The 5 Most Influential Books for Sales Professionals

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As an avid reader and former sales professional, I’ve read my fair share of sales-related books. Along the way, I have read some truly transformational books. In this post, I wanted to highlight 5 books that cover everything from people skills to handling objections in sales interactions. Diving into these books will undoubtedly level up your sales skills and, in turn, enhance your career.

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How to Win Friends and Influence People by Dale Carnegie

While not directly related to sales, this is one of my favorite books that I revisit every so often. Dale Carnegie’s book is an easy read that details strategies you can implement into your daily life to improve existing and new relationships. Dale outlines necessary people skills that will directly impact your relationship with customers and, in turn, benefit long-term business relationships. On top of this, his principles, if incorporated outside of work, can improve your personal relationships as well.

Favorite Quote

“To be interesting, be interested.”

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Objections by Jeb Blount

I am a fan of every Jeb Blount book I’ve read, but for the sake of variety, I picked my favorite for this list. Jeb specializes in sales writing as he is a successful sales professional himself. The fact that he has lived and worked in the industry validates his writing even more. “Objections” outlines the concept of resistance in sales interactions. He then takes a psychological approach to explaining the best approaches to address and properly sidestep those objections. Given that every sales professional deals with objections daily, this is a must-read.

If you are looking for a deep dive into specific sales material, start by reading all of Jeb’s books.

Favorite Quote

“In every sales conversation, the person who exerts the greatest amount of emotional control has the highest probability of getting the outcome they desire.”

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Atomic Habits by James Clear

While all of these books are compelling, “Atomic Habits” just might be the hardest to put down. I am convinced that most people would read the entire book in a day if given the chance. James offers a simple path to improving efficiency by creating good habits and breaking your unwanted ones. While building good habits is essential, we most often benefit from breaking our unproductive cycles. “Atomic Habits” has continued to allow me to assess how I spend my time and focus on the activities that are truly productive.

Favorite Quote

“You should be far more concerned with your current trajectory than with your current results.”

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How I Raised Myself from Failure to Success in Selling by Frank Bettger

After a brief stint in professional baseball with the St. Louis Cardinals, Frank went on to a successful career in sales, as well as writing. Similar to Jeb Blount, what I appreciate most about Frank’s writing is the fact that he had lived everything I was experiencing. Despite the significant gap in time from the writing of his book until now, I find the principles in this book to be timeless. Even though time has passed, people still think the same. Frank’s writing discusses the benefits one can gain from self-motivation and a bit of enthusiasm in the workplace.

Favorite Quote

“The most important secret of salesmanship is to find out what the other fellow wants, then help him find the best way to get it.”

Gap Selling by Keenan

“Gap Selling” is one of those books I wish I would have read sooner. Keenan’s main point in the book revolves around finding the gap in your customer's current plan and positioning your product as the best way to resolve that gap. I think that the ability to point out customer inefficiencies while also holding the solution is a powerful tool. Pair this with some of the people skills discussed in “How to Win Friends and Influence People”, and you have a solid foundation for each sales conversation you have.

Favorite Quote

“You don’t close the gap by selling; you close the gap by diagnosing the problem.”

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Fiduciary Financial Advisors, LLC is a registered investment adviser and does not give legal or tax advice. The 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.

Financial Planning Feature: Americans' top 5 financial regrets - and how to avoid them

Ben Lex was recently featured in a Financial Planning article titled “Americans' top 5 financial regrets — and how to avoid them”.

In it, he dives into retirement savings and the high interest rates of 2023. Check out Ben’s insights - they’re golden nuggets for leveling up financially.

Making the Most of Your Sales Income

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When it comes to managing variable income, there are several strategies to turn uncertainty into opportunity. If you’ve had a chance to read my previous post “How to Budget on a Sales Income”, then you are in the right place. Whether you’re new to the industry or a seasoned vet, my goal is to share ways you can maximize your sales income beyond your monthly budget.

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Give Yourself a Raise

One of the best parts about being a commissioned sales professional is the ability to create your own raise. Regardless of your commission structure, the more you sell, the higher your income. In a sense, you have a greater influence on your income based on the effort you put forth. While there is no guarantee that increased effort will lead to increased sales, more often than not, it does. This serves as a significant motivator for sales professionals to put in efforts that will ultimately drive sales and boost their income. This increased income will open the door to exploring further avenues for maximization.

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Supercharge Your Retirement

Most people have retirement goals, and it seems that retiring early is becoming a more popular goal. Whether you aim to retire at 55 or intend to continue working until 67 because you love what you do, having options is crucial. A great use for excess income would be to contribute to a separate retirement account in addition to your employer's 401k plan. Consider accounts like a Roth IRA or Traditional IRA. A Roth IRA allows you to contribute after-tax dollars, that will grow tax-free. The beauty of this account lies in the tax-free growth it offers, along with the fact that there are no required minimum distributions(RMD). On the other hand, a traditional IRA provides a tax deduction in the year it is funded and is a key attraction of these accounts. Collaborating with a certified investment advisor like myself can help determine which account makes more sense based on your income in the given year, projected retirement income, and goals for retirement. At the end of the day, funding these accounts is a simple way to invest more dollars toward your retirement, and provide yourself with options down the road.

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Fluctuation Creates Stability

Sales professionals experience varying degrees of income fluctuations. Some have a base salary they can count on, while others rely solely on commissions. Regardless, one of the greatest ways to maximize on the variability is to use high-earning years to create stability for your lower-earning years. As an example, let’s say you significantly exceed your sales target this year and make twice your budgeted income. You should have a standard protocol to enlighten where that money should go. One of the first things I would do is to put a good chunk of that excess aside for potential future use. That way, if your next year is not as profitable as the current one, you can still take advantage of supercharging your retirement or building up your safety net, while still covering your budgeted expenses. By doing this, you create a level of stability, even though your income is not.

