Volume 1 Issue 2

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Monthly Newsletter

Just what is comprehensive financial planning? As you invest and save for retirement, you may hear or read about it – but what does that phrase really mean? Just what does comprehensive financial planning entail, and why do knowledgeable investors request this kind of approach? While the phrase may seem ambiguous to some, it can be simply defined. Comprehensive financial planning is about building wealth through a process, not a product.

Financial products are everywhere, and simply putting money into an investment is not a gateway to getting rich, nor a solution to your financial issues. Comprehensive financial planning is holistic. It is about more than “money.” A comprehensive financial plan is not only built around your goals, but also around your core values. What matters most to you in life? How does your wealth relate to that? What should your wealth help you accomplish? What could it accomplish for others?

Comprehensive financial planning considers the entirety of your financial life. Your assets, your liabilities, your taxes, your income, your business – these aspects of your financial life are never isolated from each other. Occasionally or frequently, they interrelate. Comprehensive financial planning recognizes this interrelation and takes a systematic, integrated approach toward improving your financial situation. Comprehensive financial planning is long range. It presents a strategy for the accumulation, maintenance, and eventual distribution of your wealth, in a written

Comprehensive Financial Planning: What It Is, Why It Matters Your approach to building wealth should be built around your goals & values.

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plan to be implemented and fine-tuned over time. What makes this kind of planning so necessary? If you aim to build and preserve wealth, you must play “defense” as well as “offense.” Too many people see building wealth only in terms of investing – you invest, you “make money,” and that is how you become rich. That is only a small part of the story. The rich carefully plan to minimize their taxes and debts as well as adjust their wealth accumulation and wealth preservation tactics in accordance with their personal risk tolerance and changing market climates. Basing decisions on a plan prevents destructive behaviors when markets turn unstable. Quick decision-making may lead investors to buy high and sell low – and overall, investors lose ground by buying and selling too actively. Openfolio, a website which lets tens of thousands of investors compare the performance of their portfolios against portfolios of other investors, found that its average investor earned 5% in 2016. In contrast, the total return of the S&P 500 was nearly 12%. Why the difference? As CNBC noted, most of it could be chalked up to poor market timing and faulty stock picking. A comprehensive financial plan – and its

long-range vision – helps to discourage this sort of behavior. At the same time, the plan – and the financial professional(s) who helped create it – can encourage the investor to stay the course.

A comprehensive financial plan is a collaboration & results in an ongoing relationship. Since the plan is goal-based and values-rooted, both the investor and the financial professional involved have spent considerable time on its articulation. There are shared

responsibilities between them. Trust strengthens as they live up to and follow through on those responsibilities. That continuing engagement promotes commitment and a view of success. Think of a comprehensive financial plan as your compass. Accordingly, the financial professional who works with you to craft and refine the plan can serve as your navigator on the journey toward your goals.

The plan provides not only direction, but also an integrated strategy to try and better your overall financial life over time. As the years go by, this approach may do more than “make money” for you – it may help you to build and retain lifelong wealth.

Upcoming Events

January 18th 2018

Small Business Resource Expo

Location: ProSource Flooring Time: 4-6:00 PM

February 21st 2018

DFA Learning & Customer Appreciation Event

Presentation

“The Investment Journey”

Location: McLaughlin Motors Time: 5:30 PM

March 10th 2018

Bereskin Gallery Open House

Featuring Artist Radim Schreiber

Location: Bereskin Gallery Time: 12-1PM

For more Information contact Alex at (309)-517-5122 or Email Wealthmanagement@senb.com

MONTHLY TIP Are you building an emergency fund?

Consider investing a portion (or perhaps all) of those dollars in

an interest-bearing deposit account or bank vehicle, to help

them grow a little more.

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Summary When the Plains begin to heat up again next summer, this business expansion will be celebrating its tenth anniversary. Now, it’s not the longest expansion in modern history but fairly close. Which begs the question, what are some of the warning signs investors should be monitoring? We already have a few developments that are concerning, such as a labor market that is evolving from cool to a little hot and a monetary policy stance that is progressing from loose to moderately tight. An overheating labor market (not there yet) makes the Fed worried about an accelerating inflation outlook. Four rate hikes during this cycle and a likely fifth this month, have caused a dramatic flattening in the yield curve (another signal) with potential negative economic consequences.

Further signposts are an economy that begins to weaken, causing additional softening in demand which results in a decline in the pace of net job creation and a pullback in business investment and consumer spending. Credit conditions then tighten, and asset valuations typically drop, normally from cycle highs. This combination of events could upset an overextended economy. Where are we in the economic cycle?

