Financial Resolutions for the New Year 2025 - podcast episode cover

Financial Resolutions for the New Year 2025

Jan 14, 202535 min
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Episode description

Ready to make 2025 your most financially successful year yet?

This podcast is your guide to achieving your financial goals. We'll cover:

* Budgeting tips & tricks

* Maximizing your retirement savings

* Strategies to crush your debt

* **Planning for the unexpected (emergencies, insurance, estate planning) **

* Essential yearly financial reviews

Join us for practical advice and actionable steps to improve your financial well-being in 2025.

Transcript

Intro/Extro

Welcome to a life well lift. Grow, preserve, and transfer your wealth with Ken Ouellette, CPM certified portfolio manager and founder of Orca Wealth Management. In this podcast, he will provide some clarity and setting goals needed to build, preserve, and transfer wealth and overcome some of life's financial obstacles. Ken provides actionable steps to help you plan through your financial ups and downs

in a way everyone can understand. Join us on this journey where Ken will explore many financial avenues, drawing from his three decades of experience in helping others avoid risking a lifetime's worth of work and savings by not having a plan and a strategy in place. Now onto the show.

Don Mespelt

Well, there's no more ho ho ho. It's gone away, and here we are to stay. My rhyme for the new year, Ken.

ken ouellette

Yep. New year, twenty twenty five. New challenges, new opportunities, new. That's the, that's the beauty of a new year. Even though this is just a calendar thing, but, yeah, there's a lot a lot of work to be done in the beginning of the year.

Don Mespelt

Yeah. There's I mean, the people always, you know, have their goals and what their plans are, and, you know, they're gonna work out and everything else. And a lot of those don't really stick with people, but, you know, it's it's a person individual choice. But when it comes to financials, what are the what are the what do how do you go from there? What do you do?

ken ouellette

Yeah. I think maybe that's a great great, launch board for today's day's talk. I think we're gonna go we'll just talk about some of the things that I impress upon my clients beginning of the year. Put kinda put them in first first, you know, in front of their minds, things to think about, things we wanna check off typically by February. Right? So that kinda just tees us up for the rest of the year. Really, there's nothing

that comes as a surprise. I mean, I think if there's anything that we've learned is financial planning is all about eliminating as best you possibly can surprises. Yeah. Right? Nobody likes surprises. And so if we've already talked about them at the beginning of the year, the two most important planning periods in my view is end of the year, beginning of the year.

Don Mespelt

And I was gonna bring that up because you just said the beginning of the year is merely just a calendar thing. But financially, is it really just a calendar thing? Or is it actually kind of more? I know the end of the year, I could see that with taxes and things like that would definitely be. But is the beginning of the year just, you know, it's a year away from doing your taxes?

ken ouellette

Well, no. I mean, I think it was more psychological than anything else. You know, in the That's thirty year retirement. Right? You're does does the beginning of the year really make that big of a difference? No. Because you've got thirty of those, hopefully, God willing. But with that said, you wanna prepare each year for what it's so it's it's just a good place to take a pause. Look at where you've been. We kinda do that at

the year end stuff. Look at your performance, look at your plan, and then iron out from what happened the previous year, how your plan did versus your goals. Then look at this year's plan, which will be the same as the end of the year's plan, hopefully. It hasn't changed by year end. And then let's say, okay. This is how we did last year. This is what the expectations are

for this year. Has anything changed? And we're gonna I think in this podcast, we'll go over some of the main things we wanna cover in that initial meeting at the beginning of the year through January or February to make sure that nothing has changed on those items and that for this year, we just are set for one year in terms of planning prospects.

Don Mespelt

So you actually have you have two variables here. A, the stock market. You're kinda just gonna say what might happen this year. Right. And b, your plans. If you haven't changed any plans and you're just having fun, then nothing changes there. But if you all of a sudden, I wanna do a second trip to Venezuela, you know, then you have to plan those in. So those are two variables.

ken ouellette

Yeah. So we know that with the of those two variables, there's only one we can control, and that's the planning. We can't control the market. We try to take what we can't control and minimize it as little as possible to how it's gonna affect the client's relationship for that year with their plan. You know, you and I have spoken offline about investing is really ninety percent mental. If we get the plan in place, we look at

alright. Based off of last year and the year before is inflation, which changed a lot of people's expectation for their their need for how much money they're gonna need. So we need to evaluate at the beginning of the year, how does the plan how's it withstood the last couple of years? How are you positioned now? What in your because we wanna make people they're comfortable. Right? So there's nothing, like I said, nothing unexpected that's gonna come up.

