dsmWealth: January 4, 2024

The top travel destinations in the world — and Iowa
BY STEVE DINNEN

I’m sitting right now in the airport in Frankfurt, waiting for a flight to Amsterdam, which ranked fifth on Euromonitor International’s most recent list of the world’s most attractive cities to visit. Maybe one of them is on your wish list this winter.

Paris is No. 1, with something like 40 million visitors a year. Dubai (which may claim the world’s best New Year’s Eve fireworks) comes in at No. 2, followed by Madrid, Tokyo, Amsterdam, Berlin and Rome. New York, at No. 8, is the top American draw, while Los Angeles follows at No. 19. The cities were ranked on criteria including tourism, sustainability, economic performance, and health and safety.

But some of these cities suffer from too much of a good thing. A new report from CNN lists Amsterdam, Barcelona and Paris among the world’s most over-touristed destinations, along with Miami, Venice and Athens. In some of cases, the problem is a concentration of tourists. In Barcelona, everybody crams into the relatively compact Gothic Quarter, while the main attractions in Los Angeles are scattered across a city that’s five times as big.

And where might Iowa rank on the lists of exotic getaway spots? Well, a New York Travel Guides list of the “110 coziest winter towns in America for a magical getaway” tips its woolen cap to Pella (No. 27), Fairfield (No. 106) and Decorah (last but not least at No. 110). Leavenworth, Washington, topped the list, followed by several ski resorts in Colorado and Vermont. Those towns have a few obvious features that Fairfield doesn’t, but consider this: The Hotel Jerome in Aspen is $2,202 for one night, Jan. 23. The Coratel Inn in Fairfield will set you back $63.

Iowans travel all over, for all sorts of reasons
BY STEVE DINNEN

This winter some of our dsmWealth readers are going places that will never show up on any Top 100 destinations. Time with relatives is often the big draw. Or golf.

One couple I know is visiting a sister in Washington state after a stint in Phoenix for some sunshine. A former workmate and her husband are charting plans for Morocco. And a financial adviser in town joined with his wife and their in-laws to charter a 44-foot catamaran to hop around the British Virgin Islands.

Also bound for foreign shores is a scuba enthusiast from Des Moines. After a jaunt to Arkansas for some fishing, he’ll trek to the Philippines to meet up with friends and dive the Tubbataha Reefs in the Sulu Sea.

Ben and Barb Hildebrandt are heading to Germany to visit their daughter, who is working there on a Fulbright Scholarship. They also will visit the town in Germany where Ben’s mother was born and where he spent many of his teenage summer vacations. He’s brushing up on his German to speak with relatives.

Lawyer Jeff Courter is practicing his golf game before another trip — his 30th — to Palm Springs. It’s a popular spot for Des Moines folks for reasons he happily explained: “Palm Springs is hands-down the most pleasant and dependable good weather location for winter escape." In all his trips over 30 years, it only rained twice.

Experts expect the Fed to cut interest rates this year.
Here's how to prepare.
BY GREG IACURCI FOR CNBC

With U.S. Federal Reserve officials expecting to cut interest rates in 2024, there are steps investors can take now to prepare.

The central bank’s latest summary of economic projections, issued in December, indicates three cuts may be coming this year. This assumes each is a quarter-percentage-point decrease.

The Fed began raising borrowing costs aggressively in March 2022 to tame inflation. Inflation has since declined significantly from pandemic-era highs, and keeping interest rates too elevated risks tipping the U.S. into recession.

A cut in 2024 would be the first since the early days of the COVID-19 pandemic, when the Fed slashed rates to near zero to bolster the economy. Of course, there’s still ample uncertainty over how soon and how quickly the Fed may cut rates this time around.

Here’s what financial advisers say investors need to know.

Stocks’ runup likely won’t persist

Falling interest rates are generally a boon for the stock market, advisers said. Among the reasons: Businesses can borrow money more cheaply and are more likely to make big investments in their companies as a result.

However, 2024 is unlikely to see a repeat of stocks’ stellar performance from last year, advisers said.

The S&P 500 U.S. stock index rose 24% in 2023 following a year-end rally. That surge was partly forward-looking, reflecting investors’ expectations for lower interest rates in 2024.

“The stock market is the great anticipation machine,” said Charlie Fitzgerald III, a certified financial planner based in Orlando, Florida.

“If anyone was trying to time the market, they may have missed it already,” added Fitzgerald, a founding member of Moisand Fitzgerald Tamayo. “Because it’s what happened in the fourth quarter.”

Of course, that doesn’t mean all market growth is in the rearview mirror. But don’t make the mistake of buying stocks with the expectation of them continuing to rise, he said. That tendency is called recency bias.

That said, growth stocks like those in the technology sector are more likely to benefit from lower interest rates than value stocks, said Ted Jenkin, CFP, the founder of oXYGen Financial in Atlanta and a member of CNBC’s Advisor Council.

Now is the time to lock in CD rates

Cash and cash-like investments — such as high-yield savings accounts, money market funds and certificates of deposit — were among the big beneficiaries of rising interest rates. Rates on cash jumped to their highest level in years.

However, those rates are likely to fall once the Fed starts cutting borrowing costs.

“If you can lock in CD rates [at current levels], this is probably a good time to do it,” Jenkin said. “There are still a lot of places that offer 5%.”

Savers aren’t getting much more interest on longer-term CDs, like those with a five-year term, versus a shorter-term, one-year CD, for example — so it may make more sense to opt for one with a shorter term, Jenkin said.

