Recessions Aren't Always a Roadblock - Consider These Benefits

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Defining a Recession

Let’s begin by clarifying what a recession entails. “Most commentators and analysts use, as a practical definition of recession, two consecutive quarters of decline in a country’s real inflation-adjusted gross domestic product (GDP)- the value of all goods and services a country produces.” (Source: International Monetary Fund; link below) According to the National Bureau of Economic Research (NBER), it’s a broader concept involving, “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators.” (Source: International Monetary Fund; link below) Both definitions show the negative outcomes so let's dive deeper into what some of the positive outcomes could be.

Short-Term vs. Long-Term Views

Why would a decline in economic activity be considered a positive factor? The answer lies in the window of time you view it. In a free-market economy, businesses compete for customers. During a recession, consumers tend to spend their money more wisely, favoring businesses with lower prices or higher quality to make their money go further. While this may lead to short-term challenges such as job losses and business closures, it encourages efficiency. In the long run, recessions help eliminate less efficient companies from the market, allowing more efficient ones to thrive and take their place. In the long run, this helps improve the economy's overall strength.

How to Navigate a Recession by Being an Opportunist?

Instead of being scared of a recession, why not consider it an opportunity for growth and improvement?

• Failed businesses can make way for new enterprises, offering better jobs, products, services, and prices.

• Individuals facing job loss can use the opportunity to learn and grow new skills, making a more significant economic impact on society and for themselves.

• Asset value declines can create opportunities for strategic financial moves like Roth conversions, portfolio rebalancing, or tax loss harvesting.

A recession could be a great time to invest in yourself. Warren Buffett famously said, “Whatever abilities you have can't be taken away from you. They can't actually be inflated away from you. The best investment by far is anything that develops yourself, and it's not taxed at all.”

Navigating Recessions with Confidence

When news of a recession emerges, it's vital to resist succumbing to fear. Much like weightlifters intentionally break down muscle fibers for greater strength or home renovators tear down outdated designs for improved homes, recessions play a role in eliminating inefficiencies within our economic system.

Avoiding the pitfalls of political rhetoric is equally crucial during these times. Recessions often trigger frustration and political finger-pointing so it can be beneficial to remember that the benefits of a recession could be better than the harm of government intervention trying to prevent the recession from happening. Echoing one of my favorite quotes by economist Thomas Sowell, "The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics."

While recessions may bring short-term challenges, they are pivotal for maintaining a robust and growing economy in the long term. A recession might not fulfill every immediate desire, but it acts as a catalyst, paving the way for efficient businesses to address more needs at lower prices over time.

Sources:

International Monetary Fund https://www.imf.org/external/pubs/ft/fandd/basics/recess.htm#:~:text=Calling%20a%20recession&text=Most%20commentators%20and%20analysts%20use,and%20services%20a%20country%20produces.

International Monetary Fund

https://www.imf.org/external/pubs/ft/fandd/basics/recess.htm#:~:text=The%20NBER's%20Business%20Cycle%20Dating,real%20income%2C%20and%20other%20indicators.

Fiduciary Financial Advisors, LLC is a registered investment adviser and does not give legal or tax advice. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. The information contained herein has been obtained from a third-party source which is believed to be reliable but is subject to correction for error. Investments involve risk and are not guaranteed. Past performance is not a guarantee or representation of future results.

Home for the Holidays Magazine - Seeking Peace with Leanne Rahn

Leanne Rahn had the privilege to be featured in Real Estate By Aubree’s Home for the Holidays Magazine to talk to readers about “Seeking Peace”.

With a Christmas twist, Leanne emphasizes the importance of initiating peace within your financial life and the costly price that can result without it. Leave feeling encouraged, motivated, and driven to seek peace and to stop procrastinating. Turn the corner into 2024 with peace at the top of your mind.

Leanne, Aubree, along with many other West Michigan businesses are wishing you a very Merry Christmas!

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Home for the Holidays Magazine - Seeking Peace with Leanne Rahn

Leanne Rahn had the privilege to be featured in Real Estate By Aubree’s Home for the Holidays Magazine to talk to readers about “Staying the Course”.

With a Christmas twist, Leanne emphasizes the importance of not just your destination but your journey and the steps you take along the way. Leave feeling encouraged, confident, and motivated while understanding the value of remaining steadfast on your current course.

Leanne, Aubree, along with many other West Michigan businesses are wishing you a very Merry Christmas!

