewit: We would.
Gabriel Lewit: All right. So what I want to talk about next is what you were talking about just a little bit ago, which is asset allocation. So some new data’s come out recently, folks, from Vanguard. And Vanguard’s, not alone, but many companies do this. They put out something called a capital market assumption. Very fancy name. And basically, what it is, is it tells you various asset classes, and as of the current economic environment, what does their research team believe that those asset classes will do over the next typically 10-year period?
Steve Lewit: Yeah. So all good money managers have historical returns, Gabriel, and then they have forward-looking returns. So for example, the S&P historically is 10%, let’s say. But forward-looking, I think the estimate is about six, six and a half.
Gabriel Lewit: Well, so historical meaning over like 70, 80, 90 years, whatever timeframe you’re using.
Steve Lewit: Yeah.
Gabriel Lewit: The forward-looking’s are not that far, it’s typically 10.
Steve Lewit: 10 years. Correct.
Gabriel Lewit: And so, it’s important if you’re out there realizing that the next 10 years may be very different than the last 70 years from an expected return perspective.
Steve Lewit: So, I was sitting with a client, it might have been yesterday, boy, it seems like a long time ago.
Gabriel Lewit: Busy day?
Steve Lewit: Oh my gosh. It seems like a long time ago. It might have been yesterday. And he had bought, this was a potential client, and he had purchased a S&P index. And I said, “What do you expect that to give you over time?” And he said, “9.5%.” He says, “That’s what is done historically.” So we talked-
Gabriel Lewit: Yeah. And he’s not wrong, 9.5%, 10%, depending on the exact range you use.
Steve Lewit: Going backwards, but then we talked about forward-looking returns that because you could have 13 years light between 2000 and 2013, when the S&P made nothing.
Gabriel Lewit: The key word is it’s average 9.5%, 10%. Averages means there’s periods higher than that, there’s periods and years lower than that. And if you happen to be caught over the next 10 years in the lower portion of that, your average over that shorter-term duration will be a lot different.
Steve Lewit: For sure.
Gabriel Lewit: Yep. Okay. So let me read some quotes from this article for you. So this is the headline of course, I love the words that they use here. All headlines are like this, but Vanguard Sees Global Equities Trouncing US Stocks Over the Next Decade.
Steve Lewit: I love trouncing.
Gabriel Lewit: Trouncing. Yes, that’s the part I was going to key in on there. Again, folks, whether it’s on the positive or the negative side, right?
Steve Lewit: You think that’s an exaggeration?
Gabriel Lewit: I mean, it’s just to the way they get clicks, right? Okay. So intro here, “Vanguard Chief Global Economist, Joe Davis, is forecasting that global and emerging market equities will outperform US equities by about 2% over the next decade.”
Steve Lewit: Yeah. That’s a huge shift in where the growth has come from in the stock market, which US has been dominant over the past 10 years.
Gabriel Lewit: Yep. So Davis here said that they predict Vanguard annualized global equity returns, not including US stocks, to be in the 6.7% to 8.7% range while he forecasts that US equity, US stocks, will return between 4.4% to 6.4% over that same 10-year period.
Steve Lewit: And he’s not the only one. You’ve got Dimensional, says the same thing.
Gabriel Lewit: You’ve got Schwab.
Steve Lewit: Schwab says the same thing.
Gabriel Lewit: Fidelity.
Steve Lewit: Fidelity.
Gabriel Lewit: All the big investment banks have capital market assumptions.
Steve Lewit: Yeah. And Savant also, their forecast for US large is in that same range.
Gabriel Lewit: So, what does this mean for you? Well, we talked about asset allocation, rebalancing, looking at what you’re holding. So a lot of people, if you happen to have an all-US focus over the last 10 years, that would’ve served you well, because they outperformed internationals. But again, we’re looking forward now based on these capital market assumptions, and we’re seeing that internationals are going to buy all accounts based on valuations, key research from all sorts of investment banks and firms, likely outperform US. So the key there is if you have no internationals in your portfolio, it might be a time for you to reconsider doing that.