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Tax Advantages

When it comes to tax planning for sales professionals, I cannot emphasize enough the importance of working with a CPA experienced in handling variable incomes. Tax planning for a variable income can feel like trying to hit a moving target, and that is where the experience becomes invaluable. To top it off, forming a financial team with your financial advisor and CPA working together can uncover potential tax advantages in a given year. Having this team will allow for tax-efficient investing and creative tax planning. Given the income variability associated with commission-based roles, working with your financial team each year ensures that you’re making the right choices for your income in that specific year.

Final Thoughts

Managing a variable income will require deliberate financial decision-making, but it can also create opportunities that not everyone has. Being intentional with where your excess money goes will allow you to not only hope but have confidence that your financial plan will succeed.

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References

https://www.irs.gov/retirement-plans/amount-of-roth-ira-contributions-that-you-can-make-for-2023

OpenAI. (2023). ChatGPT [Large language model]. https://chat.openai.com

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.

MoneyGeek Feature: Women’s Guide to Financial Independence

Leanne Rahn had the privilege to be featured in MoneyGeek to talk to readers about “Women’s Guide to Financial Independence”.

Leanne discusses challenges women face when it comes to their finances and how they can maximize their cash flow to support their financial independence.

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 Manage Large Commission Checks

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There is no shortage of demands that pull at our wallets. Following a budget can help guide your income, and should be a priority. But what do you do when excess money comes in that is not factored into the budget? One advantage of working in sales is the potential to earn more than your budgeted income which I outline in my article “How to Budget on a Sales Income”. Whether you make a full commission or a base salary plus commission, there are several strategies you can employ to manage your additional commission income wisely. Here, I discuss one approach I don’t recommend and two that I endorse.

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Approach 1 - Spend It

The approach I have seen many colleagues take over the years is to immediately spend the extra money on whatever it is they have been eyeing for a while. This approach rarely makes sense, as the money is gone just as soon as it hits your bank account. While I understand that you worked hard for that money and on some level it should be enjoyed; I do not see this as a prudent approach to managing a large influx of money. Now that we’ve addressed a strategy that I wouldn't suggest, let’s dive into two approaches I do recommend.

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Approach 2 - Save and Invest

The “save and invest” approach is going to be the primary approach for someone who considers themselves to be a saver. There is nothing wrong with this approach; in fact, it is arguably the best approach for securing your financial future. Saving provides stability and peace of mind, especially in a role that has income fluctuations. Investing allows you to get your money working for your future self. Consider using this income influx to max out your 401k or IRA for the year. Depending on your income level, it might be worthwhile to consult with a financial advisor and explore the option of a backdoor Roth IRA. You can refer to the IRS website for those phase-out limits, and see if this is an option for you due to high income.

This approach will also appeal to someone who needs to pad their savings and increase their safety net. Early on in my sales career, I used this strategy to ensure I always had enough money in the bank on the rare chance that I lost my job. It is by no means the most attractive approach but can provide the most peace of mind.

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Approach 3 - Bucket Strategy

The third approach, which happens to be my personal favorite is the “bucket strategy”. You can imagine this strategy as having a budget for your excess money. You create different-sized “buckets” that you can divide the money into. For instance, you could allocate 20% to investments, 20% to savings, 10% to spending, 20% to vacations, 20% to charitable giving, and 10% to taxes. You can customize the number and size of buckets based on your needs. I prefer this strategy because it allows you to combine the 2 other approaches, and creates a sustainable balance. There is room for you to enjoy some of your hard-earned money on what you want while saving for your future at the same time.

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One Final Tip

If the commission is unusually large, it would be wise to set some of that commission payout aside in case of a high tax bill the following year. I have experienced this myself, as have many colleagues. Thanks to using the third approach, I have been able to handle larger tax bills with no issues. If there ends up being no tax implications, you can use that money elsewhere. It’s better safe than sorry.

Final Thoughts

Your financial life could be very simple, or more complicated, and as with most matters, there’s no one-size-fits-all solution. Determine what works for you and choose an approach that you can confidently implement.

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References

https://www.irs.gov/retirement-plans/amount-of-roth-ira-contributions-that-you-can-make-for-2023

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.

The Difference Between a Fiduciary and Other Financial Advisors→

Finding a financial advisor that you can trust can be an arduous task and it’s often easiest to settle on large, recognizable names of broker-dealers when conducting a search. While the name recognition of these large companies can feel comforting in clearing up some of the unknowns about the financial advice industry, it may not always be the best option. I’m hoping to offer some helpful advice as you go about your due diligence.

The Difference Between a Fiduciary and Other Financial Advisors

In a perfect world it would be easy to spot the difference at surface level, and most of the time it is made clear from the start, but there can be gray areas, so let’s put some facts on the table. Fiduciary financial advisors have taken an oath to always act in their clients’ best interest and are legally obligated to do so. Brokers are held to a suitability standard, meaning if they can justify that the product they’re selling would benefit the client, they’re able to recommend it, even if that comes at a higher cost to you.

Fiduciary advisors act in an independent capacity and have no obligation to Dealers to sell certain products or reach certain sales goals. Brokers work first and foremost for their company and follow less stringent guidelines with the suitability standard. This isn’t to say that all brokers are bad and will make recommendations that are poor choices for their clients, they’re just not obligated to make the best choice every time.

How Does This Affect You?

A key difference that we’ll keep coming back to is cost and payment structure. Brokers earn commissions, potentially leading to over-utilization of insurance products based on suitability, diverting premiums from more effective uses. Many times, brokers are given a list of investment options from the dealer that can have higher fees than similar alternatives. With a condensed world of investment considerations, their best option may not be your best option.