Don Mespelt

Uh-huh.

ken ouellette

Because we can't control the market. So we have to factor in good markets, bad markets, calamities, because there's gonna be some calamities in twenty twenty five. We just don't know what it is. And when they try to project what the calamities are gonna be, they never get it right. So that's why they're calamities because you you don't know that they're gonna happen. So we try to anticipate what the

market reaction will be to varying calamities. Really, really bad, really good, and just ho And then we we stress test it with the portfolio, but we'll kinda get into that when we go over the bullets of what what people need to really address, at the beginning of the year. How's that sound?

Don Mespelt

That's that's all we just covered half of it in my head. I'm just thinking, I don't know what other half is gonna go Yeah. Other than, dun dun dun.

ken ouellette

It might be a little bit more than a half here, but so let's start with with number one that, it it's first and foremost in my mind.

Don Mespelt

Okay. What's that?

ken ouellette

We wanna update the financial plan. Right? Any changes, goals, work, family life, are you still on track? If not, why, and what needs to change? So there If I

Don Mespelt

can right there, don't you have that really cool thing that you put all the numbers in that says you got a hundred percent chance of achieving your goal?

ken ouellette

Exactly. So why do you think we do that?

Don Mespelt

Well, just that reason. I mean, to to to put some reality into the thing, if if if I have a fifty percent chance to achieve my goal, then we gotta reevaluate.

ken ouellette

Right. And, also, I think more importantly than that, then that's an important aspect because if you are at a fifty, you there's gotta be some pretty long conversations. So we know the beauty of financial planning, we've talked about this in the past and doing these financial plans, is that there's only really two variables there. There's the performance of the portfolio, and then there's the client's actions.

Don Mespelt

Expectations?

ken ouellette

Well, not expectation, but did they Oh,

Don Mespelt

they gotta do their part.

ken ouellette

Did they do their part? Did they withdraw the amount that we've agreed upon and stress test that with the portfolio? Mhmm. So if if we're if somebody's at a fifty and we were at an eighty or ninety percentile, in the plan, which we wanna be between seventy and ninety, that's kind of the sweet spot. So if somebody's at a fifty, either the adviser failed miserably in the performance last year and upset the plan or the client withdrew more than that what they agreed to

withdraw. Something in life created a problem where they had to take out more that wasn't anticipated for.

Don Mespelt

Uh-huh.

ken ouellette

To find out, okay, what what could happen?

Don Mespelt

Uh-huh. Alright. Well And and it's just like if I didn't tell you that I was planning that trip to Venezuela and I took out an extra thirty grand, you'd be a little upset.

ken ouellette

Yeah. And I had a you know, in the past, I had I had, like for instance, I had a client, many years ago. Great plan. Really was a the numbers were were very good year of year over year. And then in March, the client comes to me and says, listen. My daughter's getting married again, and we want to take out forty five thousand dollars for the wedding. That's an expensive wedding.

Don Mespelt

I wasn't my my I still get my jaw off there at forty five.

ken ouellette

And it's a second wedding. Alright.

Don Mespelt

So It's yeah. But forty five for any wedding. Good golly.

ken ouellette

Right. And so I had to have a hard conversation with a client that, yes, you can do that. But you have to realize that when you're eighty, that daughter has to give you some of that money back, or otherwise, your plan is is going to fail. Right? So there's you know, that's why we plan because there's there's a repercussion for every action you do in the plan. The the client can do that. You know, we're we're just they're the owner. We, as advisors are the CFO, but the owner has the final

decision. But we as the the the chief financial officer for that client, we have to tell them, okay. You can do that. Yeah. But Here's here's what that is here's gonna be the ramifications of doing that.

Don Mespelt

Now with that, I mean, don't you you have your emergency fund, which you probably should make sure that's an online too. But, don't you put money aside saying I have, you know, she's gonna get married soon, so I wanna put money there with don't you I mean, isn't that part of the planning? I mean, you just don't come out and say that. Right?

ken ouellette

It should be, but it it not always the case. And let let's define emergency fund. Okay? Okay. So what is your understanding of emergency fund?