It would seem the seventh or eighth inning, but we could go into extra innings. The labor market is ostensibly “tight” but wage growth has been chronically weak. Credit market spreads are near cycle and historical tights with a strong demand by

U.S. and international investors. The most troubling development is a major

flattening in the yield curve with long term rates declining and short-term rates

increasing. Notwithstanding an exogenous economic shock, the Fed is the central

player in determining the timing of the next recession. If they continue raising

rates in 2018 and 2019 as they have projected, the U.S. economy will likely

slow dramatically and potentially face a recession. We believe the Fed will heed

the message of the market and slow down the pace of rate hikes as they continue to

undershoot their inflation and wage growth targets. But that remains to be

seen. Equities

Equity markets continued to climb in November albeit with a bit more of uncertainty and volatility than in recent months. The S&P 500 has now traded higher in each calendar month of 2017 adding another 3.1% for the month improving the year-to-date return for the index to 29.2%. With earning season now complete, markets focused their attention on the progress of the GOP tax bill, the Russian election probe and the beginning of the holiday shopping season. Growth stocks, which have been responsible for much of the recent rally, have had occasional weak trading sessions during which investors have rotated into more defensive positions. Given the magnitude of the rally in growth stocks, it’s not (continued »)

uncommon to see some year-end profit taking and to date there hasn’t been a clear change in market leadership. In total, the Russell 1000 Growth Index finished the month up 3.0% roughly matching the 3.1%

increase in the Russell 1000 Value Index.

Information technology has been the top performing economic sector for the year (+38.8%) yet joins basic materials as the worst performing sector in November, increasing 1.1% and 1.0% respectively. The top performing sectors for the month were both defensive sectors of consumer staples (+5.7%) and telecommunications (6.0%). It’s of interest to note that in spite of their strong performance last month, staples and telecom remain two of the bottom three sectors for the year. We aren’t signaling a change in leadership but there has clearly been a fair amount of portfolio rebalancing.

Regardless of whether growth or value stocks grab the reins in 2018, what is clear is the fundamental backdrop for equity outperformance remains intact. Labor markets, consumer/ business sentiment and manufacturing remain elevated and/or accelerating. The holiday shopping season has also gotten off to a solid start which should help to buoy beleaguered retailers. Brick and mortar foot traffic on Black Friday, eroded just 2% by online sales, was considered a win by most analysts. Cyber Monday set a new record increasing 16.5% over last year to $6.6

billion in sales according to Adobe Digital.

The Senate has now joined the House in passing their version of a tax reform bill

and we expect them to settle on a final bill in the

coming weeks. Add a reduction in corporate

income taxes to an already favorable economic

environment and you end up with an appetizing recipe for continued

market success. Michael Flynn’s cooperation with Robert Mueller’s

investigation of the Trump administration as well as a change in leadership at the

Federal Reserve may create a bit of uncertainty in the intermediate-term.

However, the market’s momentum may be difficult to stop in the near term which should translate to happy holidays for

equity investors.

MONTHLY QUOTE “Education’s purpose is

to replace an empty mind with an open one.” - Malcolm Forbes

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Fixed Income It is widely expected that on December 13th the Federal Reserve’s Open Market Committee (FOMC) will announce the fourth-rate hike over the past year (since last year’s December hike was on December 14th) and the fifth since the tightening cycle began in December of 2015. The new target range for the overnight lending rate will be 1.25-1.50%. With the economy continuing to exhibit signs of solid growth, the unemployment rate declining to the lowest level in nearly 17 years, the stock market making new record highs and U.S. dollar remaining weak, the FOMC has all the cover it needs to continue its progress towards “normalizing” the rate even if the core rate of inflation has not yet reached their target level of 2% and has actually turned lower in recent months. For two months now, the Fed has also been reducing the reinvestment of securities as they mature

from its massive portfolio of security holdings. By not reinvesting, the size of the portfolio will gradually be reduced from a level of about $4.5 trillion.

With the increasing overnight Fed Funds rate, it seems logical that the yields in the shorter maturity end of the curve should continue to press higher. As of the end of November, the 2-year Treasury note yield had increased to 1.78% after starting the month at 1.60% and the year at 1.19%. The yields on longer maturity notes have not reacted similarly. The 10-year Treasury note yield increased only 3 basis points (bps) to end the month at 2.41%, but this level is actually 3 bps lower than where it started the year. This year’s flattening of the 2-year to 10-year by 63 bps likely indicates that most investors are not overly concerned about inflation accelerating materially above the target

range or that the Fed will actually raise the overnight rate to the level they forecast to be neutral, neither stimulative or accommodative.