Fiduciary advisors with Registered Investment Advisors (RIAs) have fee-based or fee-only compensation structures allowing them to separate themselves from the product. The difference in fees allows them to operate in a service-based model, likely offering comprehensive financial planning. Some services a fiduciary may offer include estate planning, tax planning, business exit planning, cash flow analysis, 401k analysis, and so much more.  The difference is akin to putting a band aid on an injury or providing preventative care and maintenance for the underlying issues. While all fiduciary financial advisors may not offer all these services and all brokers may offer some, the incentive to sell products and move on is something to be aware of.

How do you Identify a Fiduciary?

The best way to identify a fiduciary is by looking for the CFP letters next to an advisor’s name. While this area can be a bit gray when it comes to one-time recommendations, in most cases Certified Financial Professionals are required to act in a fiduciary capacity. Another strong determinant is if they blatantly state they are a fiduciary on their website. Finally, you can ask them to sign a Fiduciary Oath to clear up any questions. If they don’t want to, you may have your answer.

Money is a universal tool and vital resource for you and your family. I urge you to seek out a professional that acts in your best interest to help you achieve your financial goals. While the process in finding a trustworthy financial advisor can be time consuming, it’s better to put the legwork in up front so you can enjoy the benefits down the road. The industry of financial advice is evolving and I believe we’re heading towards the fiduciary standard being more prominent in the landscape. Until then, I hope my take helps you make sound decisions as you look to navigate your financial journey.

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References:

https://www.investopedia.com/financial-edge/0312/5-facts-financial-advisors-wish-you-knew.aspx#:~:text=Investment%20advisors%20have%20a%20fiduciary,best%20possible%20pricing%20and%20performance.

https://www.voya.com/blog/fiduciary-legally-required-act-your-best-financial-interest-and-not-their-own-heres-why#:~:text=Careers-,A%20fiduciary%20is%20legally%20required%20to%20act%20in%20your%20best,for%20those%20new%20to%20it.

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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.

Cruisin' or Bruisin'? Why I'm Pumping the Brakes on an Electric Whip...for now

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To Buy or Not to Buy an Electric Vehicle

If you're here due to the catchy title, a big shout-out to Chat GPT for helping me craft it. Electric vehicles (EVs) have stolen the spotlight in recent years, with increasing popularity, advancing technology, extended range, and expanding infrastructure. While the perks of owning an EV have grown, let me share why I'm holding off on buying one for now.

The Charging Conundrum

Charging a vehicle differs from a quick gas fill-up. Though I have an attached garage for convenient overnight charging, Michigan needs more charging stations for me to feel at ease. I prefer a quick stop for gas; waiting 30 minutes for a full charge doesn't align with my lifestyle. As a single, one-car family, my decision becomes more nuanced. With two vehicles, an EV for local trips and a gas-powered one for longer journeys might be a consideration.

Solid-State Battery Technology on the Horizon

Current EVs boast a range of 200-400 miles, but Toyota's upcoming solid-state battery tech, expected by 2028, promises a staggering 745-mile range. While 200-400 miles may seem like a lot, weather conditions can significantly impact the range of EVs. Consumer Reports notes that cold weather can sap 25% of the range, and warm weather can sap 31%. (Source: Consumer Reports; link below)

Living in Michigan, where winters are harsh, a 25% drop would mean a range of only 150-300 miles. With future solid-state battery technology, a 25% decrease would still offer a substantial 559-mile range. The new technology is expected to improve performance in cold/warm temperatures and have faster charging capabilities.

Financial Implications

As a financial advisor, numbers matter. In July 2023, the average price of a new EV was $53,469, compared to $48,334 for a gas-powered vehicle. (Source: Kelley Blue Book; link below) The $5,135 difference could cover a lot of gas at $3.00/gallon—1,712 gallons, to be precise. Factoring in electricity costs, the payoff might not kick in until after 4.28 years, assuming you currently drive 10,000 miles a year at 25mpg.

Anticipating a potential drop in used EV prices when the new solid-state battery technology arrives, concerns arise about the long-term value of today's EVs. Battery replacement costs and additional tire wear are also negative factors; the absence of an engine, no oil changes, and fewer moving parts are positives when comparing EVs to traditional vehicles.

Reliability

Reliability is a crucial factor when I am choosing a vehicle. According to Consumer Reports, EVs have shown 79% more problems than gas vehicles, while plug-in hybrids have 146% more issues.

In contrast, hybrids have had 26% fewer problems than gas vehicles over the last three model years. (Source: Consumer Reports; link below) Better reliability gives me hope for less time and money getting things fixed in the future.

Hybrid Appeal

I currently drive a hybrid with an impressive 45-50 mpg, I find it to be the sweet spot between EVs and traditional gas vehicles. Slightly pricier than gas-powered vehicles, hybrids offer superior gas mileage, fewer gas station visits, better reliability, and no range anxiety. Their smaller, lighter, and less expensive batteries add to their appeal.

While EVs have made strides, a massive leap forward is anticipated in the next four years. From a financial perspective, sticking to a regular or hybrid vehicle for now, and re-evaluating the EV landscape when the new battery technology becomes available seems like a sensible choice.

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References:

Consumer Reports https://www.consumerreports.org/cars/hybrids-evs/how-much-do-cold-temperatures-affect-an-evs-driving-range-a5751769461/

Kelley Blue Book https://www.kbb.com/car-advice/how-much-electric-car-cost/#:~:text=According%20to%20data%20from%20Cox,gas%2Dpowered%20vehicles%20at%20%2448%2C334.

Consumer Reports https://www.consumerreports.org/cars/car-reliability-owner-satisfaction/electric-vehicles-are-less-reliable-than-conventional-cars-a1047214174/#:~:text=This%20year%27s%20survey%20data%20show,problem%20spots%20than%20conventional%20cars

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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.

