Route 664 Podcast Feature: Wealth Planning

Andrew Van Alstyne had the privilege to be featured on the Route 664 Podcast.

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Andrew discusses the significance that proper financial planning can have on multi-generational wealth and the importance of doing thorough, comprehensive financial reviews.

Click the Links Below to Watch or Listen to the Full Episode:

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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Financial Freedom and Wealth Trailblazers Podcast Feature: Financial Guidance and Planning

Andrew Van Alstyne had the privilege to be featured on the Financial Freedom and Wealth Trailblazers Podcast.

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Andrew discusses the importance of finding an advisor that aligns with your needs and who understands your relationship with money. He also discusses the significance that proper financial planning can have on multi-generational wealth.

Click the Links Below to Watch or Listen to the Full Episode:

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 Much Should You Invest for Retirement?

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When it comes to investing, we all have to start somewhere. It can be easy to look for a set number or percentage of income to invest and stick with it. While that may be the simple approach, I believe more needs to be considered when choosing an amount to invest continually. With that being said, this should not be so complicated; it takes forever to figure out. While investing will look different for everyone, there are some helpful guidelines to establish what investing should look like for you.

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The Importance of Investing

We must first establish why you should invest in the first place before diving into how to invest. Investing gives you the advantage of putting your money into a vehicle designed to grow wealth. This is the classic case of risk vs reward. You could leave your money in a savings account but will get minimal growth, if any. The alternative is investing some of that money into the stock market strategically to take advantage of a multiple percentage return.

When investing, it is crucial to know your goals with that money. This could be anything from saving for vacation to retirement planning and anything in between. Knowing what you are investing for is one piece of the puzzle. The second piece to consider is the timeline of your investment. If you are investing money that you plan to use for a vacation six months from now, your strategy will look significantly different than the money you invest towards your retirement, which is 20 years away. The final consideration is the risk you are comfortable taking with your investment. The timeline plays a role in this, but a personal component needs to be considered and talked through with a financial advisor.

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How Much To Invest

When it comes to establishing the amount you are investing, it again depends on multiple factors. You must take into consideration the end goal as well as your own capacity to invest. The overarching recommendation is to invest 15%-25% of your income toward retirement. While this can be a helpful target to shoot for, this amount could be too little with the end goal. Instead of picking an arbitrary amount, I suggest doing a retirement expense inventory. Doing this will allow you to get a goal that is tailored to your cost of living and retirement expectations. This takes into account life expectancy, healthcare costs, and expected retirement lifestyle. From here, you can reverse solve to find a proper investment target using a compound interest calculator. Keep in mind that this target is going to move on you throughout your life. What makes sense at 30 years old will be different at 40 years old because you’ve gained more clarity on the components used to establish your target.

As great as it would be for everyone to understand their retirement expenses, it can often be challenging to project. What about someone with significant student loans who can't swing 15% of their income to retirement? This is where capacity comes into play. The above scenario is the goal, but it may not be feasible for your current financial situation. If that describes you, then the mentality you should have is to start small but start now. You will be better off by investing a little bit each month and building the habit of investing, as opposed to waiting until your circumstances are perfect to start. I recommend you find an amount that works with your budget and commit to investing that amount for a year. By doing this, you have built the habit of investing and allowed your money to start working through compounding interest.

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Where to Invest

Now that you have established your goals and an amount of money to invest, you can consider what investment vehicle you want to use. If this is new territory for you, read my article “The Order of Operations for Retirement Savings.” This can give you a baseline of where to begin with investing.

All the pieces we have discussed up to this point will influence the strategy you choose for investing. At the end of the day, diversification is one of the most essential components of retirement investing. You’ve heard the phrase, “Don’t put all your eggs in one basket,” which holds true when investing. The stock market is volatile and should be approached with a well-thought-out strategy. Diversify your investment across multiple asset classes such as stocks, bonds, real estate, etc. This will help you have a robust strategy when the market is up and protect you from downsides when the market is down.