Don Mespelt

Your total bills that you're gonna have for, like, three or four months, and some people say up to six months. So that way, if everything went south, you can just live off your savings for at least that long a time without having to do anything.

ken ouellette

That's that's a pretty good definition, Don.

Don Mespelt

Wow. Thanks. But, yeah, the big caveat is some people some experts say six, some say three, and it's really I think as you get older, it kinda should go up proportionally in my opinion. Is that right? Yeah. So I have starting out as a teen or as a twenty year old, I mean, having six months saved up? Right. I barely had enough Top Rama to live six months.

ken ouellette

Yeah. So that emergency plan, I like to I'd like to do a minimum of six months. Yeah. I've just found, six months. And when I say emergency fund, I mean, that's that's money that is not market related that

Don Mespelt

you can

ken ouellette

get at if you were cut off from everything, and you're not gonna have to force liquidate something at a bad time. So if you only have three months worth of emergency expenses and you're cut off, you lose a job, something happens where you have no income, you you go three months, then you're running out of money, and then you're gonna have to make the markets down, let's say, twenty five percent, then you have to go in and sell things at an inopportune time.

Don Mespelt

Uh-huh.

ken ouellette

So I try to do six months. At best, I encourage some clients to go as far as a year just so that gives us the flexibility. Right now, it's not so penal. Right? Because Yeah. You can get four point five percent in treasuries and money markets at the current time. So you're earning something on those those short term monies that you you don't you can take it out, and you're not gonna have to worry about where the market's at, what's going on with the economy. Uh-huh. That that creates a a sense

of, comfort. Now when the when the interest rates were at less than one percent, it was a stretch to go six months because your six months you were earning not what inflation was. That created a a major issue for for people. But now I think you can you can look at it. You can have a conversation with your adviser. You know, how much do we have in the emergency fund, and what what is that earning?

Don Mespelt

Uh-huh. And the high yield accounts aren't as high yield anymore, but they're still there.

ken ouellette

Yeah. They're still not bad. I mean, historically speaking, if you can get four and a half percent on short term emergency funds money, that that's you know, we're set to spread one percent above inflation right now. I'm comfortable with that.

Don Mespelt

Mhmm.

ken ouellette

So you

Don Mespelt

got your emergency fund going then, and you you also talked about, checking, what was it, your beneficiaries and stuff like that?

ken ouellette

Yeah. It's a good time to, review beneficiaries because, you know, things change. And, on a yearly basis, we we like to to to have that in that first meeting. You know, has anything changed in your beneficiaries? You know, sometimes oftentimes, we'll have a copy of their beneficiaries to provide them. Uh-huh. That way they can review that and make sure, yeah, that's that's set. So there there you know, you can have a lot of issues with beneficiaries

if they're not done correctly. Right? We wanna make sure that and when I say issues, I'm I'm not talking so much as family issues, which those are those that's a whole another podcast, but you'll also have taxation issues, which are important.

Don Mespelt

Oof.

ken ouellette

Do you wanna recognize those as much possible?

Don Mespelt

So Oh, totally. I can see that.

ken ouellette

Yeah. My name and your like, for instance, I'll give you a good good cases. So it used to be very prevalent for people as their beneficiaries. They would put their estate. They would put this person something happens to that person, their estate. Uh-huh. That creates a tax issue. You wanna name individuals as or charities as beneficiaries when whenever possible. So we we try to we we try to get if we ever see a client that puts their estate as the beneficiary because then it

has to go through the estate process. It's just not

Don Mespelt

Efficient.

ken ouellette

Efficient, and it's and it creates a tax nightmare. So that's something that we'll look at and and address with the client individually.

Don Mespelt

And now you schedule these reviews every year like this in the beginning to get all this?

ken ouellette

Yeah. We'll we'll start ramping that up right now. It's a good time because people are they're calling they'll they'll be calling in in probably the second or third week in January because they wanna get their their ten ninety nines and their information. Yeah. So at that point, we say, yeah. That's great. Let's schedule a time to to do our quick review, look at the for the year, and, we can discuss those ten ninety nines and when

those are gonna be issued as well. It's a good good good launching point because the clients are, are gonna be reaching out to us because they wanna get their taxes done. Usually, most clients wanna get them done early.

