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In case you haven’t heard, May is Mental Health Awareness month and it comes as no surprise to learn that financial wellness and mental health can be directly related. In fact, “One study found that individuals with depression and anxiety were three times more likely to be in debt. Other studies have even found a link between debt and suicide.” (Morin, 2019) Now, I’m a financial advisor and not a mental health expert but I think it’s important to provide you a way to connect with mental health resources since the search alone can be overwhelming.
First and foremost, if you or someone you know is struggling with suicidal thoughts please use the National Suicide Prevention Lifeline at 1-800-273-TALK (8255) or TTY 1-800-799-4889. The free and confidential Lifeline is available 24 hours every day in the U.S. Sometimes it will take a moment to speak with someone and if you can’t wait, call 911. Washington state offers 24-Hour Crisis Lines (see numbers below) that provide immediate help to individuals, families, and friends of people in emotional crisis. The Crisis Line will help you determine if you or a loved one needs professional consultation and link you to the appropriate services. King County 1-866-427-4747 North Central WA 1-800-852-2923 Pierce & Southeast WA 1-800-576-7764 The WA Warm Line at 1-877-500-WARM (9276) offers peer support for people living with emotional and mental health challenges. Their office is open everyday between 12:30 pm and 9:00 pm and helps with people experiencing anxiety, depression, loneliness, problems with family or friends, and other emotional or mental health challenges. These are only a few of the phone numbers I found online and oftentimes the crisis lines will provide you with more information and additional resources. If you want to learn more about the correlation between financial wellness and mental health read “How Mental Health Affects Your Financial Health”. To start taking control of your financial journey, book your appointment with KJ Dykema, MRFC® today. Resources Morin, A. (2019, September 10). How Your Mental Health Affects Your Financial Health. Psychology Today. Retrieved May 18, 2022, from https://www.psychologytoday.com/us/blog/what-mentally-strong-people-dont-do/201909/how-your-mental-health-affects-your-financial-health.
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We often talk about diversification in your investment portfolios but focusing on different tax treatments in your retirement accounts is equally important. The type of account(s) you can contribute to are based on many factors including income, age, and filing status. Each investment account type (i.e., Roth, Traditional, Brokerage, etc.) offers unique ways to save with your taxes. Some common account types include:
Traditional 401(k), 403(b), or IRA: A tax deduction at the time you contribute but you will pay taxes when you withdraw funds during retirement. Roth 401(k), 403(b), or IRA: Funds are taxed when contributions are made, gains are not taxed, and qualified withdrawals are tax-free. Taxable Savings or Brokerage: Taxes are paid on dividends, interest earned, and capital gains. As you can see, Roth IRA account contributions are made in after-tax dollars, which means you pay for the taxes upfront. When you reach retirement age and withdraw the funds, it is tax-free. Compared to a tax-deferred Traditional IRAs where distributions are taxed at your ordinary income tax rate during retirement. In addition to choosing the best account types, it is beneficial to create a strategy for how and when you will withdraw your funds. Distributions are almost always considered income and can bump you into a higher tax rate. By staggering distributions, you can maximize savings by keeping taxable income below the next tax-bracket rate increase. There are several strategies you can implement to reduce lifetime taxes and our list is certainly not comprehensive. Take some time to consult with your tax professional or book your appointment with KJ Dykema, MRFC® today and find new ways to save. Getting motivated to pay off credit card debt can be a challenge knowing that you only need to make a minimum payment to get by but let’s help put things into perspective. Did you know that consumers can pay off a 30-year mortgage faster than their $5,525 in credit card debt when making only the minimum payments? It’s true - we’ve done the math. According to Experian, the average balance on consumer