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Adjust and Review

I’ve mentioned it once, but it deserves to be revisited. The amount you contribute to retirement savings will be a moving target. It will change as you get closer to retirement, have income fluctuations, and gain clarity on your financial goals. This change is not something to shy away from. It creates the opportunity to revisit this topic regularly. If you work with a financial advisor, this conversation should be part of a standard cadence between you and them. Having a plan is important, but understanding how that plan should flex over time is equally important.

Keep in mind that these are general guidelines around investing toward retirement. As I mentioned, everybody has a different situation and should consult a financial advisor to help consider all factors of your financial picture. If I can leave you with any piece of advice, it is that the best time to start investing was yesterday. The second best time is today.

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References

https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator

https://smartasset.com/investing/how-much-money-to-invest-in-stocks-per-paycheck

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.

Yahoo! Finance Feature: Transitioning Into Retirement: A 2024 Financial Checklist→

Andrew Van Alstyne had the privilege to be featured in Yahoo! Finance to talk to readers about the preparing for retirement in 2024.

Andrew discusses a systematized checklist that can be utilized in the years leading up to, and then through, retirement.

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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Financial Planning Feature: American's Top 5 Financial Regrets of 2023→

Andrew Van Alstyne had the privilege to be featured in Financial Planning to talk to readers about the financial regrets of 2023.

Andrew discusses how one of the biggest missed opportunities was missing out on higher yield savings accounts and how inflationary risk is all too often under valued for the impact in can have on the real rate of return of an investment.

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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Recent Articles Written by Andrew:

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Yahoo! Finance Feature: 13 Key Signs You’ll Always Be Middle Class→

Andrew Van Alstyne had the privilege to be featured in Yahoo! Finance to talk to readers about the behaviors keeping them middle class.

Andrew discusses how certain financial habits are keeping high-income earners from elevating their socioeconomic position.

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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Recent Articles Written by Andrew:

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Yahoo! Finance Feature: How Much the Average Florida Retiree Should Have in Their Savings Account→

Andrew Van Alstyne had the privilege to be featured in Yahoo! Finance to talk to readers about the factors to consider if you want to retire to the sunshine state.

Andrew discusses the benefits to consider when retiring to a state without income tax as well as strategies that can be applied more broadly.

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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Recent Articles Written by Andrew:

Recent Articles Andrew Has Been Featured In:

GoBankingRates Feature: Net Worth for Baby Boomers: How To Tell Whether You’re Poor, Middle Class, Upper Middle Class or Rich→

Andrew Van Alstyne had the privilege to be featured in GoBankingRates to talk to readers about gaining clarity on the blurred lines between classes in America.

Andrew discusses the differentiating factors in each wealth segment, and how to properly manage your assets based on the one you’re in.

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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The Order of Operations for Retirement Savings

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One of the most common questions people ask me is how to determine the best way to save for retirement. It’s a fair question because there is no one-size-fits-all retirement saving and investing approach. Each person’s unique financial situation can impact how they save for retirement. So, before we jump into a general recommendation for the order of operations in retirement savings, consult a financial advisor-–like myself-–to discuss your individual financial considerations that can influence your retirement outlook.

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Step 1: Work-Based Retirement Plan

Employer retirement plans, such as 401k, 403b, or 457, are often the best and simplest way to begin retirement savings. Not all plans are created equal, depending on your employer, but these plans contain some significant benefits worth taking advantage of.

Minimal Barrier to Entry

Employer-sponsored retirement plans typically have low to no barriers to entry. In most cases, employees are auto-enrolled in the company plan, with some employers requiring a small contribution from each employee. If not automatically enrolled, opting into the plan is often as simple as filling out a few forms. 

Matching Incentive

One widely recognized benefit of employer plans is the associated company match. While not mandatory for all employers, a company match is becoming a common addition to benefits packages. I like to call this “free money”. By contributing a percentage of your paycheck, your employer agrees to match your contribution up to a specified limit. For example, “Employer agrees to match 50% of employee’s contribution up to 6%”. This means that if you contribute 6% of your paycheck, your employer will add an additional 3% to your contribution. This is a key reason why work-based retirement plans are so effective.