While we believe that two or three additional rate hikes in 2018 or 2019 are likely for the cycle, we do not believe the Fed will increase the rate six or seven times as they currently are projecting. In either case, short rates should continue to move higher with the 2-year note piercing 2% in the first half of 2018. Longer end rates could trend slightly higher, but we are less optimistic about reaching our 3% target in 2018. Ironically, if the Fed lowers their expectation of rate hikes, longer rates will likely rise, but if they keep calling for a 2.75-3.00% overnight rate, longer yields will stay anchored or even fall as investors forecast their actions, causing the next recession.

Banking News Overdraft Protection and Overdraft Privilege

Life happens! With our busy lives, it’s easy to make mistakes such as forgetting to deposit a check, make a transfer,

or deduct your last debit charge from your balance. A simple error or balance miscalculation can lead to an unexpected shortage of funds. We understand that unexpected overdrafts occur from time to time.

To sign up, call us at (309) 757-0700, email custserv@senb.com or stop by any of our banking centers today!

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On your way to retiring, you may question whether you have saved enough. Three factors promote this anxiety, and you can take steps to counter them. Many people approach retirement with only a vague notion of how much money their “second acts” will require. You may need to amass as much as $1 million for a 30-year retirement; in some metro areas, you might need even more. Replacing the ambiguity with a goal, a target number determined in a consultation with a retirement planner, at least gives you an idea of how much to save. If your employer partly matches your retirement plan contributions, do all you can to bring that free money into

your account. If you earn the median annual U.S. salary (about $51,270), an average employer match of 2.7% of your salary would mean an extra $1,380 or so per year into your plan. Even over five or ten years, that additional contribution could grow and compound profoundly. You may be concerned that you are contributing

too little to your retirement fund each year. Vanguard says that the median deferral rate for the standard workplace retirement plan is only about 5%. A 10-15% annual contribution is widely recommended; strive to fund your retirement account at that level to respond to your concern.

Retirement Insight Are you Really Saving Enough for Retirement?

The High Cost of Self-Storage

Why are Americans spending so much money to stash little-used belongings? Maybe more households ought to have garage sales. Today, about 10% of Americans pay anywhere from $20-$300 a month to rent self-storage space. Nearly 75% of the world’s self-storage facilities are within our borders. That $240-$3,600 a year spent on storage could go into retirement savings accounts. Any one of four life events – death, divorce, downsizing, or dislocation – can prompt the decision to rent storage space. The first month may be free, but a cash drain follows as tenants succumb to one or more of three tendencies: they rent for far longer than they anticipate they attach too much sentimental value to what they are storing; they fail to shop around for better rates. A decision about whether to keep or jettison items may be emotional, so rather than face it, tenants postpone it and pay more money to the landlord. As a rule of thumb, a tenant may want to try to be out of a self-storage space within a year, unless the storage space is necessary for business purposes

Watch out for “Lifestyle Creep” Did you just get a raise or a promotion?

Beware of Lifestyle creep – the tendency to spend more when you make more. Be sure to direct

appropriate amounts of your increased income into savings and investments.

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4 Large, Firm Tomatoes 1 Cup Milk 2 Cups Diced, Cooked Chicken 2 Tbsp. Flour 2 Tbsp. Butter 1/2 Cup Shredded Medium Cheddar Cheese 1/2 Cup Finely Diced Celery 1/4 Cup Chopped Green Onion Sea Salt (To Taste) Black Pepper (To Taste) Parsley (For Garnish)

Slice the top off of each tomato, scoop out the pulp, and set aside. Grab a pinch of sea salt and sprinkle inside each tomato 'shell,' allow to drain upside down. Melt butter in a pan over medium heat. Stir/blend in flour, and continue to blend and cook - stirring until bubbly. Turn off

heat, stir milk into mixture, and then place back onto low heat. Cook, stirring, until mixture is thickened and smooth. Stir celery, onions, cooked chicken, and 1/4 cup of the cheddar cheese into flour/milk/butter mixture. Season with sea salt and black pepper as desired. Fill each tomato shell with the mixture, arrange filled shells on pie plate or shallow baking dish, and then sprinkle with remaining portion of shredded cheese. Bake stuffed tomatoes at 350 degrees for approximately 20 minutes (or until top is baked and golden). Garnish with parsley, if desired. Enjoy with sour cream or on their own!

Happy Holidays from SENB Bank Check out our Holiday Video below

Recipe of the Month Cheesy Chicken Stuffed Tomatoes