Ask an Advisor: I'm Having a Baby. How Should I Financially Prepare?

Leanne Rahn had the privilege to be featured in Financial Planning.com’s “Ask an Advisor” column to talk to readers about how parents can financially prepare for a baby.

As a mama of two herself, Leanne shares her tips and tricks on how to save money, minimize taxes along the way, her favorite child savings vehicles, and more. Check out the post below!

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Invest Like a Sales Professional

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Investing is confusing for many people. You are stuck trying to find the best strategies and performance, while still minimizing risk. On top of finding a strategy that is in line with your situation and goals, you have to be willing to ride the rollercoaster that is the stock market. If you work in sales, you have the added complexity of managing your variable income. Everyone has their opinions, but I firmly believe that there’s more than one way to achieve your financial goals. In this article, I aim to offer some principles that can simplify investing for sales professionals.

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Employer Match

Many employers offer a contribution matching program, and taking advantage of it can feel like getting free money. For this reason, it is likely to be the first step in maximizing your investments. Nowadays, many plans even provide a Roth option, which can be a great perk to take advantage of. The employer contribution will be pre-tax, so putting your contribution into the Roth bucket allows for tax-free growth of your retirement assets. If you find yourself in a high-income position, make sure to keep your contribution below the annual limit, so that you can invest any additional money outside of your employer plan. The current employee contribution 401k limit for 2024 is $23,000 with a catch-up contribution of $1,000 if you are 50 or older, although the limit can change annually.

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Tiered Approach

Once you’ve maximized the employer match, you should have a strategy for your next investment contributions. Your next step is likely to maximize your Roth or traditional IRA contributions. If you still have funds you want to invest, then this is where your options expand, depending on your financial goals and risk tolerance. Whether you plan to fund a taxable account or invest in real estate, this is the time to do it. There is no one-size-fits-all approach, so I highly recommend consulting a professional to walk you through the pros and cons of each option and help you find an approach that is aligned with your goal. One way to keep track of your tiered approach would be to follow the method I outlined in “End-of-Year Financial Checklist: 7 Steps for a solid Financial Plan”. This allows you to automate your plan and ensure everything is in order towards year-end.

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Dollar Cost Averaging or Lump Sum

Most individuals enjoy the consistency that accompanies dollar cost averaging (DCA). This is an excellent approach for someone with a consistent income. During my time in sales, my income was never truly “consistent”, and I find that to be the case across the board for most sales professionals. Let me also be clear that the approach you should take is the one you will stick to. Research has shown that lump sum investing can be superior to DCA due to the time in the market, but DCA is still very effective and useful for risk-averse investors. Working in a heavily commissioned role will often result in using a lump-sum approach, and it is important to not shy away from it. Nobody has a crystal ball when it comes to the stock market and can know the best day to invest. With that being said, you are typically better off letting your money start working for you as soon as possible.

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Tax Considerations

Tax-efficient strategies should be a key element of every sales professional's investment strategy. This could involve using a Roth IRA, doing backdoor Roth conversations, or tax loss harvesting. While being tax-conscious, you will still want to maximize investment performance. This is truly a balance and should be considered when deciding on an investment strategy. I recommend working closely with a certified public account (CPA) who works in tax preparation and can give advice on your tax efficiency.

While many investing principles are synonymous with most individuals, these are a few strategies to keep in mind for sales professionals who often have high, fluctuating incomes. These guidelines are intended to provide clarity to investing. If you want specific advice on investment strategies, consult a financial advisor that is willing to take your entire financial picture into account, and help you find an approach that is in your best interest.

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References

https://www.irs.gov/newsroom/401k-limit-increases-to-22500-for-2023-ira-limit-rises-to-6500

https://investor.vanguard.com/investor-resources-education/news/lump-sum-investing-versus-cost-averaging-which-is-better

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.

How to Budget on a Sales Income

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How can I budget when my income is variable? If you’ve asked yourself this question, you are in good company. Most sales professionals experience the challenge of figuring out how to plan for their fluctuating income. Let’s walk through tips on the basics of budgeting off of a variable income.

I’ve had the joy of working in sales and experiencing this firsthand, and now working with sales professionals as their financial advisor. Variable income will present itself in one of two ways; employees will be compensated with full commission on sales or a mixture of base salary plus commission. These principles will pertain to both individuals, with an added emphasis on those with fully commissioned roles.

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Step 1: Estimate Minimum Expenses

Start by listing your monthly expenses, distinguishing between necessary and discretionary expenses. Necessary expenses would include housing, utilities, insurance, food (groceries, not eating out), and transportation. You can do this on paper, excel, or through an app. This will give you a budget that is broken down by normal expenses and bare minimum expenses. Understanding your bare minimum expenses is crucial when developing a safety net.

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Step 2: Establish Safety Net

This amount will be different for everyone but ultimately is based on the security of your job, income, and lifestyle. If you feel like you have a very secure job and a lower-cost lifestyle, you could stretch this amount to a low end of 3-4 months' worth of expenses. If your job is highly competitive and your company has been known to frequently replace underperformers, it might be a good idea to have closer to 6 months' worth of expenses.

The other piece of this safety net revolves around how easily you can find another job, should you leave or be let go from your current role. If you have confidence in your ability to get a new job within a month, then we can stretch to the lower end. If you work in a specialty sales market with a longer timeline to hire. I always recommend that you take whatever you think makes sense for your current situation and add a 1-2 month buffer. This safety net is in place so that you have options in case of job loss.

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Step 3: How to Budget

You should have already created a complete budget in step one. If not, add the rest of your non-essential expenses to your bare minimum budget. This is what you can plan to live off of once your safety net is established. If you have a base salary as part of your compensation structure, I recommend making sure your salary covers your entire budget. This way you won’t depend on sales commissions and will have massive financial flexibility.