Automatic Deduction

The final distinction of these employer plans is that your contributions come directly from your paycheck before you receive it. This makes the process of saving for retirement very simple and automated. Automatic deduction enables you to save for retirement before recognizing that money as income.

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Step 2: Emergency Fund

I know what you’re thinking—having an emergency fund has nothing to do with retirement savings. While it doesn’t directly count as retirement savings, it’s a necessary step in the equation. To fund your retirement, you need to ensure that your current financial situation is under control. The control starts with having a safety net in place. An emergency fund allows you to manage your current financial picture before addressing your future financial picture. By establishing an emergency fund, you can stay on track with your retirement goals when unexpected expenses arise rather than halting retirement contributions to cover unforeseen costs. Once you’re contributing to your work-based retirement plan and have an emergency fund established, we can move on to other retirement savings accounts.

Step 3: Individual Retirement Accounts

Individual Retirement Accounts (IRAs) are often the next step in retirement savings. These accounts are separate from employer plans but still hold numerous benefits. There are two main types of IRAs, each effective depending on individual financial considerations. While this won’t be a deep dive into these accounts, here is a quick overview of their function and benefits.

Traditional IRA

A traditional IRA is a pre-tax retirement account. Contributions are made pre-tax, resulting in a current-year tax deduction. The money invested in the account grows and is taxed at an ordinary income rate when withdrawn. This is often referred to as tax-deferred, meaning that you defer your taxes until withdrawal.

Roth IRA

A Roth IRA is considered a post-tax retirement account. Contributions happen after taxes are taken out of your income. Since you pay taxes upfront, that money grows tax-free. Regardless of your tax bracket at withdrawal, you won’t have to pay taxes on the money in your account, assuming you follow proper withdrawal guidelines.

Which One?

This is where a professional comes in handy. Many individuals benefit from utilizing both IRAs at different points in their careers, often dictated by their current income. In most cases, ask yourself, “What is my current tax bracket compared to my retirement tax bracket?” If your current tax bracket is higher than your projected retirement bracket, it might make sense to contribute to a traditional IRA over a Roth. But a Roth could be the most efficient option if your current tax bracket is lower than your projected retirement tax bracket. The maximum contribution for an individual in 2024 is $7,000 for those under 50 years of age and $8,000 for those 50 and above.

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Step 4: Health Savings Account

Health Savings Accounts (HSAs) are great financial tools for some individuals. An HSA is primarily a form of health insurance an employer could offer. It’s a high-deductible plan that allows you to put money into an account for qualified medical expenses. HSAs often have an employer contribution attached. Due to the high deductible, these plans are great for healthy individuals with lower medical needs.

There’s a point where an HSA can secondarily be used as a retirement savings account in addition to its primary use as a health insurance plan. This is when you have unused money in the plan to be invested. This allows you to utilize the “triple-tax advantage” of using an HSA as an investment vehicle. Contributions are tax-deductible, while the earnings and withdrawals are tax-free when used for medical expenses. After the age of 65, withdrawals can be taken from your HSA account for non-medical expenses and taxed like a traditional IRA. For many individuals, the HSA functions as a great tool for wealth accumulation after maxing out your IRA.

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Step 5: Taxable Account

The final piece of the puzzle for retirement savings is a taxable account or brokerage account. This account does not offer the same tax benefits as the previously mentioned accounts, which is why it is last on the list. Contributions to these accounts occur after taxes, and the growth or income produced each year counts towards your taxable income for the year. With that being said, the benefit of this account is that you can contribute and withdraw as you please. Because the money is likely invested, it may take a few days to sell and withdraw, but there is no age limit to take the money out. What you lose in tax benefit, you gain in liquidity.