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5 Ways to Fight Inflation as a Business Owner

Fiduciary Financial Advisors, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

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5 Ways to Prepare Your Business For a Recession

Recessions, hard times, and slow growth are all things no small business owner wants to hear. But the reality is you will have times like these in your business. How do you prepare as a business owner? What can you do right now to go confidently through a natural phase of your business life? Let’s jump into five ways you can prepare your business for a recession: 

1. Build That Emergency Fund

We often talk about emergency funds on the personal side but we can’t forget about the business side. Set a goal to build a business emergency fund that would cover 3-6 months’ worth of business expenses (things like office supplies, payroll, rent, software subscriptions, etc.). There is always going to be something else you’d rather spend your business dollars on, but trust me when a recession hits you will feel so much better knowing your business essentials are taken care of. 

2. Pay Down Debt

Do you have a business credit card or a business loan that has reoccurring balances? Now’s the time to try and minimize that debt - especially debts with a high-interest rate. Being tied to a lender is never a good feeling and it’s even more challenging when business is hurting due to the economic surroundings. Once you have an established business emergency fund, chip away at that debt. Your future self will thank you. 

3. Look Ahead

All businesses have some seasons that are slower than others. Look ahead at your expected business activity in the months to come. Are they usually slower or perhaps you're coming up on your busiest time of the year? Taking a glance forward will help you know what to prepare in the now. If you know the slow months are quickly approaching, it might be time to build that extra cash reserve (maybe even slightly larger than normal) to tackle the slow months and weather a recession. 

4. Revisit Your Marketing Plan

It’s always a good idea to review your current marketing plan every so often to know what’s working and what’s not. Both your time and your potential leads are valuable - we want those two things to complement each other. Carve out an hour or two out of your time to do a deep dive into your marketing streams. Where are you getting most of your business? How much are you spending and are the dollars coming back to you in the form of new business? What type of marketing takes the most of your time and is it worth it? Are there new streams you could be taking advantage of? If and when a recession comes, you can confidently know your marketing strategy is at its best. 

5. Review Your Current Expenses

With subscriptions being at the click of a button nowadays, it can be easy to forget what services you are paying for and how much you are actually paying. There are some expenses that definitely are worth paying for and help your business tremendously but it’s a good habit to often review your current expenses to decipher that. Clean up your business budget and make the most of your business dollars by staying on top of your monthly costs. On the other hand, is there a service or product that, if purchased, will increase your productivity/your time/your leads/your quality/etc.? Then click that “checkout” button! This tip isn’t just to cut back on all your expenses but to help your business and your revenue be the most efficient possible.

As I mentioned at the beginning of this conversation, talk of recession is never something a small business owner wants to hear. But coming to terms with this natural economic wave and knowing how you can prepare will allow you to ride the wave with ease. So get to work on building your emergency fund, minimizing business debt, looking ahead at your business activity, revisiting your marketing plan, and reviewing your current expenses. The storm is a lot less fearful when you have shelter and an umbrella in hand. 

Fiduciary Financial Advisors, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

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How to Beat Inflation

What is Inflation?

Recently inflation has been a hot topic, but what exactly is inflation and why does it matter so much? Inflation is the rate of increase in prices over a given period of time caused by an increase in the money supply. Since this causes more money to chase after the same amount of goods and services in our economy, prices increase. Our money then has less purchasing power because we end up paying more for things than before. Inflation is not a new phenomenon but hasn’t been a big issue since the early 1980s.

If we look at the M2 money supply data below, which is how the Federal Reserve broadly measures the money supply, you will notice the large increase that happened during the COVID pandemic to try and help stimulate the economy. People can debate back and forth if that was the right or wrong thing for politicians and the Federal Reserve to do. I would like to instead focus on some practical tips to help weather the “inflation storm” and potentially come out on the other side unscathed or even better than before!

Have an Emergency Fund!

Having money sitting in an emergency fund is not the most exciting tip, and inflation will indeed decrease that purchasing power. However, the purpose of an emergency fund is not to make a high return. It is to have a liquid supply of money available in an emergency. Going without one could lead to more serious financial issues if something unexpected happens and you don’t have enough cash to cover it. Since the Federal Reserve has started to increase interest rates, we should see that translate into higher yields on savings accounts soon!  

Typically, I’d recommend 3-6 months of living expenses in your emergency fund, but you may want more or less depending on your situation.

• Are you single? 

• Do you have children? 

• Are you a one-income or two-income household? 

• Is your job in a high-demand sector?

• Could you easily find another job quickly if needed?