This can be a bit more challenging if you’re someone who is in a 100% commission role. First things first, I would attempt to have a 6-9 month safety net. Sales can be a rollercoaster of a profession, and the compensation tends to follow. Even if it rarely comes, you need to be prepared for the worst-case scenario. To create a budget off an entirely fluctuating income can be done in two ways. The first way is to take your previous year's income and budget off of that. This can be a useful strategy, especially if your previous year was more of an “average” year. The method I prefer to use is based on forecasting. To do this, you need to have a good understanding of your company's payout structure and project forecast. Take your projected sales target and assume you will hit exactly 100%, or 90% if you want to be conservative. Multiply the amount of sales by your commission percentage to get your yearly income, and don't forget to take taxes off of that number. Either way, it's crucial to add some extra room when making these estimations.

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Step 4: How to Manage When You Get Off Track

While I wouldn’t wish this on anyone, I understand that volatility of sales doesn’t play favorites. On the rare occasion that you hit a major dry spell with your commission, don't panic and remember the safety net you established. Although it can be challenging, temporarily reducing your expenses to cover only the essentials might be necessary. This will ideally be a short-term adjustment, and that is why it is important to have your bare minimum budget.

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Balancing a variable sales income can be challenging as every year is different. However, utilizing this approach will provide the necessary safeguards to protect you and your family. Along with financial protection, implementing these suggestions will come with a level of stress reduction that can often be associated with a fluctuating income.

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.

YahooFinance Feature: 13 Key Signs You’ll Always Be Middle Class

Ben Lex recently got a shout-out in a Yahoo! Finance article titled “13 Key Signs You’ll Always Be Middle Class”.

In it, he dives into the major signals holding people back from growing their wealth. Check out Ben’s insights - they’re golden nuggets for leveling up financially.

A Beginner’s Guide to Investing

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If you’ve ever felt that the world of investing is confusing and intimidating, you’re not alone. There is a lot of information, but it can be a challenge to know where to start. Let’s explore the steps necessary to begin investing, simplify your approach, and figure out what is going to work for you.

Investor Types

There are three main types of investors. The first is someone who prefers to be hands-off and hires an advisor to manage their entire financial picture, like a personal CFO. The second person likes to take the DIY approach to financial management. The third individual falls somewhere in between, opting to hire a financial advisor for their investment management while staying informed on the strategy and approach being used. Each of these approaches has its pros and cons, but it is important to know that all can be effective at different times.

Establish an Emergency Fund

Regardless of your approach, before you start investing, it is wise to establish an emergency fund that will protect you and your family in case of… well, an emergency! Having this fund in place will allow you to start investing and stay consistent, even if you have major expenses arise. Once your emergency fund is established, you can sort out the remaining information needed to begin investing.

Goals and Risk

The first step to investing is to understand your individual goals and risk tolerance. This is entirely custom to your financial situation, so it is important to not take a blanket approach. Examples of financial goals might include saving for your child’s college education, retirement planning, or vacation. Each of these goals will come with its own timeline and risk tolerance. It is important to select accounts that will line up with your savings goals. For instance, if you are saving for a college education, you might choose to invest in a 529 plan since it is an education-specific account.

Once the account is established, you can determine the timeline of your investment, and what risk you are willing to absorb. You will often see longer investments placed into a more aggressive allocation because you have more time to absorb the fluctuations of the stock market. If your timeline is short, however, you may prefer to use a more conservative investment approach. It is important to continually adjust your risk tolerance over time, and if you are not confident in your ability to manage this, don’t hesitate to seek out a professional.

Investment Capacity

In this example, we will assume that you are already contributing to an employer plan to get the employee match, which can often be a great starting point for investing. Beyond that, you have to decide how much money you are willing to invest consistently, based on your current budget. I discuss this in my post, “Mastering Your Money: Budgeting Essentials and When You Need Them”. I am a fan of incorporating investment contributions into your monthly budget if possible, and automating those contributions. This eliminates the concern of “timing the market” and allows you to take advantage of time in the market.

Pick a Strategy

Now that you have your emergency fund, established goals, risk tolerance, and your investment capacity, you can now decide on your approach to investing. For the DIY investor, it is important to do your research and find a strategy that has historically performed consistently well. This is not the time to dump all your money into the newest investing “fad”. Find a good balance of investments that aligns with your goals and risk tolerance. The balance that you want to see here is called diversification. This means that you are intentional in picking funds that give you broad exposure to the stock market, as opposed to putting all of your eggs in one basket.

If the thought of picking investments, or even doing the research is intimidating, it might be time to seek out a certified investment advisor who can help guide you through everything I’ve outlined here. When doing so, make sure to find a fiduciary advisor who is not going to make commissions on your investment selection.

Stay the Course

The final piece, and perhaps the most important is to stay the course. Investing is a long-term play that will have fluctuations over time. Some people handle this fluctuation better than others. If you struggle with the fluidity of the market, try not to view investments on a weekly or monthly basis, but on a yearly basis or longer. As we saw in the graph above, avoiding the market is not the answer.

Keep in mind that there is no one-size-fits-all approach to investing, and what worked for someone may not be what is best for you. Have confidence in your approach, and stay the course.

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References:

https://investor.vanguard.com/investor-resources-education/how-to-invest

https://www.schwab.com/how-to-invest/how-to-start-investing

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.

Mastering Your Money: Budgeting Essentials and When You Need Them

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The findings of a recent survey done by The Harris Poll found that 74% of Americans have a monthly budget. It’s a significant number, and one might assume that budgeting is the key to financial well-being. However, it raises questions about why consumer debt remains on the rise despite so many people budgeting. It’s a fair question to ask. Let’s explore the purpose of a budget, how to create it, and find out if everyone should be following one.

