March Newsletter from Woodward Financial Advisors

Greetings!

Hello from Woodward Financial Advisors! We hope our quarterly newsletter finds you well and enjoying the start of spring.

To begin this edition, we introduce you to our newest team team member, Libby Boehne. Next, Victor Colella, CFP®, shares a different way to think about budgeting. Finally, check out what some of us are reading in What’s On Our Nightstand.

Thank you for reading and please keep the great ideas for future content coming our way.

Introducing Libby Boehne

We're thrilled to introduce you to our newest colleague, Libby Boehne! Libby is a career changer who joined the Woodward team as a Wealth Advisor in 2021; some of you have already met her on Zoom or in the office. One of the things we appreciate about Libby is the enthusiasm she brings! Please join us in welcoming Libby and read more about her below.

Favorite band? U2 is my great love. I’ve met Bono, been to several U2 concerts, and would be beyond thrilled to hang out with the band. Many people tease me for my deep devotion, but I will stand by them forever.

Favorite sport to play/watch? I played tennis in high school, and it’s the only sport I watch.

Favorite movie? Waiting for Guffman.

Favorite recipe to make? I prefer to let my husband cook for me! He makes a great saag paneer.

Favorite vacation destination? My dearest friend lives in Santa Barbara, California, and it is paradise.

Favorite restaurant in the Triangle? Himalayan Nepali Cuisine in Morrisville.

Who do you admire? I admire my 96-year-old grandmother who lives in Kansas and is lovingly called Gagee. She has aged gracefully and keeps a sharp sense of humor.

What is the last country you traveled to outside the US? Cuba.

How long have you lived in NC? I moved to Durham in 2011 for graduate school and never thought I’d stay away from my home city of St. Louis this long, but the Triangle is a great place to call home.

What was your first job? When I was 12, I had my first babysitting job and watched ten children at once. I’m not sure what the parents were thinking in hiring someone so young, but it was a great payday for a middle-schooler.

What’s the last book you’ve read (or book you are reading right now)? My Name is Asher Lev by Chaim Potok.

Tell us about your family? My husband, Charlie, is a Licensed Clinical Social Worker and mental health therapist, with a specialty in substance abuse.

To learn even more about Libby's background, you can read her bio on our website here.

Nonno’s Alternative to Budgeting

If you google “Budgeting” – you’ll quickly find headlines like “6 Reasons You Need a Budget” and a million different “how to” articles about things like the “envelope system” or the “50-20-30 rule,” or the “80-20 rule.” I could keep going, but it’s enough to say that general wisdom is that we should be budgeting, and there are many ways to budget that all claim to put you in control of your financial future.

I’m not railing against the goals of budgeting here, such as living within your means or being more intentional about how you spend your dollars. The benefits of budgeting are significant, and it is a valuable exercise for almost anyone. However, much like exercise, the best workout is the one that you stick to. For those of you who are diligent budgeters, this article isn’t a criticism. In fact, I’m in awe of you. Many people out there fail to reap the benefits of budgeting because they can’t stick to it, and I’m one of those people.

I’m not [only] here to confess my failures as a budgeter or to make anyone feel bad about their inability to follow-through on their budget – I come with an alternative. Whether you’re budgeting traditionally or not, our cashflow (whether we’re retired or working) boils down to a simple formula:

Income – Expenses = Savings

If savings are positive, then you’re actively saving and likely working.

If savings are negative, this number represents a withdrawal

from your portfolio – this is especially important for retirees.

I know – this formula seems obvious. Most traditional budgeting focuses on the expenses part of this equation: your income is fixed and your savings/withdrawals are an output, not an input. The hope is, if you’re able to control your expenses, there will be more money left over at the end of the month for savings. While that’s true, it can be hard to achieve without some serious time spent tracking and categorizing spending. Like any formula, with a little algebraic magic, we can rearrange the order of things:

For working folks: Income – Savings = Expenses

For retired folks: Income + Sustainable Withdrawals = Expenses

When you flip the formula, you flip the script – suddenly expenses aren’t an input to manage, but an output of focusing on the important things.