Don Mespelt

Well, I I assume that would be it. Yeah. When you stress now I'm bouncing around a little bit, but I'm thinking of the things that you mentioned. When you stress test, you're talking about that's for the year, and then you also have to do a long term one too. Right? And that's what I'm thinking of the test that you've done with me.

ken ouellette

Yeah. The the plan itself, does that pretty robustly. It's it's called the Monte Carlo analysis, and I know that sounds like it's gambling, but I don't know what whoever named that. I should probably look that up, but it's it's not a real good name. Right? Monte Carlo. They call it

Don Mespelt

the gamble with your retirement.

ken ouellette

The craps table analysis. You know, it's just not real real good. But the the thought behind it, it's very good. So it takes a thousand different market cycles, and it, varying market conditions and back test it with your portfolio and your allocation and tells you what you would do in varying market cycles over a period of time. And then it spits out a probability of successful outcomes or negative outcomes. If you're if you're at a, we

talked about that seventy to ninety percent. So if you're at a seventy five, that means if we back test it with seven hundred and fifty different market cycles, mark market scenarios, that the market has gone up down every year, that means seven hundred and fifty out of a thousand you would meet or exceed your goals. That's excellent. Yeah. Yeah. That's that's

kind of the gold standard. Right? On two hundred and fifty of those, more than likely you would exceed, but you did there would have to be back to back, like, financial calamities that that that year over year over year, decade over decade before you not do it, which is not really it's not probable. Right? So we're all Yep. Is dealing with probabilities when we do these, but the seven the seventy five, seventy to ninety. No. So if you're at a hundred, right, that means

there's no market cycle in history. Even we go back to back bad markets where you would have not met or exceed your goal. So you think, well, well, I wanna be a hundred, right? Well, the probabilities are so stark against that, that you're probably sacrificing a little bit in your life, or you're gonna create an estate problem above ninety unintended circumstances

gonna happen. We want people to enjoy their life, and we also don't wanna create a unintended estate planning situation that they don't they don't really want to do or go through, upon their passing to their heirs. We try to keep people between that seventy and ninety because if it gets above ninety, then we have to have different conversations. They're gonna leave more than what they've anticipated to leave, and then we've got to deal with

Don Mespelt

Or that might be their plan.

ken ouellette

It could be their plan. Right. But we would plan that in how much they wanna leave. And so we plan that in, and then we get to the seventy to ninety.

Don Mespelt

Oh, I see. Yeah. That totally.

ken ouellette

Right? So, but if somebody's at has has planned that in and they're they're at a hundred, well, you've got so much of an overage that maybe, you know, you you can do a little bit more in retirement, spend a little bit more money, retire a little earlier, things of that nature, or just do more of what you wanna do because you've already met or exceeded all your other goals on a favorable probability.

Don Mespelt

Do you get clients that are, like, give you okay, Ken. I have a daughter that's gonna get married potentially. We're looking at buying this house here for x amount, and, I also wanna do vacation. What are my odds? Or, you know, I mean, is that kinda you just you lay it all out Yeah. With you. Yeah.

ken ouellette

And So we'd have scenarios. So these are great. You you you build a plan, and then you can put in a scenario. Hey. I wanna buy a hundred and fifty thousand dollar RV and travel the country. Great. Let's plug that cost of that that variable into the plan as a scenario. How does it affect your overall retirement plan goals? What does that do to your probabilities? That's what we did with the person that was having the client that was having the daughter, second marriage, forty five dollars.

Don Mespelt

We plugged it in and had

ken ouellette

a very negative consequence on their plan. So at that point, the client has to decide. Okay. Is it worth doing? Can I downsize the wedding to make it where I can fit this in and not have to worry about my retirement? Otherwise, they're going to have a consequence down the road, and they just it's our job to make them aware of that. Not to tell them not to tell them no, not to tell them yes, but to say, okay. Based off the planning that we've done for you, this is the consequence of that action.

Don Mespelt

Wow. When you lay it out like that, that's totally you know? Do you find that they still go ahead sometimes? Or

ken ouellette

Yes. Wow. Some do. I mean, some do. And so then then the tough conversation has to be that I I have to explain to them that we have to downsize the amount that they're gonna receive in retirement to still be successful.