These are some questions you should consider when deciding how much money you should keep in your emergency fund. 

Own Assets!

Owning assets that produce income could help during high inflation and protect your purchasing power. As inflation increases, these income-producing assets should be able to increase their rates to help soften the blow felt by inflation. Real estate properties can command higher rents as inflation increases. If you can’t afford to purchase an entire property then REITs (Real Estate Investment Trusts) are the other potential option to gain access to that asset class with smaller capital amounts. 

Owning businesses is similar. The money the business receives as income may become less valuable due to inflation. If the business can increase the prices charged for goods and services, then the greater amount of income could offset the money being worth less. If you can’t afford to purchase an entire business, then consider owning parts of businesses through stocks, mutual funds, or index funds.

Own Debt?

I wouldn’t encourage anyone to go out and accumulate more debt. If you already have a fixed low-interest debt such as a mortgage, it may make sense to delay paying it off early. If inflation remains high, the money you use to pay back that debt will be worth a lot less in the future than the money you originally received. Using that money to invest in other assets could be a much better option.

Review Your Expenses

With inflation running high it’s the perfect time to look at your expenses. Review what you are spending your money on to figure out if it aligns with your long-term goals. Do you need five different streaming services? Is it time to stop eating out as often and start cooking more at home? Is it time to start carpooling to save on gas prices? Incorporating some of these ideas to help reduce your expenses is another potential way to decrease the effect felt by high inflation.

Invest in Yourself

I saved the best for last! Investing in yourself is one of the best ways to deal with inflation. Learn a new skill, read a new book, take a new class/certification program, and grow your knowledge base. By making yourself more marketable to your current/future employer and providing more value for them, you should be able to command a higher salary. That can help make inflation not sting quite as much. Even though things will cost you more, earning more money to help offset those costs can be a difference-maker. 

James Clear, the author of Atomic Habits, shared a powerful principle: a 1% improvement every day leads to you being 37x better at the end of the year. And I’m confident you can get 1% better at something every day! Inflation does not prevent you from improving yourself.

“Whatever abilities you have can’t be taken away from you. They can’t actually be inflated away from you. The best investment by far is anything that develops yourself, and it’s not taxed at all.”

— Warren Buffett

Fiduciary Financial Advisors, LLC is a registered investment adviser and does not give legal or tax advice. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. The information contained herein has been obtained from a third party source which is believed to be reliable but is subject to correction for error. Investments involve risk and are not guaranteed. Past performance is not a guarantee or representation of future results.

MONEY SESSIONS // The Power of Reinvesting in Your Business with Mista Caswell

The Power of Reinvesting in Your Business with Mista Caswell

Episode Description

In today's money session, we chat with Mista Caswell - a small business owner and West MI photographer specializing in weddings and engagements, lifestyle, and senior sessions. We chat all about the power of reinvesting in your business. Mista discusses her real-life examples of how prioritizing her business's growth has impacted the quality of work she can provide to her clients. If you are a business owner playing around with the idea of reinvesting into your business, this session is for you!

PODCAST // The One Thing with E.W.E. (Empowering Women Entrepreneurs)

The One Thing with E.W.E. (Empowering Women Entrepreneurs)

Episode Description

Have some goals in mind but not sure how to actually reach them? Leanne Rahn addresses the topic of “The One Thing” that you can do every single day to get to that someday goal that feels so far off! Each of us pitch in on this topic to see how we (and you!) can create simple but intentional steps to take daily, weekly, monthly and yearly to be the person you want to be! Ready to get that fire in your heart and to be motivated to become the best version of you for yourself, your business and others? Then you’re in the right place!

The ONE Thing Book by Gary Keller

5 Steps To Fast-Track Your Business Through Mentorship

Being a business owner means the work you put in, the opportunities given, and the paths you take are all on you. Sometimes, being a business owner can feel like you are all alone, left with the heavy task of figuring out how to succeed. But you are not alone! Every business owner goes through the same season. We all start somewhere. With that in mind, we have the opportunity to use others who have been down our same road and learn from them. Mentorships are powerful tools that we all can use right now. Here are five steps we can use to fast-track our businesses through mentorship:

1. List Your Inspiration

Who’s that person who is farther down the road than you in your line of business? Who is that woman or man that is just crushing it and you dream to be in their footsteps? Start writing a list of names. Think of your connections local and nationwide (Zoom calls, people!). If you haven’t talked to this person in years or maybe ever, stop fearing what could go wrong and start asking what could go right. 