For working folks: If you know how much you need to save to achieve your long and short-term goals, start with that number and see if you’re able to live on what remains after you’ve “automated” your savings to come out of your bank account (or paycheck) first. If you have extra money left at the end of the month, then maybe you can increase your savings (or your spending… live a little!), but you certainly don’t need to track whether you’re spending on restaurants, hobbies or kid’s clothes. If you don’t have enough at the end of the month, then it’s time to start making tradeoffs. E.g., do I really need Netflix, HBO GO, Hulu Live AND Cinemax? Could we go out to eat a few less times this month? Might I limit my Amazon orders to one per week? All that matters is that you’re able to reduce your total expenses to bridge the gap, or agree to accept less ambitious goals (or find ways to increase your income).

For retired folks: Just like the working folks are focused on the amount they need to save to achieve their goals, you should be focused on the sustainable withdrawal range from your portfolio, which ensures a sufficiently high likelihood that you’ll achieve your goals in retirement. Admittedly, for both working and retired folks, arriving at the amount to save or the amount to withdraw can sometimes require some assistance from an advisor (we’ve heard Woodward Financial Advisors is a great firm in the area), but your effort will be worthwhile.

Much like our savers can automate transfers to their accounts, you can do the same with your sustainable withdrawal, creating a paycheck to supplement your Social Security or other income in retirement. If you’re accumulating cash, maybe it’s time to reduce your draw on your investments. If you’re finding that you need to supplement your spending with additional withdrawals, it might be time to think about some tradeoffs: do I need to do the Alaska and Caribbean cruises BOTH this year? Do I really need to buy the Ferrari, or will the Honda work? Do I really need to buy a vacation home, or can we just rent when we want to go on vacation?

The benefit of this alternative approach is simple – as long as you start with what matters, and try to live “within your means” on what remains, the categories of your expenses cease to matter. This leaves you free to enjoy spending your time on what matters most to you, which likely is not budgeting.

There’s a quote from my Great Grandfather (and namesake), Vic Giovanelli, that has been etched into my brain by many family members over the years, starting with my first ever paycheck from the local golf course. He always said, “pay yourself first – and the rest will take care of itself.” This simple thought from Nonno Giovanelli has been a life changer for me, my family, and for so many of our clients. It’s my sincere hope that it does the same for you.

Written by Victor Colella, CFP®

What's On Our Nightstand...

Every newsletter a couple members of our team share a brief introduction to a book they have been reading. We hope you may find something that piques your interest, and we would be delighted to hear your recommendations.

Austin Brown - How the States Got Their Shapes by Mark Stein

Have you ever wondered why your state’s boundaries look the way they do and why those borders are located where they are? If so, then you likely will find How the States Got Their Shapes an enjoyable and educational read. Mr. Stein offers historical, political, geographical, and economic reasons for the shapes and locations of the states’ borders. The book is littered with maps, which I find very helpful, showing the border sections described in the text. Each state is its own 5-to-8 page chapter, which makes navigating within the book easy and allows me to skip around to different states first rather than reading it linearly. I now have a better understanding why my home state of NC has a relatively straight northern border, while its western and southern borders are more jagged.

Jessica Hobbs-Mullins – Atomic Habits by James Clear

Many self-help books tend to come off as cliché and annoyingly positive. James Clear impressively dodges these pitfalls by providing practical, evidence-based, self-improvement strategies without all of the extra fluff. This novel will make you rethink how you define progress and give you tools to transform your habits as you take on your goals this year. Even the most pragmatic reader among us will be able to find solid inspiration from James’ straightforward breakdown of developing impactful changes to improve your life.

Thank you for reading our March newsletter! Please reach out if there is anything we can do for you.

Sincerely,

Your Friends at Woodward Financial Advisors

Woodward Financial Advisors

1504 East Franklin Street, Suite 105, Chapel Hill, NC 27514.