Steve Lewit: Well, yeah, but then you’re trying to time the asset class movement.
Gabriel Lewit: That’s if you went all international. Let’s say you had US today and you said, “Okay, Gabe and Steve said internationals are going to trounce.” Actually, we didn’t say that. Vanguard said that. Okay? To clarify. But let’s say you said they heard on the podcast they’re going to trounce, so I’m going to sell all my US and buy all international. Good idea or bad idea?
Steve Lewit: Bad idea
Gabriel Lewit: Care to explain more?
Steve Lewit: Because you don’t know. US could continue, you just don’t. And you don’t know when the turn is going to happen. That’s why a lot of folks… Here, I’ll give you an example. Who was it that I was talking to, that might have been yesterday too. I’m having a tough recollection morning in terms of time, but we were talking about the performance of the S&P. Oh, I know what it was. We were looking at, I did a portfolio analysis for a client. Now I got it. So his portfolio is 90% us.
Gabriel Lewit: Yeah, not uncommon.
Steve Lewit: And he said, “And my portfolio outperformed your portfolio.” And I said, “Well, yes, of course, but your portfolio is more dangerous than my portfolio because over time I’m going to win because there’s going to come a time, which it is now, where US will underperform the rest of the market.”
Gabriel Lewit: Or an all-US portfolio, as we always say, in 2013 would’ve drastically underperformed internationals or diversified portfolio.
Steve Lewit: Absolutely, absolutely.
Gabriel Lewit: So, you’re right. It is a more dangerous prone to long drought periods potentially, whereas when you diversify, because look, the key is, folks, market timing’s risky. Anytime you do it, whether it’s market timing of stock, or saying, “Based on Vanguard’s research here, we’re going to sell all US, go all international.” Because people ask me that. They say, “Well, okay, should we just sell all our US and go international then based on all this research?”
Steve Lewit: No.
Gabriel Lewit: I’m like, “No, no.” Exactly. So forecasts are still forecasts, and you want to be prepared no matter what, but it is an important consideration based on all the available data that you may want to consider, if you don’t already, which of course, clients of ours, you do, have an international allocation to your portfolio mix.
Steve Lewit: And I would just add one thing. I know you want to go on, but I would add one thing onto that, is that the barometer that most people use is the S&P 500. Well, that’s 500 large cap stocks. That’s not a diversified portfolio.
Gabriel Lewit: It’s lightly-
Steve Lewit: Lightly diversified.
Gabriel Lewit: Lightly diversified.
Steve Lewit: Slightly diversified.
Gabriel Lewit: Slightly lightly.
Steve Lewit: So, when folks come into us, and folks come into us and they say, “Well, how did you do compared to the S&P?” Well, we have a diversified portfolio, so we have a different benchmark, but oftentimes we beat the S&P because it is diversified.
Gabriel Lewit: It just always depends on the timeframes too, right?
Steve Lewit: Yeah.
Gabriel Lewit: And what you’re comparing. Short term, one year, long term, 20 years, etc. So just keep that in mind, some interesting data there. Now, a couple other data points from this article I also think is interesting just to share with you, since we’re here. Same article, same chief economist, Joe Davis. “We also see a good chance of a US recession sometime this year.” This is Vanguard’s guy. “We continue to assign a high probability of a mild recession in 2023, although the odds of continuing economic growth, aka a soft landing, have risen.” They say.
Steve Lewit: Yeah, I’m not sure those two go together as well as they would think because Fed will continue to rise interest rise.
Gabriel Lewit: This is Joe Davis, “We continue to expect the Fed to increase its rate target by a total of 50 additional basis points over the next two meetings in March and May, to a range of 5% to 5.25%.” And they believe they’ll keep it there through late year-end.
Steve Lewit: Yeah. So I’m down with that projection.
Gabriel Lewit: You’re down with that? Good.
Steve Lewit: Yeah, I’m good with that. I think it’s a midline, it’s taking the mid-road. It’s saying, “Look, I would think there’ll be some recession.” And there are a lot of indicators there could be. It’s so problematic though, this economy and this market. It’s really hard to go out on a limb and project anything.