Don Mespelt

Uh-huh.

ken ouellette

But that's the client's choice. Totally. Yeah. Wow. We make recommendations. They make decisions.

Don Mespelt

That's,

ken ouellette

you can't make those decisions unless you have a plan.

Don Mespelt

Oh, yeah.

ken ouellette

Otherwise, you're just flying by the handle, and you're just at a whim of whatever happens. Plan, plan, plan, and that's why these early, plan meetings are important.

Don Mespelt

So how about the end of the year as we bring this up before taxes and everything like that? Because you're probably doing some of those now too.

ken ouellette

Yeah. That's that's more just to your point, that's that's more tax related. So we we assess their tax situation, their gains for the year. Is there any losses that they can take to reduce their tax situation, things of that nature. So that that's that's more dollars and cents balance sheet stuff that is just tax related. Uh-huh. We try to take care of the most of the tax related stuff in November, late October.

Don Mespelt

Okay. Okay. The the, the year round issue is always, debt in general. How do you Yeah. I mean

ken ouellette

Yeah. So In that meeting, in that initial meeting, we you know, you got the financial plan, and then you've got the budget budgetary process. So for some clients, they like us to do, work on their budgets with them. And and the budget and the budget is where you, you know, you iron out the emergency funds, what their expenses look like, where can we reduce some expenses, where can we well, you know, how how do those fit?

Do do does your budget actually fit with the outlay of what the plan's gonna provide? Yeah. Know, that gives us a real good sign. You know, if their budget if they're if they need eight thousand a month because they're they live in Florida and their homeowners insurances went from six thousand to fourteen thousand, and that's a budgetary item. We need to put that into the plan and see, okay.

Well, how how right. Now you're we know you've said you wanted this much, and we've planned for this much, but now your budget's showing us you're gonna need this much. So we need to get realistic on that and see when we start need to start doing our scenarios.

Don Mespelt

With the the end of the year stuff, I know we're talking about budgeting and things like that. How do you I mean, do you just do you evaluate midyear saying, okay. You you have to take out this much, and so, you know, we should start doing it now. Or is that the conversation you have at the beginning as well? Yeah. Yeah. We do it in the beginning and then What do I'm not there yet. What's it called? The the the you recommend, your your mandatory withdrawals. What's those called?

ken ouellette

Yes. Yes. For those that are seventy three and above, there there's something called the required minimum distribution.

Don Mespelt

RMDs. Dang it.

ken ouellette

RMDs. Yeah. And so they have to take that out during the year, in that calendar year. And sometimes it's advantageous to take the RMD early, and sometimes it's advantageous to take the RMD later. What what do you think would be the variable there, Don?

Don Mespelt

You're gonna die?

ken ouellette

Well, yeah. That's good. Yeah. That's that's definitely a very

Don Mespelt

when you're late on

ken ouellette

come out. Even if you pass away, your heirs have to take the RMD out in that year.

Don Mespelt

For that year?

ken ouellette

Yeah. Yeah. So the RMD is gonna come care of it. What I That's crazy. So if the market I do this basically on valuation. So I look at the historical valuation of the market. And if the market is at an historically high valuation and we're going into the new year, I encourage clients to take their RMD early because we wanna liquidate a a a higher value. Yeah. Right? We wanna sell when it's high and and and, you know, if anything, not sell when it's low. So if the market like, this is

a great year of an example. I will be recommending to my clients to take their RMDs in January, February of this year because the market is at an historically high valuation. The probability is not a known, but the market could be fifteen percent less at the end of the year because historically, we're at a high valuation. I don't wanna have to sell something to get their RMD out of

their IRA, at a lesser value. So at the very least, if they don't wanna take it now, they wanna take it to the end of the year for whatever reason, we will we will liquidate enough to cover that RMD and just keep it in the kind of a a liquid money market or something of that nature. But I like to distribute it out at the beginning of the year.

That way they'd have those funds. And, you know, if the clients are are diligent and they're responsible with their plan, they they'll take that money and they'll use that throughout the year and not just, wow. You know, I've got a big huge lump sum. Let's go spend it in January.

Don Mespelt

Yeah. And then, you know, then we got

ken ouellette

we got stress on the plan the latter part of the year. It depends on the case by case analysis of the client. You get to know, you know, how that's gonna work. But by and large, the rule of thumb is high valuation at the

Don Mespelt

end of the year, beginning of

ken ouellette

the year, we take the I I encourage people to take the RMD early.