credit cards in 2021 was $5,525 and 40.7% of those consumers carry a balance on their cards from month to month. At a quick glance, these numbers don’t seem so bad. In fact, the percentage of consumers who carry over balances each month is at an all-time low. Unfortunately, the truly concerning part is how much these people will pay for this debt without thinking twice about the real cost. Here’s a riddle, what do the numbers 443, 37, and 10,380 have in common? It will be the approximate 443 months, 37 years, and $10,380 in interest each consumer will pay for their $5,525 in credit card debt. Did you just think how is that even possible? Are they really paying double their principal balance in interest? Let’s take a look at some of the math. According to the Federal Reserve, the average credit card annual percentage rate (APR) in 2021 was approximately 16%. Most credit card companies require 1%-3% of your principal balance paid down each month plus interest charges - we’ll use 2%. Let’s assume consumers only make the minimum payment and don’t add any additional debt. To get the daily interest rate, use the APR and divide it by 365 (for the days in a year). Take that figure and multiply it by the current balance to get the daily periodic rate. DAILY APR (APR / days in year) * current balance = daily periodic rate (0.16 / 365) * 5,525 = $2.42 daily interest You can calculate the monthly payment by multiplying the daily periodic rate and the number of days in the billing cycle. MONTHLY PAYMENT daily periodic rate * number of days in billing cycle = monthly payment $0.24 * 31 = $75.08 Repeat these steps 442 times to get your total interest paid or use this super easy (and free) online calculator that even provides you with a payment schedule. Now, if these figures don’t motivate you to pay off your credit cards every month, I always recommend looking at the amount of time it takes you to earn that money. If you make $15/hour, it will take you 692 hours to pay only the interest owed on your credit card. Get help to create better habits and book your appointment with KJ Dykema, MRFC® today to pave your path to financial freedom. Resources Johnson, A. (2021, September 10). The average credit card balance is $5,525. here's what you need to know. CreditCards.com. Retrieved January 2, 2022, from https://www.creditcards.com/credit-card-news/credit-card-debt-statistics-1276/
We often talk about different ways to invest and the best way to make the “biggest bang for your buck” but what about the people that want to ensure their values align with the company they invest in? Well, ESG investing may be your answer. ESG stands for environmental, social, and governance - the intention of ESG investing is to align finance with long-term value and societal values. In fact, ESG investing has grown in popularity over the past decade and by the end of 2019, the sustainable market size increased more than 30% compared to 2016 with total assets exceeding 30 trillion USD.
Each pillar of ESG signifies a different purpose. For instance, the environmental (E) pillar strives to integrate metrics aligned with environmental performance, climate risk mitigation, and strategies towards renewable energy. A company's carbon footprint is only one metric considered when measuring its environmental impact - others may include waste production, energy use, and water withdrawals. The social (S) pillar values social responsibility ranging from workforce related issues (health, diversity, training) to societal issues as a whole (human rights, data privacy, community engagement). Whereas governance (G) focuses on factors surrounding corporate governance and corporate behaviors, ranging from shareholders’ rights to executive compensations. Right now, the most difficult part of ESG investing is the quality of information and comparing different companies. Yahoo Finance provides free information on most tickers under the “Sustainability” tab where the lower scores indicate less unmanaged risk within the company. Of course this information is helpful but take time to research the company beyond these simple features or book your appointment with KJ Dykema, MRFC® to help evaluate your investments further. Resources OECD (2020). OECD Business and Finance Outlook 2020: Sustainable and Resilient Finance, OECD Publishing, Paris, https://doi.org/10.1787/eb61fd29-en. Cryptocurrency (“crypto”) has been around for years but many still don’t understand what it is, how it works, and how you can invest in it.