Gabriel Lewit: Yep. And so last but not least here, Davis, Vanguard’s chief economist expects US aggregate bonds that pay a projected 4% to 5% over the next 10 years. Treasury bonds, 3.6% to 4.6%. And TIPS, 3% to 4%.
Steve Lewit: Yeah. Okay.
Gabriel Lewit: So interesting stuff there. All right. Anywhos.
Steve Lewit: Much more interesting than doing a budget, I would say.
Gabriel Lewit: Depends who you ask.
Steve Lewit: Yeah, I guess it does.
Gabriel Lewit: It does. Yeah. Alrighty. So with our last couple minutes here of our show here today, I wanted to ask, well just one get-to-know-you question to Mr. Steven Lewit, because we got to know Monte Carlo the last couple episodes, but not you.
Steve Lewit: Okay. My most exciting part of the show.
Gabriel Lewit: I know, it is.
Steve Lewit: Self-revelation.
Gabriel Lewit: Okay. Are you ready? This is a deep question.
Steve Lewit: All right, I guess.
Gabriel Lewit: Get prepared.
Steve Lewit: All right, I’m ready.
Gabriel Lewit: Would you rather, and by the way, I play a lot of would you rather games with my kids.
Steve Lewit: Do you?
Gabriel Lewit: Yeah.
Steve Lewit: Oh, that’s fun.
Gabriel Lewit: But there’s like they stuff they come up with, I don’t know.
Steve Lewit: That’s so much fun though.
Gabriel Lewit: Okay, yes. Would you rather have a personal maid or a personal chef?
Steve Lewit: Well, well.
Gabriel Lewit: And the maid does not also cook.
Steve Lewit: Oh, the maid doesn’t cook.
Gabriel Lewit: And the chef does not clean, so you get to pick one or the other.
Steve Lewit: That’s kind of hard. I think I would like, oh my gosh. I don’t know.
Gabriel Lewit: But the chef would also go get the groceries for you as a side note.
Steve Lewit: Yeah. So I don’t have to worry about food or anything, but on the other hand, I don’t have to worry about my shirts, and cleaning, and blah, blah, blah.
Gabriel Lewit: Yeah. This is a tough one.
Steve Lewit: This is a tough one. I think because I enjoy cooking more than cleaning, I would like the personal maid, even though I would love to have a personal chef, but I do not like, just like I don’t like doing my budget, I don’t go home and say, “I can’t wait to clean.”
Gabriel Lewit: Hey, you’re a financial advisor. You should love doing your budget.
Steve Lewit: I do, but it’s sort of… Let me put it this way, I’d rather do my budget than clean my house.
Gabriel Lewit: Yeah. Let’s see. Producer Katie, you won’t be able to hear her answers. What would you say? We’re going to put… Oh, she said without hesitation, maid.
Steve Lewit: No hesitation
Gabriel Lewit: Yep. That’s because you do like to cook. Yeah, you’re a chef at heart as well.
Steve Lewit: Yeah. And what about you?
Gabriel Lewit: Me? I think I would go for the personal chef.
Steve Lewit: Really?
Gabriel Lewit: I would.
Steve Lewit: I can understand that.
Gabriel Lewit: Actually, I don’t cook. If I have the time, I don’t totally hate cleaning because I generally clean up all the time just as I’m doing stuff. And if I didn’t have the kids tornadoes, aka tornadoes, in the house all day long, my house would be very, very… It would stay spotless just by default, because nothing would ever move. So I would much rather have the-
Steve Lewit: Right now, everything moves.
Gabriel Lewit: Oh my gosh. I can’t find the remote ever.
Steve Lewit: I went down into your basement when I was visiting over.
Gabriel Lewit: You can never find anything in this house.
Steve Lewit: Boy, you’ve accumulated, man.
Gabriel Lewit: Oh, we sure have. So yeah, I would go with the personal chef.
Steve Lewit: Yeah. Interesting. It’s a great question.
Gabriel Lewit: Good, healthy breakfast meal. I don’t have time for that yet. They can get up early while I’m getting ready and start cooking.