Don Mespelt

So the biggest takeaways that I'm getting from this, the first one is just schedule your your your meeting with your financial adviser.

ken ouellette

Yeah.

Don Mespelt

Because if you don't do anything else, your financial adviser, they're a good one. They're gonna bring up all these things for you. So if you don't if you're brain dead, if you schedule a meeting, you should be okay.

ken ouellette

Yeah. That's the that's the main but there is a couple of the points that they need to to look at in the in that initial meeting.

Don Mespelt

Remember, I said the brain dead part. So that's where you come in and help me.

ken ouellette

Yeah. Let me cover a couple more points that I think are important, just for just just to kinda round out this part of the planning process. Okay. We wanna look at does your allocation look good for twenty twenty five? Okay. Because we just talked about the market had a really good year out last year. The previous year had a really good year. The valuations are high. So sometimes your

allocation gets skewed. And the beginning of the year is a good time to look at your evaluate your your allocation and see that it does it match the plan? Right? So giving it give you a good example. If you're if the plan is looked at the historical number on the assets, whether it be bonds, cash, stocks, commodities, and one of those groups has done very, very well. You could get out of skew on your value on your, allocation. Right? That let's say, to make it real simple, let's say you're at a

seventy twenty ten. Seventy percent equities, twenty percent fixed income, and ten percent cash. Say make it simple. The market's really good. What does that do to your allocation?

Don Mespelt

Well, I guess I mean, you know, you said we're at seventy twenty ten. I mean but what if, you know, if it's been really good and it might have been went up to eighty even instead of the

ken ouellette

Exactly. Exactly. You've gotten you've gotten over allocated on the equity side. Right? And so discipline in investing is having your allocation meet your plan. What happens when equities go to eighty percent and the bonds have gone down in the portfolio and and cash has stayed stagnant, it's a hard conversation to tell somebody, hey. These things have done really well. We wanna curve back that thing that has done really well for you. Yeah. Clients don't like to do it. They don't like it.

Don Mespelt

Well, no. They just wanna ride the wave as long as they can.

ken ouellette

Right. But the allocation protects you from the wave when the tide comes out. So it forces you to buy the things that are out of favor. And allocation can go really deep. Right? You can go mid cap, small cap, international stocks, domestic stocks, emerging markets. So we're talking the macro, but we take it to the to the to the real to the real surgical side of each slice of the equities, each slice of the fixed income. So I'll give you a good example here.

Okay. Emerging markets, I tend to like about ten percent in emerging markets. Why? Because emerging markets historically emerging markets for the listener are markets that are like Brazil, smaller European countries, Asian countries that are that are not as as large, and they're growing at a typically at a larger rate because they're smaller. They're smaller economies, so they grow a little bit quicker. Larger economies like ours, Europe, they grow

at a slower clip. Okay. Emerging markets have done atrociously bad versus the the more mature markets over the last three to five years. So it's difficult conversation to have with the client. Hey. We're our emerging markets, what we started at ten is now at five, but we really need to be at ten. They're rightly so, they're gonna say, well, why would we throw money after some at something that's done so poorly? Well, because that cycle is

going to change. I don't know when. I know the allocation historically has done so well that we need to buy things that we don't wanna buy when they're low and reduce things that we don't wanna sell when they're high. Make sense?

Don Mespelt

Buy low, sell high.

ken ouellette

Yeah. That it and reallocation forces you to do that. It forces it protects your plan, and then it also allows you to be able to buy things that are out of favor when nobody else likes them. That's how money is really generated on a consistent basis by buying things that are out of favor until they come in favor, reducing them and buying more of the other things that's out of favor and just doing that every year looking at that. Now you have to take

into tax considerations. So, you know, so those things that have gone up a high, you have to look at it. Where is it in a tax deferred account such as an IRA versus a tax Uh-huh. What's gonna be the tax consequence of doing this? So we we need to intermix in there where we make those changes so it's most, you know, so it's not too too harmful on a taxation basis. So that's another sliver in there.