These accounts have multiple purposes but are commonly used to create a “bridge account” for retirement. Because work-based retirement plans, IRAs, and HSAs all require you to be a certain age before making withdrawals, you can use a taxable account to save and invest money if you decide you want to retire early. This account functions as the “bridge” to fund your life from when you retire until you start collecting Social Security or retirement account distributions.

As I mentioned at the start, this is not a blanket approach to retirement savings for everyone. While the structure may work for some, it is important to talk with an investment professional to consider how your income, retirement plan, and goals will impact your strategy. What’s universal about this information is that everyone can contribute to retirement savings in multiple ways to ensure their financial picture is on track.

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References

https://www.bogleheads.org/wiki/Prioritizing_investments

https://www.bogleheads.org/wiki/Health_savings_account

https://thecollegeinvestor.com/1493/order-operations-funding-retirement/

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.

An X-ray of Grand Rapids Hospital Retirement Plans: Which One is Best?

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Employer Retirement Plan Details: Why Should You Care?

Employer retirement plans — such as 403(b)s and 401(k)s — are usually a large part of the financial plan for providers, nurses, and other medical professionals. The details of these plans can be confusing so I thought it would be helpful to compare and contrast the plans of the four larger hospitals in Grand Rapids, MI for you.

• Corewell Health-Empower

• U of M Health West-Principal

• St. Mary’s Trinity Health-Fidelity

• Mary Fee Bed-Empower

Understanding the details of your employer plan can lead to a huge difference in your account value at retirement. It should also be factored in when deciding where to work, as it is part of your compensation package. Different aspects of these plans can make them better or worse, I will assign them a Heath Biller score ranging from 0 to 10 — since that is the range used for pain assessments. 10 will be excellent and 0 will be horrible. Let’s X-ray the plans.

*Full disclosure, I have previously worked at Corewell Health & Mary Free Bed

Eligibility

This is when you are allowed to start participating in your company’s retirement plan. Due to compounding interest, the sooner you can start participating the better.

Automatic Deferral

This is when a company automatically enrolls you into the plan at a certain contribution rate when you get hired. The other option is having you opt into the plan yourself, which sometimes doesn’t happen. Automatic deferral is usually much better since it helps you start investing sooner. Life can get busy and procrastination is real.

Employer Matching Contributions

This is the amount of money that your employer contributes to your account on your behalf. It can be matching contributions which is usually a percentage of what you contribute. They can also make a non-elective contribution which means they contribute money to your account even if you don’t contribute anything. A higher rate here is better since that is more money towards your account.

Vesting Schedule

This is the length of time you have to stay working at the company before you are eligible for their matching contributions. If you leave the company before this period of time, they will take their matching contributions back from your account. The shorter the vesting schedule the better.

Roth Option

For a long time, most companies only offered Traditional contributions as an option for their plans. This means you get a tax deduction now but will have to pay taxes down the road when you take the money out. More companies are now offering a Roth contribution option. This means you do not get a tax deduction now but when you take the money out down the road, it will be tax-free. Sometimes Traditional contributions are better and sometimes Roth contributions are better. Having a Roth option is beneficial as it allows flexibility for your specific situation. If you want to learn more about Traditional vs. Roth contributions, read this blog post.

Plan Fees

These are the fees charged to your retirement account by the plan providers for helping set up and manage the retirement plan. Lower fees here mean less money is coming out of your account.

Investment Options

These are the range of investment options the plan offers inside the account. You want to make sure you are contributing to your account, but you also want to be aware of how the money is invested inside your account.

And the Winner is…

Saint Mary’s-Trinity Health with a score of 60/70 (86%). The aspects of their plan that stood out the most compared to the competition were: their employer contribution, their plan fees, and their investment options.

The other plans are pretty decent, I have seen much worse. I would have liked to have seen more automatic deferrals, higher employer matching contributions, and more target date funds as the default investment option. Hopefully, this has helped you better understand the plan where you work or evaluate the plans of future employers you are considering.

Please reach out if:

• You work for one of these hospitals and have more questions about your plan and what you are invested in

• You work for a different medical facility and would like me to help you review the retirement plan they offer

• You work for a facility that currently does not offer a retirement plan but would like help setting one up

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.