Let’s start with the question, what is cryptocurrency? According to Frankenfield, “cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend.” Most crypto involves decentralized networks based on blockchain technology where control stays with the user - as compared to centralized where a central authority governs and handles the network. You may be asking, why does it even matter? Well, decentralized networks are less prone to data hacks and data leaks and often have fewer fees than a centralized network. There are many pros and cons to each type of network and if you want to learn more, I suggest reading, Decentralized vs. Centralized Network: A Detailed Comparison. Investing in crypto may have some complexities but the gist of it includes choosing a platform to trade (a broker or cryptocurrency exchange), funding your account, placing an order, and storing your funds in a cryptocurrency wallet. As far as crypto platforms are concerned, Coinbase and Binance are well-known platforms with an array of crypto options to invest in. The currency that each platform accepts for funding an account may be different but more often than not, US currency is accepted. Now, choosing a crypto wallet is a bit more tricky because there are different types of wallets available including hot wallets, cold wallets, exchange wallets, and custodial wallets. Right off the bat, I want to point out that I don’t suggest using exchange wallets as your primary wallet since you are really surrendering your assets to a centralized entity. Instead, consider a hot or cold wallet. Hot wallets use keys stored on a device that has access to the internet and can be more susceptible to leaking private key information. Whereas, cold wallets store your information offline and offer a higher level of security. Coinbase Wallet is a well-known wallet provider, especially for beginners. I’ve covered some basics above but remember that we are here to help you through this process. To learn more about cryptocurrency or talk about your specific needs, simply book your appointment with KJ Dykema, MRFC® today. Resources Frankenfield, J. (2021, October 25). Cryptocurrency. Investopedia. Retrieved October 27, 2021, from https://www.investopedia.com/terms/c/cryptocurrency.asp. When I was a young girl, my father had “the talk” with me. No, not about the birds and the bees but he discussed what I should do in the event that he passed away (even though there was no indication his end was near). He showed me exactly where his legal documents were placed and who we should contact to handle any legal matters. Throughout the years - and, especially closer to the end of his life - these conversations transformed to more specific topics ranging from funeral arrangements to making a list of every subscription service he was using. As you can imagine, these conversations can be challenging to have with your loved ones but it is necessary and significant for those making your life/death decisions.
Now, before jumping into “the talk”, I suggest preparing legal documents that express your wishes clearly in writing. A power of attorney (POA) allows you to designate an agent to handle your affairs during life and a Last Will and Testament offers specific instructions on how to distribute your assets after passing. Choosing agents and executors for these legal documents isn’t simply picking the person you are closest to. Instead, you should consider who will uphold your wishes best. Additionally, these documents guide you on the decisions that need to be made and provide discussion points for your end-of-life conversations - and, at the very least, examining these legal documents will get you to consider the decisions you and others will need to make for your end-of-life journey. Once you have some direction on how you want things carried out, it is crucial that you discuss your plans with whoever will execute your wishes and anyone else you want involved. Even at ten-years-old, I knew the gravity of what my father was telling me and I understood his intention was to protect our family. The National Council for Palliative Care provides a helpful guide on subjects to talk about, how to start the talk, and tips to use during these conversations. I know that it seems strange to prepare for death when it isn’t something you’re expecting to happen in the near future but studies indicate talking about your plan with loved ones helps to alleviate the fear of death and reduces stress during highly emotional times (i.e., incapacitation, death, etc.). People are often reluctant to talk about death due to its ominous nature; however, by the end of each discussion with my father, I felt more prepared and less anxious about the unknown.. We didn’t have all the answers and even learned some things along the way. We made difficult decisions but felt confident in our choices based on our previous end-of-life conversations. By discussing my dad’s wishes throughout his life, it gave us the freedom to cherish every last moment with him. If you need assistance with end-of-life planning, book your appointment with KJ Dykema, MRFC® today. The majority of people use their HSAs to pay for qualified medical expenses but don’t realize you can do so much more. For instance, did you know that most HSAs offer a way for you to invest your funds while you are not using them? How about the fact that your contributions and distributions are tax-free*? HSAs are more than just a way to pay for medical expenses, they are a great solution to help reach your financial goals.
