dsmWealth: February 15, 2024

Local club pitches in for charitable investments
BY STEVE DINNEN

Members of the Contributors Breakfast Club could have had their ham and eggs, swapped tales about golf and called it a morning. But soon after forming in 1988, they decided to move beyond networking and see how they might live up to the “contributors” part of their name. They started contributing to community betterment projects through grants to nonprofit organizations.

The idea involves both funding and personal involvement. For example, they financially support Wildwood Hills Ranch, a riding academy in Warren County that works with disadvantaged youth, and also organize an annual obstacle course on the property to raise supporting funds. That hits all three Ts of nonprofit support: time, talent and treasure.

Club members also raise funds from dues and contributions. In 2003, each member pitched in $4,800 to open endowed accounts with the Community Foundation of Greater Des Moines, which manages their money and disburses funds to causes the club designates. As of January, those accounts had collectively gifted more than $1.7 million, with a remaining balance of $761,000 still on hand.

“You have developed a model to be shared and an impact to be proud of,” foundation president Kristi Knous wrote to the club. “We share your story … when we talk about best practices in charitable giving.”

For the club, best practices focus on a few nonprofits rather than scattering their contributions around town. The club prefers to support smaller organizations, especially those that work with kids at risk.

Members annually decide which groups to support. They make a three-year commitment to the charity, to lessen the disruption of one-off funding. The bulk of their donations currently go to Wildwood Hills Ranch, the Fellowship of Christian Athletes and the Genesis Youth Foundation, which promotes academics, athletics and arts among local immigrant communities.

The club is non-denominational but is guided by its members’ faith.

“CBC is a group of people who try to support organizations that promote Christian values, though having those values is not a stated goal nor a prerequisite for an organization to receive funding,” club member and former president Mark Riley said.

That’s not a bad way to handle breakfast.

To predict the future, look beyond the recent past
BY STEVE DINNEN

Are you a victim of recency bias? Or perhaps an instigator? You can be either or both. It happens to the best of us — in life, in sports, in school, in work and in the investing world.

Recency bias is the tendency to overemphasize the importance of recent experiences or the latest information we possess when estimating future events. Recency bias often misleads us to believe that recent events can give us an indication of how the future will unfold.

Here’s an example from Schwab: In 2021, real estate was one of the best performing sectors in the S&P 500 Index, delivering an annual return of 46%. A client who subsequently loaded up on real estate stocks may have been disappointed that the sector dropped 26% in 2022.

To combat recency bias, Schwab said its advisers help their clients take a broader view, to see how markets move over time.

Personally, I had an adviser with a different firm suffer from a bad case of recency bias when he tucked me into a Unit Investment Trust that increased 12% over three months. He predicted it would climb 48% for the year, but I sold it at a 5% loss.

So you’re on your own here. Just remember that recency bias is real, and it doesn’t care about you.

Four tips to shape up your financial wellness
BY SALENE HITCHCOCK-GEAR FOR KIPLINGER

Eating better. Exercising more. So many of our plans at the beginning of a new year tie into our physical health, and for good reason. But let’s not overlook our financial wellness. With nearly a full year ahead of us, now is a great time to make a commitment to money matters — things like better budgeting, saving for retirement and planning for the future.

According to a recent FINRA Investor Education Foundation study, 60% of Americans feel anxious about their finances. I wanted to get a sense of this closer to home, so we conducted an informal survey of employees in Prudential’s Individual Life Insurance business. The survey results were not surprising: Just 25% said they were feeling confident about their finances heading into the new year, with 34% saying budgeting was the top thing to focus on to improve their finances in 2024.

I often hear the question, “What does it mean to be financially well?” To me, it means you can comfortably pay bills, manage monthly expenses without worrying about where that money is coming from and have money set aside for emergencies. It can also mean you’re saving for retirement, you’re protecting your loved ones through life insurance and estate planning, and you regularly engage with a financial professional to ensure you have the right plans in place.