Yahoo! Finance Feature: Why Your Idea of Retirement May Be Wrong: And What You Can Do To Better Prepare→

Andrew Van Alstyne had the privilege to be featured in Yahoo! Finance to talk to readers about the importance of preparing for expenses in retirement.

Andrew discusses why retirees must plan on having similar, if not greater expenses in retirement to those they’re experiencing in their working years 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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Pulse Check: Why Healthcare Professionals Should Monitor Their Credit Scores

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What are Credit Scores?

Let’s start by first reviewing what a credit score is. It is a number assigned to you by a credit reporting agency that helps creditors obtain a quick snapshot of your creditworthiness. Equifax, Experian, and Transunion are the three main reporting agencies in the United States and the credit score number can range from 300 to 850. (Source: Experian; link below)  

When you apply for a credit card, a car loan, insurance, or a home mortgage; the lender is going to look at your credit report & score to help determine if you qualify and meet their standards to get approved. By proactively understanding and taking steps to get your credit score high, you should have a better chance of getting approved for credit in the future. 

There are 5 different ratings assigned based on your credit score number.

• Poor is considered 300-579

• Fair is considered 580-669

• Good is considered 670-669

• Very Good is considered 740-799

• Exceptional is considered 800-850 

I would recommend striving to get your credit score to at least Good and if you want the best rates and approval chances then keep going until you get to Very Good or Exceptional.

Factors Contributing to Your Credit Score

Your credit score number is calculated based on six different categories: Payment History, Credit Utilization, Derogatory Marks, Length of Credit History, Total Number of Accounts, and New Credit Inquiries. Payment history, Credit card usage, and Derogatory marks have the highest impact on your credit score so those areas would be the highest priority to focus on. Credit Age has a medium impact on your overall credit score. Total accounts and Hard inquiries have the lowest impact. 

Payment History: Your goal should be to have as many on-time payments as possible. The higher the better.

• 100% on-time payments for excellent

• 99% for good

• 98% for fair

• 97% and below needs work

Credit Utilization: Your goal should be to not use all of the credit that is available to you. The lower the percentage the better

• 0-9% of credit utilized for excellent

• 10-29% for good

• 30-49% for fair

• 50-100% needs work

Derogatory Marks: These include accounts in collection, bankruptcies, civil judgments, and tax liens. Your goal should be to have as few as possible.

• 0 is excellent

• 1 is fair

• 2+ needs work

Length of Credit History: This is the average age of all your open accounts. This goes up over time but you should be cognizant not to close older accounts that have been open for years or this will decrease.

• 9+ years is excellent

• 7-8 years is good

• 5-6 years is fair

• 0-4 years needs work

Total Number of Accounts: This is just based on the number of credit accounts you have overall. Having more accounts gives creditors more history and data to evaluate you on.

• 21+ is excellent

• 11-20 is fair

• 0-10 needs work

New Hard Credit Inquiries: If you keep applying for a bunch of different accounts this could be a red flag. Limiting the number of accounts you apply to can help keep your credit score high. This usually looks back over the past 2 years.

• 0 is excellent

• 1-2 is good

• 3-4 is fair

• 5+ needs work

Why Your Credit Score is Important

Some people like Dave Ramsey are totally against any debt while other people like Robert Kiyosaki say you should take out as much “good” debt as possible. Both of these are extremes and most people probably fall somewhere in the middle, using credit and some debt wisely but not going overboard. 

If you are going to use debt during your lifetime then knowing what your credit score is and keeping it high should help you when you apply for a credit card or car loan, get insurance, or buy a home with a mortgage. 

I use credit karma to monitor my credit score since they were one of the first companies to offer it free years ago. Nowadays there are a plethora of options to pick from. You are also able to check your full credit report for free once a year at https://www.annualcreditreport.com/index.action

If you don’t know what your credit score is currently, take some time this week to figure it out and see if there is anything you should be doing to improve it.