Qualifications In order to qualify for an HSA you must be covered under a high deductible health plan (HDHP), have no other health coverage**, must not be enrolled in Medicare, and can’t be claimed as a dependent on someone else’s tax return. Contributions One of the best features of an HSA is that contributions can come from just about anyone - this includes you, your spouse, your employer, family members, and more. In fact, the funds contributed by your employer to your HSA are not included in your gross income - free money, yes please. Do keep in mind that there are contribution limits. The amount depends on the type of HDHP coverage you have, your age, the date you become an eligible individual, and the date you cease to be an eligible individual. For 2021, if you have self-only HDHP coverage, you can contribute up to $3,600. If you have a family HDHP coverage, you can contribute up to $7,200. For eligible individuals age 55 or older, contribution limits are increased by $1,000 at the end of your tax year. Distributions You can receive tax-free distributions from your HSA to pay or be reimbursed for qualified medical expenses you incur after you establish the HSA. For more information on qualified medical expenses, review IRS Pub. 502, Medical and Dental Expenses. Did you know that you can’t pay for insurance premiums using an HSA but you can use it to pay for Long-term care insurance? Of course, there are some limitations based on age and the amount is adjusted annually but this can save you some money. Tax Benefits HSAs have a triple-tax advantage. First, many people contribute pre-tax dollars to HSAs through payroll deductions. If you have an HSA outside of your workplace, contributions can be used as a deduction from your taxes. Second, interest or other earnings on the assets are tax-free. Third, when you use the funds for qualified medical expenses the distributions are tax-free. I could easily have an entire series of articles on the advantages of HSAs but everyone’s situation is different. Let’s talk specifics about how you can use an HSA to boost your financial wellbeing - book your appointment with KJ Dykema, MRFC® today. * Some exceptions apply. Review IRS Publication 969 to learn more. ** Except what is permitted under IRS Publication 969, Other health coverage. Resources Publication 969 (2020), Health savings accounts and other tax-favored health plans. Internal Revenue Service. (2021, February 16). https://www.irs.gov/publications/p969. An exchange traded fund (ETF) is a type of security that tracks an index, sector, commodity, or other asset, but which can be purchased or sold on a stock exchange the same as a regular stock. ETFs can often be used by investors to diversify your portfolio as they hold multiple underlying assets, rather than only one asset (like stocks).
Like any investment, ETFs come with pros and cons. Some advantages include lower expense ratios, access to more stocks across various industries, and they manage risk through diversification. However, not all ETFs are what they seem. A rise in social media influence has many investors looking at the latest ETFs (often with catchy names) but it is important to truly understand where your money is going. The article “Do You Really Know What Is Inside Your ETF? Probably Not” by Matt Krantz takes a deeper dive into some of these trending ETFs. The US Vegan Climate ETF (VEGN) is a perfect example of when you should ask yourself, “what am I really investing in?” While most people would believe that VEGN is about a plant-based food future, it is surprising to see 4.6% of its portfolio in Microsoft (MSFT) and 4.8% in chipmaker Nvidia (NVDA). In fact, more than half of VEGNs portfolio involves stock accounts connected to information technology. You could make an argument on why these are beneficial to have in an ETF but they seem like a bit of a far fetch when trying to relate it to a plant-based food future. There are so many factors to consider when investing and there is an extensive selection of EFTs to choose from that it can become overwhelming. Well, we are here to help you! Let us do the research for you and help you reach your financial goals. Take the next step today and book your appointment with KJ Dykema, MRFC®. Resources Chen, J. (2021, July 28). Exchange traded fund – etfs. Investopedia. https://www.investopedia.com/terms/e/etf.asp#advantages-and-disadvantages-of-etfs. Krantz, M. (2021, July 16). Do you really know what's inside your etf? Probably not. Investor's Business Daily. https://www.investors.com/etfs-and-funds/etfs/best-etfs-do-you-really-know-whats-inside-your-etf-probably-not/. Finance bloggers stick to the cardinal rule of "start with saving $1,000" but how can you do this when you feel like you are living paycheck to paycheck? I would like to introduce Lean February. It's is my favorite month! First, it gives you the opportunity to get your finances ahead of schedule and start saving. Second, I always choose February because it’s the shortest month and for most people who struggle with budgeting or savings it’s an easy way to move into the new year!