Why Budget?

A budget is a strategic plan to evaluate your income and expenses. People create budgets for various reasons, but they all boil down to effective money management. You might be saving for a vacation, working to pay off debt, or hoping to gain a better understanding of where your money is going. All of these are great outcomes we see from budgeting, and easier said than done. If we had to boil it down to one main reason, I’d say that you work too hard for your money to be unintentional with where your money goes.

How to Budget?

Budgeting can take shape in multiple ways, and there are a few steps to take regardless of your preferred method.

1. Collect your spending and income: Ideally, your income would exceed your spending. If this is not the case, now is the time to find areas where you can cut expenses to make sure you are living within your means. You can create your budget in a spreadsheet where you are in charge of tracking each expense or utilize an app that tracks everything for you.

2. Include goals: Once you have a good handle on your baseline budget, integrate any goals you have such as debt pay down, saving for large expenses, or retirement.

3. Track and Adjust: Your budget should be fluid, and will likely change every month. Give yourself the flexibility to make these changes as unforeseen expenses arise.  

4. Stay Consistent: The true benefit of budgeting comes when you stay consistent over the long haul. Find an approach that suits you, and stick with it. As one goal is accomplished, start on your next one.

Do I Need to Budget?

While the benefits of budgeting are evident, not everyone will choose to implement one. If you're not going to budget, at the very least, consider tracking your income, expenses, and investments every month. For your financial health, it is necessary to know that your income is more than your expenses and that you are investing in your retirement.

Final Thoughts

In the second quarter of 2023, we saw credit card balances grow by $45 billion, consumer loans increased by $15 billion, and auto loans by $20 billion according to the Center for Microeconomic Data. The persistently growing consumer debt underscores the importance of budgeting for each household. While implementing a budget may not lead to overnight transformation, it can set you on a path to a better financial future and provide increased peace of mind.

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References:

https://www.bls.gov/news.release/cesan.nr0.htm

https://www.bankrate.com/banking/create-a-home-budget/

https://www.nerdwallet.com/article/finance/data-2023-budgeting-report#:~:text=While%20close%20to%20a%20third,has%20to%20come%20from%20somewhere.

https://www.newyorkfed.org/microeconomics/hhdc.html

OpenAI. (2023). ChatGPT [Large language model]. https://chat.openai.com

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.

End-of-Year Financial Checklist: 7 Steps for a Solid Financial Plan

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To enhance your financial situation, consider doing an end-of-year financial review. This doesn’t need to be a complex or time-consuming process, but it can set you up for success in the next year. Here are 7 steps to help guide you through your end-of-year review, and gain confidence in your financial plan.

1. Review Your Budget and Spending

Begin by assessing your spending habits. If you don’t currently use a budget, I would look at your expenses and make your best guess at creating one for the coming year. If you’re already dedicated to your budget, this is the time to figure out what worked well, and what needs to be changed. Think about these questions as you forecast for the next year.

• Is my income going to remain the same?

• Do I need to be more strict in one area, or loosen up in another?

• What large expenses am I anticipating in the coming year that I can plan for?

• Am I saving and investing enough of my income?

Remember that your budget should be a fluid tool to ensure you know where your money is going.

2. Prepare for Tax Time

Much of your tax planning will have to wait until next year, but it can be helpful to get a few items in order before tax season. You can collect business expenses, charitable giving receipts, childcare expenses, and other tax-deductible items.

The final piece of preparation for tax season would be to decide how you plan to prepare your taxes. You might do it yourself or prefer to hire it out. There is no wrong way to go about it, but now is the time to reach out and find a good CPA that you can work with to optimize your tax situation.

3. Max out your Contributions

The end of the year is the ideal time to review the contributions you have made to your retirement accounts. While doing this it’s important to know the maximum limits you can contribute to each account. When dealing with retirement accounts, we are typically talking about an employer-sponsored plan such as a 401k, 403b, and 457; or a brokerage account such as a traditional or Roth IRA. The employer plan limits for the year 2023 are $22,500 for employee contributions. It is important to note that this does not include the employer match. On top of this, if you are 50 years or older, you qualify for what is called a “catch-up” contribution that allows you to contribute another $7,500, bringing your total to $30,000 max for the year. The IRA options max out at $6,500, with a $1,000 catch-up contribution if you are 50 and older. Even if you can’t max out these contributions, adding to a Roth IRA can still benefit your financial future.

4. Review Investments

If you work with a financial advisor, now is the time to reach out and see if you can sit down with them for a year-end review meeting.

If you are a DIY investor this is still a great time to reconfirm your approach, assess performance, and rebalance your portfolio. It may be time to consider working with an advisor, if so, opt to find a fiduciary advisor who has your best interest in mind.

5. Consider a Roth Conversion

Roth conversions are done by transferring pre-tax dollars into a Roth account which will then grow tax-free. This approach can be great for someone nearing retirement who has a large amount of their wealth in pre-tax accounts. It can also be beneficial for young professionals with plenty of time for the investment to grow. This does not make sense for everyone, so consult a financial professional to weigh the pros and cons of this option.

6. Open Enrollment

Open enrollment occurs at different times of the year and is dictated by your employer. It is most commonly presented around early November and allows you to review or change your employee benefits options.

This is a good time to ensure you’re getting the best value on your insurance plans. You may even find that you qualify for additional plans such as term life insurance or disability coverage at little to no cost to you and your spouse.

7. Confirm Beneficiaries

While this is not something that changes often, it is necessary to make sure that they are up to date. Here are some accounts that should have a beneficiary associated with them. 