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Shout out to Alex Kiel with Macatawa Bank’s Mortgage team for helping me co-write this blog post. She joined their team in 2016. Alex holds her Bachelor’s degree from Davenport University, where she double majored in Marketing and Finance, and played both basketball and golf. When she’s not fitting her customers with the perfect mortgage, Alex cheers on the Detroit Lions, who did quite well this year but unfortunately weren’t able to make it to the Superbowl…next year though! I have also had the privilege of competing with Alex in beach volleyball. 🏐😎

616.502.8044 akiel@macatawabank.com Website

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Sources:

Experian https://www.experian.com/blogs/ask-experian/credit-education/score-basics/what-is-a-good-credit-score/

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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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.

What Teaching My Children About Finance Has Taught Me

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Are you as shocked as I am that financial literacy is not a mandated course in all school curriculums? I’m obviously biased on the subject and while you may not be as laser-focused as I am, it's a crucial life skill that can impact our financial well-being for years to come. As my children start their schooling, I won’t leave it up to chance that they will learn the fundamentals correctly.

While my children may only be five and two, I feel it’s never too early to start passing on some of my wisdom. With that being said, there are some key takeaways to consider if you elect to start these conversations with your children.

Keep it Simple at The Beginning

It is crucial to keep things simple when teaching children about money. Depending on their age, children may not even understand the concept of money, which is becoming increasingly difficult to grasp as we move further into the digital age. The transactional act of handing over physical currency in exchange for a good or service is extremely powerful in not only learning when they have run out of funds and to spend within their means, but it also involves an emotional experience in separating from one item of value to obtain another. Learning this fundamental concept will help lay the groundwork for more complex matters later in life.

Financial Tips from Andrew

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Get Specific About What They’re Saving For

As adults, the savings goals start to present themselves more naturally. Whether it’s retirement, your children’s college tuition, or purchasing a larger house. If I were to put my kids on the spot and ask them what their long-term goals are it would probably be to get candy after dinner, so to save for something even a week or two out may seem alien. But when the opportunity presents itself such as an interest in a new toy I capitalize on it by mentioning how if they saved (insert birthday, chore, etc.) money, they could buy it themselves.

The Money Needs to Go Somewhere

While I help my clients with their finances by making sure their assets are in the correct investment vehicles to achieve their goals, even a savings account is overkill for my children at the moment plus, that would take away from the tangible transactional experience mentioned above. Yet placing it in a sock drawer or worse, immediately into their pocket, isn’t the solution either. Whether it is a family heirloom piggy bank or an empty jar, the money needs to have a defined place to go where they (once again) need to physically take it out if they intend on spending it. An additional measure that I’ve taken with my oldest is to have her manage a balance sheet that we reconcile every few months (as there isn’t enough cash flow for monthly/weekly balancing just yet.)

Let Them Vote

If you want your child to gain financial literacy then they need to have a say in their finances. Constantly telling them what decisions should be made and how to direct their funds, they won’t develop the skills and habits to make the correct decisions on their own. Just remember to take it easy on them when there is a mistake, while a $3 misspend may not be a big deal to us, it can be devastating to a child who was intending on a bigger purchase and they can now no longer afford it. I recommend extending grace if it is a rare occurrence and tightening up if it starts to present itself as more of a habit.

It’s Okay to Incentivize

As adults, we have plenty of reasons to put money aside, whether it's for an employer match or as part of a strategy to minimize tax liability. So why should it be any different for kids? I encourage my children to save by offering to match an additional fifty cents for every dollar they can save for a month. Additionally, I offer extra matches and savings incentives around vacation time. I'll match a percentage of their savings leading up to vacation and offer an additional match for every dollar they bring back home. My kids seem to enjoy the process of saving and planning, and it's a great way to teach them about money management. While these strategies may not work for everyone, I believe it's okay to pay more for good financial behavior.