Bonds are poised to pop

Bonds got clobbered by the Fed’s interest-rate-hiking cycle.

That’s because bond prices move opposite to interest rates. It’s like a seesaw: When interest rates rise, bond prices fall.

The share prices of bond mutual funds and exchange-traded funds sank in 2022, the worst-ever year for U.S. bonds.

Now, if interest rates fall, bond funds are poised for a rebound, advisers said.

An environment of gradually falling interest rates “is an easy place to make money in the bond market without a whole bunch of risk,” Fitzgerald said.

Those with a strong conviction that interest rates will fall may consider buying funds with a longer maturity, which would generally benefit more from declining rates, Jenkin said. However, they also carry more risk, he said.

REITs are another likely beneficiary of rate cuts

Real estate investment trusts are also poised to do well amid falling interest rates, Jenkin said.

“This is one of the top moves I’d be making with my money” if expecting rates to fall, he added.

The REIT sector “depends highly on the debt market to carry out business activities,” and such companies therefore “benefit from lower borrowing costs,” according to Zacks Equity Research.

For investors who buy, it would perhaps make more sense to do it in a retirement account like an individual retirement account or 401(k) plan, so the dividends aren’t taxable until later, Jenkin said.

As with any of these recommendations, it’s important to make investment decisions within the construct of a diversified portfolio, Fitzgerald said.

Hold an adequate amount of stocks in your portfolio relative to your age and time horizon, be disciplined and don’t freak out if and when the market goes down, he added.

Trick your brain into being better with money
BY OYIN ADEDOYIN AND JOE PINSKER FOR THE WALL STREET JOURNAL

The human brain isn’t very good with money. Even when we set out with the best intentions, we often end up making the same mistakes. There’s a reason the top three financial New Year’s resolutions for 2024 remain consistent with years past, according to Fidelity Investments surveys: save more, pay down debt and spend less.

Altering our habits and attitudes around money requires a little brain training and putting up some guardrails, behavioral scientists said.

First, acknowledge that having money trouble isn’t a personal shortcoming, said Wendy De La Rosa, a professor at Penn’s Wharton business school. “Our brains are fundamentally not wired to make the decisions that we’re asking ourselves to make,” she said. “You’re asking a single individual to stand up against a whole host of organizations who are incentivized to get you to part with your money as quickly as possible.”

The way to keep those forces at bay is to reshape your own financial environment, she said.

Simplify your bills

Big payoffs come from making one-time decisions right now that will streamline your finances in the future, said Abigail Sussman, a professor at the University of Chicago Booth School of Business.

One of her recommendations is to reschedule the timing of your recurring bills so that they are all due at the same time of the month, perhaps shortly after a paycheck hits your account. You can often request a new due date from your credit card company, cable provider and other billers. This practice reduces the chance of forgetting to make a payment and frees up some of your finite mental bandwidth to handle other things.

In the spirit of simplifying, Sussman also suggests consolidating your money into as few accounts as possible, and using a single credit card rather than chase points and rewards with several.

Set a financial health day

Adjusting your finances takes time. So schedule it.

“When you’re sick, you take a health day. When you need a vacation, you take vacation days,” said De La Rosa, the Wharton professor. “Put on the calendar, two weeks from now, a financial health day.”
Use that day to tackle tasks such as canceling a subscription you don’t use anymore or closing an account that has been hitting you with fees.

If a whole day of financial chores feels overwhelming, take 15 minutes a day to cross one item off your to-do list, said Bari Tessler, a financial therapist, who refers to these sessions as “money dates.”

“Ritualize it, make it creative, sit down, light a candle,” Tessler said. If you feel anxious during these activities, go for a quick walk or find something that will ease the tension. (She likes to have a mocha latte on her money dates.)

Make spending hurt

Upfront fixes have some power to improve your financial life, but making smarter decisions about spending is an ongoing challenge.

It can be too easy to buy a pint of ice cream or a flat-screen TV. Making yourself more aware when money is leaving your wallet helps people spend less, said Scott Rick, an associate professor of marketing at the University of Michigan’s Ross School of Business. He calls these actions “psychological speed bumps” that can protect you from overspending.

One tactic is to clear your saved credit card information from websites and apps. Having to re-enter the card number, expiration date and security code every time you check out online gives you a moment to think over the purchase.

People might realize, “‘Oh yeah, I actually have quite a bit of debt already this month on this card,’” Rick said.

Other favors you can do yourself while shopping online are installing an ad blocker so that tempting products don’t follow you around the internet, and designating one day of the week as a time to make all of your purchases. In the preceding days, keep a list of everything you plan to buy so that you can reflect more on what you actually want.

For in-person transactions, you can make spending more painful by asking for a receipt. Getting a physical one makes it easier to register how much you are spending in the moment, Rick said.

Sweeten the small stuff

Restricting yourself from purchases that you enjoy can create unnecessary guilt and lead to more stress. “You’re not going to become rich by not buying lattes,” Rick said. “Don’t beat yourself up over these little things that might actually be important for your mental well-being.”

See how much money you have left each month, Rick says, after accounting for monthly bills, retirement contributions, emergency savings and coming savings goals. Then the fun part: Spend the majority of the remainder on treats, anything that might make your life easier, or donations to charity.

And just because something is bought on a whim doesn’t mean it is a bad purchase, Rick said. Research also shows that budgeting too far in advance can lead to overspending. That is because the discomfort of limiting your spending with a budget fades over time. It is better to make such commitments closer to the fact.

“This is another place where people need some deprogramming,” Rick said. “There’s so much puritanical shaming of quick decisions to buy.”