• Retirement accounts (401k, 403b, 457, and IRAs)

• Investment Accounts

• Bank Accounts

• Life Insurance Policies

Having beneficiaries properly assigned can help you have peace of mind that your loved ones will be taken care of. 

Walking through this checklist can give you a clear picture of your current financial situation, and set you up for success in the coming year.

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References:

https://www.experian.com/blogs/ask-experian/year-end-financial-checklist/#:~:text=Otherwise%2C%20gather%20information%20about%20your,and%20invested%20over%20the%20year

https://www.irs.gov/newsroom/401k-limit-increases-to-22500-for-2023-ira-limit-rises-to-6500#:~:text=Highlights%20of%20changes%20for%202023,to%20%246%2C500%2C%20up%20from%20%246%2C000

https://www.bankrate.com/personal-finance/end-of-year-financial-checklist/#checklist

https://www.investopedia.com/terms/b/beneficiary.asp#:~:text=Beneficiaries%20should%20be%20designated%20for,may%20need%20your%20financial%20help

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.

Maximizing Tax-Smart Charitable Giving: 4 Strategies to Consider

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If you are passionate about supporting your favorite charities while optimizing your tax liabilities, this blog post is tailored for you. We will explore four tax-smart strategies that could help you maximize your charitable giving. It's essential to consult your tax professional before implementing these strategies, as everyone's financial situation is unique.

1. Bunching Your Contributions

The standard deduction for 2023 varies depending on your filing status: $13,850 for Single Filers, $27,700 for Married, and $20,800 for Head of Household. To benefit from itemizing your tax return, your total deductions should exceed the standard deduction. Otherwise, choosing the standard deduction might be more straightforward.

For example, if you are married and plan to donate $15,000 annually to your preferred charity, and your standard deduction is $27,700, donating $15,000 alone wouldn't surpass the standard deduction. In this case, opting for the standard deduction makes more sense.

However, consider an alternative approach: accumulate $15,000 in year 1, year 2, and year 3, totaling $45,000. During the first two years, take the standard deduction, and in year 3 donate the $45,000 and itemize your tax return to deduct the charitable donations. This three-year "bunching" strategy could help minimize your overall tax burden.

"In general, contributions to charitable organizations may be deducted up to 50 percent of adjusted gross income…" (Source: IRS; link below)

2. Using a Donor Advised Fund (DAF)

A Donor Advised Fund (DAF) is a specialized account designed for charitable donations. When you make an irrevocable donation to a DAF, you become eligible for a tax deduction in that year. The funds in the account can be invested and directed to specific charities in the future.

You can combine the bunching strategy with a DAF, which can be especially useful if you donate to multiple charities. It simplifies tax recordkeeping and may be appreciated by your CPA.

3. Giving Appreciated Investments Instead of Cash

Donating appreciated investments from a taxable brokerage account directly to a charity can be advantageous. When you sell an investment in such an account, you typically incur capital gains taxes. However, donating the investment directly to a charity may allow you to avoid capital gains tax. Ensure you've held the investment for at least one year to qualify for long-term capital gains treatment and claim the deduction if itemizing. (Source: Fidelity; link below)

The cash you initially intended to donate can be used to repurchase the investments, effectively resetting your cost basis. This can lead to lower capital gains when you eventually sell the investments, resulting in reduced future tax obligations.

4. Qualified Charitable Distribution (QCD)

As you approach retirement, you'll be required to take Required Minimum Distributions (RMDs) from your traditional retirement accounts, typically starting between 70.5 and 75 years old, depending on your birth year.

If you wish to allocate some or all of your RMDs to charity to avoid paying taxes on them, consider a Qualified Charitable Distribution (QCD). You can direct your RMD to your chosen charity, provided it's the first withdrawal of the year. This strategy is beneficial if you are already planning on being charitable while facing RMD requirements.

Utilizing these strategies for charitable giving can significantly reduce your tax liability. Supporting charitable causes is admirable, and doing so while optimizing your tax situation is even better.

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Jurgen Longnecker

Action Tax & Accounting, PC 616.422.3297 actiontaxandaccounting.com

I'd like to extend my thanks to Jurgen Longnecker for his contributions to this blog post. Having insights from a CPA regarding charitable contributions and taxes is always incredibly valuable.

References:

https://www.irs.gov/charities-non-profits/charitable-organizations/charitable-contribution-deductions

https://www.fidelity.com/viewpoints/personal-finance/charitable-tax-strategies

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.

SavvyMoney Feature: 6 Tips For Teaching Your Kids to Save

Leanne Rahn had the privilege to be featured in SavvyMoney to talk to readers about “6 Tips For Teaching Your Kids to Save”.

Leanne shares tangible tips and steps parents can implement to create a positive environment around money for their littles.

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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MoneyGeek Feature: Women’s Guide to Making Financial Moves After College

Leanne Rahn had the privilege to be featured in MoneyGeek to talk to readers about “Women’s Guide to Making Financial Moves After College”.

Leanne discusses challenges women face as they begin their financial journey after college and what they can do to set themselves up for a fruitful financial life.

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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Is A Financial Advisor Worth It?

If you have extra time, are interested in finances, and are willing to research the actions needed to become successful financially; then you might not need a financial advisor. There are a lot of great free resources available if you are willing and able to put in the time and effort. That being said, there are also many reasons why you might choose to work with a financial advisor. 

You might:

• Be too busy with work/life to complete research on your own

• Deal with analysis paralysis and need some guidance on how or where to invest

• Get nervous during periods of market volatility and need someone to give you reassurance and prevent you from making an emotional investing decision that could cost you a lot of money

• Need someone to help keep you accountable and consistent with investing

• Not be interested in finances/investing and would rather pay someone to help so you can spend more time on things that you enjoy

Whether you are currently working with a financial advisor or looking to work with a financial advisor, here is a review of some ways financial advisors could add value to your investing plan according to Vanguard. If you do not need/want a financial advisor you may still want to focus on these areas as you manage your own financial plan. (Source: Vanguard Advisor’s Alpha; link below)

Value a Financial Advisor Could Bring

As I review the seven modules that Vanguard presents, please keep these quotes from the paper in mind.