Steve Lewit: I get on that, especially with three kids, because each one wants a different meal.
Gabriel Lewit: Yes, they do. Okay, let’s see here. Well, okay, I got a few here to choose from. What’s the worst haircut you ever had? We’re going to go with this one.
Steve Lewit: Okay. So you’re going to love this.
Gabriel Lewit: I’ve seen some older pictures of you.
Steve Lewit: Yeah. So when I was younger, I had hair down to my shoulders. And I was a professional tennis player, which was really cool with the headband and everything. That was the look.
Gabriel Lewit: And you had those socks with the three stripes pulled up to your knees?
Steve Lewit: Absolutely. And the little skinny shorts.
Gabriel Lewit: Yeah.
Steve Lewit: And a wooden racket. This was in 1833, folks. So my friend owned a beauty parlor, and he says, “Come in and I’ll get you a real haircut.” I said, “All right.” And he curls my hair. You saw the picture of me.
Gabriel Lewit: Yes, I’ve seen this.
Steve Lewit: And I’ve got a head full of curly hair.
Gabriel Lewit: Wow.
Steve Lewit: And he was a good friend, so for three months I’d have to go back every month and have my hair curled.
Gabriel Lewit: But what’s funny is when you look back at old pictures of yourself with these, what you say now are bad haircuts, at the time you must have looked at yourself and been like, “I think I look okay.”
Steve Lewit: Yeah, it was kind of cute.
Gabriel Lewit: Like, “I looked pretty good.”
Steve Lewit: It was kind of cute actually, I think. But that was my worst haircut, I would say.
Gabriel Lewit: Yeah, that’s funny. Yeah.
Steve Lewit: What about you?
Gabriel Lewit: Oh, well, there’s some photos of me when I was a kid. Well, I had two phases that I didn’t love. Actually, I never was able to find, I felt, like a good haircut until I got older enough and went to a more pricey hairstylist, and then I think I figured it out since then. So back in the day, I sort of had two phases. One when I was really young, you guys, for whatever reason, gave me a bowl cut.
Steve Lewit: Everybody had a bowl cut.
Gabriel Lewit: It’s terrible.
Steve Lewit: You were so cute.
Gabriel Lewit: Terrible looking, it was horrible looking.
Steve Lewit: You were so cute.
Gabriel Lewit: Nobody looks good with a bowl cut.
Steve Lewit: Oh, everybody would pinch your cheeks.
Gabriel Lewit: Oh gosh. I look back at this one, I’m like, “Ugh. Bowl cut.”
Steve Lewit: Oh, it was so cute, folks.
Gabriel Lewit: Legit salad bowl. Just straight around. I was terrible.
Steve Lewit: I’ll find a picture.
Gabriel Lewit: All right. The second was when I was in my college years, I was trying to save money, too cheap to go to the hairstylist, even like the really cheap hairstylists. I just buzzed it myself.
Steve Lewit: Uh-oh.
Gabriel Lewit: Buzz, buzz. Army cut straight up.
Steve Lewit: Buzz boo.
Gabriel Lewit: And I look back, I’m like, at the time I was like, I thought it looked all right. Now I look back, I’m like.
Steve Lewit: Oh my gosh.
Gabriel Lewit: So yeah, those would be my two.
Steve Lewit: Self-induced pain.
Gabriel Lewit: Yeah. All right, friends, well thank you for joining us here today. That’s what we’ve got for you. Hopefully you had a little bit of fun on our journeys here today, and we wish you a very happy spring and warm weather ahead. So happy March to you and stay well and we’ll talk to you on the next show if we… Well, actually, I forgot my call-out here, but if you need our help, call us (847) 499-3330, or sglfinancial.com, or email info@sglfinancial.com.
Steve Lewit: Good job, stay well everybody.
Gabriel Lewit: Talk to you soon.
Steve Lewit: Bye.
Announcer: Thanks for listening to Our 2 Cents, with Steve and Gabriel Lewit. For any questions about your finances, give SGL a call at (847) 499-3330, or visit us on the web at sglfinancial.com and be sure to subscribe to join us on next week’s episode.
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