2. Tax-Deductible Cup of Joe

Once you have a good list of who you want to connect with, offer to buy them a cup of coffee or a glass of wine. A welcoming offer like that can set the tone right. Plus - don’t forget, this is for your business. You bet you can deduct 50% of the bill from your taxes! Express to them their expertise would be valuable as you are trying to deepen your knowledge in the field. Never underestimate the power of buying someone else a $3 cup of coffee. 

3. Prep, Prep, Prep

Before you meet with your new-found mentor, develop a list of questions you want to ask. Some good financial questions to keep in mind are what unexpected expenses came up while growing their business? What is a realistic prediction of income growth? What area of their business did they invest the most time and money into? Having a list of questions ahead of time keeps you on track and makes sure you are getting the most possible value out of your time with this expert.

4. Vulnerability and Advice

Don’t be afraid to ask for advice. Maybe you are stuck between investing more money and energy into advertising or into in-person networking. Maybe you don’t know which direction to take next. Whatever it is, don’t be afraid to be vulnerable and ask for their input. Remember, they were once in your shoes too. Even if there isn’t one hill you are stuck on, ask for a piece of general advice from them. Their wisdom and mentorship are too good to pass up.

5. Let the Motivation Take Root

After your meeting, your mind is probably going to be running a hundred miles an hour. Different ideas and sparks are going to be all over the place. Don’t let that go to waste! Grab a piece of paper and pen and let the thoughts flow. There is something about getting all your thoughts on one piece of paper and from there, you can start to digest each to figure out which direction to take. Ignoring the motivation defeats the purpose of the mentorship meeting. Accept the motivation and let it come rushing out. 

Anthony Douglas Williams once said, “Knowledge comes from learning. Wisdom comes from living.”. Mentorship gives us the opportunity to gain knowledge from a wise individual. Surrounding ourselves with people we want to be like will often point us in the right direction. We all can use the tool of mentorship to fast-track our business to where we want it to be in the future. Listen, live, and learn. And maybe, when you get to your future self, you can be a mentor to someone else. We are in this together. 

Here, at Fiduciary Financial Advisors, we take our fiduciary oath seriously. We hold these five principles:

1. I will always put your best interests first

2. I will avoid conflicts of interest

3. I will act with prudence; that is, with the skill, care, diligence, and good judgment of a professional

4. I will not mislead you, and I will provide conspicuous, full, and fair disclosure of all important facts.

5. I will fully disclose, and fairly manage, in your favor, any unavoidable conflicts

Fiduciary Financial Advisors, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

Why I’m quitting a good job, in the middle of a pandemic, with my first kid on the way, to pursue my passion for financial advising

As I began to share with family, friends, and coworkers that I was changing careers to become a financial advisor a common question they asked was, “why?” or “why now?”. I think I knew on some level the answers to these questions but having to actually explain “why” out loud clarified for me what motivated this change and made me more and more confident I was on the right path.

1. I want to be able to see the impact my work has. I truly believe Steelcase and my work there has helped contribute to more inspiring work environments, but it can be hard for that to feel immediate or personal. For me, seeing the direct impact of helping people attain their goals and plan their financial futures will be more fulfilling.

2. Doing something I’m truly passionate about will bring out the best in me. I’m conscientious and hard-working regardless of what I’m doing, but I also know I’m at my best when doing something I really care about and enjoy.

3. I realized I had no control in the corporate world. A lot of people and companies had to do whatever it took to get by in 2020. I think Steelcase handled things as well as they could! But project cuts, people cuts, and being told how many hours you’ll work and where puts your lack of control in the corporate world into clear focus.

4. Change will only get harder. I certainly won’t have more time or energy once kids are part of the equation! That plus inertia makes me believe a leap like this will only get harder the longer I wait.

5. I never wanted to wonder “what if?” 

If I’m honest with myself, there are a lot of “I’s” and “wants” there. In many ways “pursuing a passion” does feel selfish and privileged, especially this year. Because of that I’m even more grateful for a supportive wife who encouraged me to get serious about pursuing this new career when she could have told me to be practical and keep a reliable job with a salary. I’m also thankful for family, friends, and coworkers who have offered encouraging words when they could have discouraged me or rolled their eyes. Thanks for being part of my team!

Lastly, thank-you to Fiduciary Financial Advisors for taking me on… I’m so excited to be joining an independent local firm that is doing things the right way! I never would have made this leap if it wasn’t to join something I really believe in.

Have you made or thought about a big change during 2020? Would be nice to know I’m not the only one!