“Paying a fee to a professional who follows Vanguard’s Advisor’s Alpha Framework described here can add value in comparison to the average investor experience, currently advised or not. We are in no way suggesting that every advisor—charging any fee—can add value. Advisors can add value if they understand how they can best help Investors.”

“We do not believe this potential 3% improvement can be expected annually; rather, it is likely to be very irregular.”

“Some of the best opportunities to add value occur during periods of market duress or euphoria when clients are tempted to abandon their well-thought-out investment plans.”

(Source: Vanguard Advisor’s Alpha; link below)

1. Suitable Asset Allocation Using Broadly Diversified Funds/ETFs     Value: >0.00%

Asset allocation is the percentage of investments you have in stocks, bonds, cash, and alternative investments. Factors to help determine your asset allocation are your risk tolerance, risk capacity, and the goals you have for that particular sum of money. Having the right mix of investments for your specific situation and goals is very important. Vanguard found this value add to be significant but stated it was too unique to quantify.

2. Cost-Effective Implementation (expense ratios)     Value: 0.30%

After determining your asset allocation, the next step would be to decide what investments to invest in. One thing that you have a lot of control over is how much you pay to be invested in the stock market. The difference between the returns you achieve and the cost you pay is your net return. Vanguard recommends keeping your expense ratios low, and I agree. A high expense ratio for a fund could be greater than 1% whereas a low-cost index fund could be as low as 0.04%. Vanguard found this value add to be 0.30%.

3. Rebalancing     Value: 0.14%

Your asset allocation can drift over time. Let’s say you originally invested 80% in stocks and 20% in bonds. One year later if stocks perform better than bonds, you might now be 90% stocks and 10% bonds. If you want to control your risk and stick within your risk tolerance, then rebalancing back to the original 80% stocks and 20% bonds may make sense for you. Rebalancing can also help you buy low and sell high. It forces you to buy the investment that underperformed and sell the investment that overperformed. This is easier said than done. If you had an investment that did really well, emotionally you may not want to sell some of it and buy the investment that underperformed. A financial advisor could do this automatically for you. Vanguard found this value add to be 0.14%.

4. Behavioral Coaching    Value: 0.00%-2.00%

As human beings, we all have emotions. During periods of market volatility and downturns, having an advisor to help prevent you from changing your investment strategy could be very valuable. When COVID initially started, the market took a huge dive as the economy shut down. I know a few people who sold completely out of the stock market because of fear. Then when the market recovered they missed out on the huge gains that followed. They let their emotions get the best of them and ended up locking in their losses by selling. If they would have had an advisor to help them stick to a financial plan they might be in a better position today. Vanguard found this value add to be 0.00%-2.00%.

5. Asset Location     Value: 0.00%-0.60%

There are three main types of accounts where you can keep invested assets: Tax-deferred accounts, Tax-free accounts, and Taxable accounts. Having the right investments inside of the correct accounts could help you pay less in taxes, which would leave more money left over for you. Here is a figure from the Bogle Heads forum which reviews which funds might be better for the three different account types. A financial advisor could help you decide which investments should be inside which accounts. Vanguard found this value add to be 0.00%-0.60%.

(Source: Bogleheads Wiki; link below)

6. Spending Strategy (withdrawal order)     Value: 0.00%-1.20%

If you only have investments inside of one account type then this module wouldn’t bring any value to you. On the other hand, if you have some investments inside of a 401(k), a Roth IRA, a Health Savings Account, and a taxable brokerage account then which account you withdraw money from first could add a lot of value and help you save on taxes.

You might withdraw from your 401(k) for your required minimum distributions for that year first, then you might consider taking money out of your taxable brokerage account, after that you might decide to withdraw money from your Roth IRA, saving your HSA for later. Having money invested in different account types can allow you to adjust how much tax you pay during your retirement years. Withdrawing money in a sub-optimal order could cause you to pay more taxes! Vanguard found this value add to be 0.00%-1.20%.

(Source: Vanguard Advisor’s Alpha; link below)

7. Total Return Versus Income Investing     Value: >0%

This includes helping investors decide what kind of bonds to include in their portfolio such as short-term, long-term, and high-yield. Guiding investors to not focus solely on retirement income with bonds but to also consider capital appreciation that could add value over the long term. This could also help decrease risk and increase tax efficiency. Vanguard found this value add to be significant but stated it was too unique to quantify.

So Is Having a Financial Advisor Worth It?

That is a value judgment, so only you can decide if having a financial advisor is worth it. Vanguard has shown that advisors can add up to, or exceed, 3% in net returns by following their Advisor’s Alpha framework. Over a long period that could add tremendous value to your financial plan. That’s if you are being charged reasonable fees for the services provided. This figure shows the median advisory fees based on account size.

• If you want to do it on your own, make sure to do your research so that you can invest well

• If you currently work with a financial advisor, make sure you what they are charging you and evaluate if they are following Vanguard’s best practices in wealth management

• If you want to work with an advisor then feel free to reach out to as I would happily meet with you to explain how I would be able to help you with your financial plan

(Source: Kitces Blog; link below)

Sources:  https://advisors.vanguard.com/content/dam/fas/pdfs/IARCQAA.pdf

https://www.bogleheads.org/wiki/Tax-efficient_fund_placement

https://www.kitces.com/blog/financial-advisor-average-fee-2020-aum-hourly-comprehensive-financial-plan-cost/

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.