Looking Into The Future

As they get older, we will begin opening up bank accounts that will develop a deeper understanding and appreciation of the varying accounts that can be utilized in achieving long-term goals. Eventually, I’ll have to succumb to letting my children have access to electronic forms of payment. The initial foray will be a debit card linked to a checking account with minimum funding as to avoid the temptation of blowing through all of their savings.

Of course, once they begin to earn a paycheck, we will incorporate more complex systems and budgeting measures, but by starting small now there will be plenty of runway ahead of us to ensure that they are well-equipped to make smart financial decisions by the time they reach adulthood.

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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.

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Embracing Lifestyle Changes Over Strict Budgeting: A Sustainable Approach to Personal Savings

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If you’re looking to lose weight, instead of a diet, the focus should be on making lifestyle changes. Meaning that if you’re going to force yourself to eat certain foods, it won’t be sustainable, and you’ll be right back to where you started if it isn’t a change that will naturally fit within your lifestyle. 

The same philosophy should be applied when working towards saving for the future. The more the budget fits with your lifestyle, the more likely you are to follow it.

The 50/30/20 Budget Rule

One of the most common budgeting tactics is the 50/30/20 rule. It will assist you in living within your means and staying out of debt. Use the percentages below as a rough guide for how the percentages should play out:

• 50% For necessary expenses

  • 20-25% Housing

  • 10-15% Food

  • 5-10% Utilities

  • 5-10% Transportation

  • 5-10% Healthcare

• 30% For lifestyle expenses

  • 5-10% Recreation/Entertainment

  • 5-10% Consumer goods

  • 5% Miscellaneous

• 20% For Savings

Keep in mind that these percentages should be based on your take-home pay (after tax). Additionally, your budget for savings should be prioritized after necessary expenses but before lifestyle.

Avoid a Mindset of Constriction

Remember how I mentioned earlier that sustainability was the key to a successful "diet" strategy? The 50/30/20 budget plan includes discretionary expenses to enable you to enjoy occasional treats that make life worth living. Being too strict with yourself can be counterproductive, as it may lead to excessive purchases driven solely by emotion due to the stress of trying to stick to the budget.

But Be Prepared to Have to Make Hard Decisions When Setting Up Your Budget

While it's important to include discretionary spending in your budget, keep in mind that it should be the last category to consider. The preceding categories may exceed the recommended ratios meaning you may not have the full 30% to spend here. For example, if you live in a high-cost-of-living area, your necessary expenses may exceed  50%. This may sound in opposition to the enjoyment mentioned previously, but the difficult (and oftentimes stressful) decisions being made here are when you sit down to plan out your budget in advance of expenses.  This will lead to the ability to avoid making stressful decisions in the moment.

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Flexibility is Key

It’s perfectly acceptable to get very, very intentional for short periods to achieve goals. Want to buy a new car and pay cash? Go on a lavish trip? Pay off your mortgage 5 years early? These are rather lofty examples but regardless, if the goal you set is what will bring you joy, then by all means get after it. Keep in mind, if your budget is too tight you’ll have trouble sticking to it for extended periods and the extra savings amount will have to come from your lifestyle expenses.

Reflection and Adaptation

When you’re drawing up your first budget, reference historical data and avoid guestimating amounts. Ideally, you want to review six to twelve months of financial statements to ensure you’re able to spot trends in expenses. The great thing about this exercise is you’ll probably find expenses that you either weren’t aware you were still paying or are more than what you thought it costs.

Pay Yourself First

I alluded to this earlier but saving for your future should always precede your current lifestyle. You should establish a savings account that is linked to your employer for direct deposit. From that account, you can then transfer the EXACT dollar amount you budgeted for to your checking account where all outgoing payments will be transacted.

Ideally, there will be excess funds left in the savings account at the end of every month (and as you improve, it’ll be more than 20% of your post-tax income) This is the simplest, and most cost-effective way to ensure that you pay yourself first.

Review and Improve

The more frequently you can track and review your progress, the less likely you are to deviate from the plan. A bare minimum should be a monthly review but for the first few months, daily reviews would be best.

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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.