No matter where you are in your financial wellness journey, the start of a new year is the time to make sure you have a financial plan that inspires confidence and provides peace of mind. Here are four tips to consider:

Take it one day at a time
A key to achieving financial wellness is organizing and understanding your day-to-day finances, then creating a budget you’ll be able to follow. By tracking your spending, you can see where your money is coming from and going to, and it will be easier to take bigger steps, such as paying down debt or building an emergency fund.

Set financial goals
Do you know how much you have saved for retirement and how long it will last? If not, have you thought about what your plan is and how you’ll get there? While retirement is just one example, other financial goals can include buying a house or saving for your child’s college tuition. Setting short- and long-term financial goals, and making progress toward them, can play a big role in achieving overall financial wellness.

Protect against risk
Protecting yourself — and your loved ones — against serious financial disruptions and setbacks can help alleviate stress as you look to the future. From life insurance to health insurance to retirement savings, having the resources to navigate and manage financial challenges such as unforeseen illness or injury, or the premature death of a spouse, can be key to a financially secure life.

Connect with a financial professional
You’ve got help at your fingertips. A financial professional can help support you with advice and strategies you may have not considered. They will help you map out a realistic financial plan that can be part of your blueprint for a happy and healthy future.

Meet the typical millionaire: They're over 55, own a house worth nearly 7 figures and are probably moving to Scottsdale
BY JULIANA KAPLAN FOR BUSINESS INSIDER

Who wants to be a millionaire? Probably lots of Americans — but members of the rarefied club are likely to be white, older, and college-educated.

America's millionaires are flocking to cities such as Austin, Miami, and Scottsdale, Arizona. They're also making a return to New York City after a pandemic hiatus as lower-earning New Yorkers decide to leave.

But who are the members of America's seven-figure club? There are a lot of them, and their ranks have grown over the past few years; the Wall Street Journal found that 16 million American families held wealth of more than $1 million. Using the Federal Reserve Bank's Survey of Consumer Finances 2022 individual-level data, we took a look at the millionaires of America.

Millionaires — those who have a net worth of at least $1 million — are, perhaps not surprisingly, on the older end. They're predominantly 55 and older; just 2.4% are under the age of 35. Older Gen Xers and boomers have the millionaire market particularly cornered, with more than a quarter of millionaires in the 55 to 64 range.

Millionaires are also very likely to hold at least a college degree, with three-quarters of them having completed college. Under 1% of millionaires didn't finish high school or a GED.

And many millionaires have additional post-secondary education: According to BI's analysis, about 21% of millionaires hold a master's degree, and just under 17% hold a doctorate or professional school degree.

Millionaires are also mostly white, showcasing yet another example of racial wealth gaps in the U.S. Nearly 86% of millionaires are white. That's not constrained to just millionaires: According to the Federal Reserve, a typical white family's wealth dwarfs that of typical Black and Hispanic families, with the white family's wealth six and five times higher, respectively.

Millionaires are also predominantly homeowners, with about 95% owning houses. The average value of a millionaire's home is $982,938, suggesting many are real-estate rich — especially older millionaires who've had time to grow their home equity.

Similarly, about 47% of millionaires hold stocks; on average, they own $949,248 in stock. Meanwhile, about 35% of millionaires hold stock mutual funds. On average, those stock mutual funds are worth $996,663. They're also socking away a good amount for retirement, with an average total value of $452,491 in individual retirement accounts or Keogh plans, which are retirement plans for those who are self-employed.

That makes sense when it comes to how America's wealthy derive and hold wealth; those with ultra-high net worths like to park their money into equities and invest in stock and real estate. That composition of wealth has become one issue for politicians who have tried to hike taxes on America's wealthy.

More than a third of millionaires have a business that they either actively or non-actively manage. Those businesses are, on average, worth $3,304,674. Businesses that millionaires actively manage are worth $2,784,236 on average; ones that they don't actively manage are worth $520,438.

And millionaires do like to splurge on some of the things you'd expect. Roughly 94% of them own a car. About 40% own two cars, and about 18% own three cars. They're also splashing out on eating out and eating at home. On average, they spend $5,286 on food away from home annually; they're also spending about $548 on average on food delivered to their houses.

But, like many Americans, millionaires are also spending a lot on groceries: an average of $9,904 annually.