Don Mespelt

That's a big sliver, Ken.

ken ouellette

It's big. I mean and it's those are those are tough conversations to have, but they're so important because the next point to the plan is doing your your fireboat drills. Right? So

Don Mespelt

Okay. We

ken ouellette

want that that's the stress testing of the portfolio. If the market's down twenty five percent, what's our allocation? How does it look? How will our portfolio respond? How and more importantly, how do you feel emotionally when that happens? Because, yeah, that's the the real real struggle and to to be as a successful investor. So the price we pay the average the average annual return on equities is ten percent per annum. It's been like that forever. We've

talked about that in past podcast. The price you pay for that ten percent is every three to five years, you gotta be down thirty. That's the price of admission. You can't get to ten without facing down being down twenty five or twenty at at some point. Yeah. It's just that is what you have to pay, and you have to weather that and do the right things at the bottom to be able to get that average annual return. So we do the fire drills more just to show the client. So that way

we can see, okay. If the market's down, has a real bad year and it's down forty, you're down twenty. How are you gonna feel? The plan says you're gonna be fine, but how are you gonna feel emotionally? And we give them the dollar value. Right? Because everybody monetizes the law the high level the highest level they've ever hit on the on in the their value of their portfolio. Uh-huh. Everybody assumes that that's the that's the value that they're they're gonna always have going forward

building upon. So if you got a million, you're down twenty percent. You're now at eight hundred thousand.

Don Mespelt

How are you gonna sleep that night?

ken ouellette

How are you gonna sleep? Now the plan says you you should sleep like a baby. Right? Because we we bake this in.

Don Mespelt

Uh-huh.

ken ouellette

How are you going to react? You know? Because what it doesn't just go from typically a million to eight hundred. It goes from a million to nine. And then you're like, wow. That's a hundred thousand dollars. Alright. Well, it you just probably got more to go. It goes down to eight hundred, then your mind starts to play little mental gymnastics with you, and you think eight hundred is going to six hundred, then it's going to four hundred, then it's going to zero. Yeah. So

that's why we do, the fire drills. And I think that's an important part of of the, the planning process at the beginning of the year. Just it's just reeducation. And, you know, I sent out a nice newsletter to the clients at the beginning of this year, kind of outlining what we do in varying market cycles and why we do it, and, you know, we're not gonna change.

Don Mespelt

Yeah. Yeah. Plan. You have a plan too.

ken ouellette

Yep.

Don Mespelt

Right on. Ken, thank you for this talk.

ken ouellette

Yeah. We covered a lot in this one.

Don Mespelt

I thought so. I gotta go back, and I'm gonna listen to this one twice myself just to make sure I got everything.

ken ouellette

Yeah. I'd encourage, you know, the if there's one takeaway, just, plan your meeting. You know, make it make it, you know, I think that people change the batteries in their smoke detectors. You know, they do things every year. You know, put that that financial planning meeting at the forefront. Get it done in the first quarter of the year.

Don Mespelt

Then if you are brain dead like I alluded to, you have people like you that can help you out.

ken ouellette

Yeah. Yeah. We'll we'll what what will

Don Mespelt

Shock test it. Yeah.

ken ouellette

We'll, yeah, we'll shock you back into the reality. So

Don Mespelt

Right on.

ken ouellette

Because there's no downside to having that plan that planning meeting in the beginning of the year zero. I wouldn't.

Don Mespelt

Yeah. Kenolette, a life well lived, grow, preserve, and transfer your wealth. Love you, man. You have good knowledge.

ken ouellette

Well, thank you. And, as always, you know, reach out to us at Orca Wealth, o r c a w e a l t h. We have offices in Tampa and in North Carolina. So, you know, we pretty much cover the south and, and kind of the West Coast for you guys too. Yeah. Seven two seven seven four one six zero seven seven.

Don Mespelt

Have a great afternoon, sir. You too, Don.

Intro/Extro

Thank you for listening to a live well lived, grow, preserve, and transfer your wealth with Kinolett CPM. Click the subscribe button below to be notified when new episodes become available. The information covered and posted represents the views and opinions of the guest and does not necessarily represent the views or opinions of Orca Wealth Management, LLC. The content has been made available for informational and educational purposes only. The content is not intended to be a substitute for

professional investing advice. Always seek the advice of your financial adviser or other qualified financial service provider with any questions you may have regarding your investment planning. Orca Wealth Management LLC does not provide legal or tax advice. Clients should seek the advice of a qualified attorney or

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