Quick rules for your lean month:
Let’s define these for a better understanding of how low you should go. Groceries are a hot topic and some say it can’t be done but I know someone who shops for 3 people and has friends over 4-5 times a month on $250 of groceries. $150 should be more than plenty if you are buying for the month. Before going shopping inventory what you have in your fridge, freezer, and pantry. Identify which proteins 1-2 that you’d like to have for the month. Proteins are typically the most expensive groceries. I like to use Pinterest to create a meal plan that focuses on using those proteins and the items you currently have. Another best practice is to stick to meals with 10 ingredients or less. The more you can streamline the meals it hinders the need to purchase obscure items. When the major meals are taken care of, evaluate how much more you will have for snacks. Snacks are most commonly the impulse buys because they can be on sale. If you know how much you can spend you won’t feel like you are being restrained. After you have paused some of your services and called to see if you can get better deals on your current expenses I have a feeling you might have some time on your hands. Keeping that in mind come up with a list of organization projects that you’d like to tackle. Clean space will lead to an overall better mindset. Document your process so when you think about doing another lean process you can note what you’d like to do differently or keep the same. Now that your done reading leave a comment with a question of how to complete the process. In the world of financial advisors, there has been a surge in publicly of the gold standard, the fee-only advisor. This is an individual who will charge a flat rate or a percent of assets under management, in industry terms, they are an investment advisor representative. These advisors are regulated by the State or SEC to document the needs of their clients and any changes in their risk tolerance, time horizon, and goals. When establishing these needs the advisor will fill out an extensive intake questionnaire to assess investable assets, liabilities, and tax planning.
Most people associate fee-only advisors to a Certified Financial Planner. Like the fee-only advisor, this is an investment advisor representative but they take another test and pays an annual fee to have this designation. In return, the CFP board creates campaigns to aware consumers of the benefits of working with a designated Certified Financial Planner. Like many designations, there is ongoing continued education to keep them current which can be purchased from their website at www.cfp.net. Here’s the thing if the advisor sells insurance products they will not be able to call themselves fee-only advisor. When the advisor sells insurance their payment is called a commission, that commission is paid by the insurance company and the advisor is not acting as a representative of that company, but an agent who is filling out a suitability form instead of this extensive process. Since it’s paid by the company and not out of your pocket the agent is not required to disclose their commission. Insurance instruments are tools for legacy planning, tax planning, and long term health care. In my opinion, to recommend these tools and understand how they fit into the big picture your agent should have an idea of the financial plan. If you outsource a portion of that plan if can allow weaknesses because there is not the careful vigilance of the financial advisor. If you are looking for an advisor, make sure they are going to fit your needs and put together a comprehensive plan for your investments and insurance needs. Our firm is an independent insurance agency that will provide you with multiple carrier options and disclose all fees. |
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Family Retirement LLC is a registered investment advisor in the State of Washington. Family Retirement LLC may not transact business in states where we are not appropriately registered, excluded, or exempted from registration. Individual responses to persons that involve either the effecting of transactions in securities, or the rendering of personalized investment advice for compensation, will not be made without registration or exemption. Neither the firm nor its agents or representatives may give tax advice or legal advice. Individuals should consult with a qualified professional for guidance before making any purchasing decisions.
Privacy Policy | ADV Part2A
425-610-9226
1700 Westlake Ave N Suite 200
Seattle, WA 98109
Copyright © 2022
Family Retirement LLC is a registered investment advisor in the State of Washington. Family Retirement LLC may not transact business in states where we are not appropriately registered, excluded, or exempted from registration. Individual responses to persons that involve either the effecting of transactions in securities, or the rendering of personalized investment advice for compensation, will not be made without registration or exemption. Neither the firm nor its agents or representatives may give tax advice or legal advice. Individuals should consult with a qualified professional for guidance before making any purchasing decisions.
Privacy Policy | ADV Part2A
425-610-9226
1700 Westlake Ave N Suite 200
Seattle, WA 98109
Copyright © 2022
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