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.


2024 Tax Planning Guide for Optimal Wealth Management

Navigate the ongoing tax planning landscape with this comprehensive guide for 2024. From handling investment gains and losses to managing RMDs and exploring charitable giving strategies, optimize your financial strategy for maximum tax efficiency. Start your tax planning now to ensure a prosperous financial future.

Read More

How Much House Can I Afford with on a Sales Income?


Buying a home can be a challenging process, even if everything goes smoothly. Throw a few complicating factors into the mix, and it doesn't get any easier. Being a sales professional can be one of those complicating factors when it comes to acquiring a home loan. I’ve experienced this both personally and professionally. Let me shed some light on the process of getting approved for a home loan and then give some guidelines on how much you can afford.


Be Prepared

After getting your finances in order and deciding that the time is right to buy a house, you will need to connect with a mortgage lender to walk through the pre-approval process. A mortgage lender can help determine the best type of home loan based on your circumstances. At this stage, there is no harm in talking with multiple lenders to figure out which company can give you the best rate and provide the best client experience.

Mortgage lenders prefer to see 2 years' worth of tax returns from individuals with a steady income, but often give more flexibility due to the consistency of their income. For those with a variable income, it will most likely be a requirement to provide 2 years' worth of tax returns to even be considered for a loan. Having these forms ready ahead of time, can help you expedite the process.


Don’t Get Caught Up in the Potential

When going through the pre-approval process, lenders will give you a conditional letter of approval for the highest amount that you’re able to borrow. In many cases, that amount will put you into a house that you cannot truly afford. You should have an idea of the monthly payment you are hoping to lock in, before beginning this process. If you haven’t done so yet, now is the time to run the numbers and settle on a payment that mathematically makes sense based on your income. A good mortgage professional can and should assist you in this process.


How Much Can You Actually Afford?

How much house can you actually afford, then? There are different schools of thought on this topic, but I believe that your mortgage payment should be less than 25% of your gross monthly income. Keep in mind that this is a top-end number, and the lower your monthly payment, the more flexibility you give yourself down the road.

Now, with a variable income, 25% becomes a harder number to pinpoint. As mentioned in my post “How to Budget on a Sales Income”, if you have a salary component of your income, I would recommend using 25% of that number assuming you have a decent base pay. This will give you confidence that you can make your payment regardless of job performance. It can be easy to incorporate your commission into this amount, but I recommend against doing this as it exposes you to unnecessary risk.

For those working solely on commission, I recommend finding your number by averaging your income over the span of 3 years, or longer if possible. Using your commission structure can be a good element to incorporate as well. Not every year will be a down year, but my goal is to protect you if it is. Calculate your income if you were to hit 75% of your sales target and assume that to be your yearly income. Incorporate this into your 3-year average and take your 25% from that number. This creates a small buffer in your predictions for protection.


Have Confidence

There will always be a small level of uncertainty when working in sales. Often, that works in your favor, allowing for more income flexibility, but it's also important to protect the downside. Once you’ve been pre-approved and decided on a monthly mortgage that you can afford and are comfortable with, move forward in the home-buying process with confidence.


References

https://selling-guide.fanniemae.com/Underwriting-Borrowers/Income-Assessment/General-Income/Variable-Income-Stability-Continuity/1048717451/What-is-required-for-variable-income.htm

https://www.greatestlender.com/blog/18765/purchasing-a-home/how-to-qualify-for-a-mortgage-when-your-income-isnt-steady#:~:text=A%20longer%20employment%20history%20is,period%20and%20average%20it%20out.

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 5 Most Influential Books for Sales Professionals


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.


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.”


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.”


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.”


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.”


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.

Pulse Check: Why Healthcare Professionals Should Monitor Their Credit Scores


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.


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


Heath Biller

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.

Making the Most of Your Sales Income


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.


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.


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.


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.


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.


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.


Recessions Aren't Always a Roadblock - Consider These Benefits


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.

Heath Biller

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 Manage Large Commission Checks


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.


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.


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.


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.


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.


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.



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


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.



Heath Biller

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!


Invest Like a Sales Professional


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.


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.


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.


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.


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.


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.

West MI Woman Feature: Saving for Your Child’s Future

Leanne Rahn had the privilege to be featured in West Michigan Woman’s Magazine to talk to readers about “Saving for Your Child’s Future”.

Leanne dives into some of her favorite savings vehicles and the details parents need to know. Want to know how you can create a solid financial foundation for your children? You won’t want to miss this piece.


Financial House Keeping

Financial Housekeeping

Consider doing these key financial task headed into the new year

As we wrap up the year these are excellent financial housekeeping tips. 

 

1.     Consider Maxing out IRA Contributions:

For those under 50, the allowable annual contribution to a traditional or Roth IRA is $6,500; for those 50 and older, it's $7,500. Evaluate the advantages of a pre-tax traditional IRA versus a Roth IRA in the context of your financial goals. Also, note the extended contribution deadline until April 15th, 2024, for the 2023 tax year.

 

2.     Collecting Tax Documents:

As the year concludes, proactively compile a comprehensive list of all financial accounts. Anticipate incoming tax forms from relevant institutions. Timely receipt of these documents is imperative for accurate tax filing. Exercise diligence, recognizing that the responsibility for completeness lies with you.

 

3.     Increase your 401k/403b Contributions:

Embrace the wisdom of Albert Einstein by incrementally enhancing contributions to your employer-sponsored retirement accounts. Recognize the intrinsic value of compound interest in wealth accumulation. Additionally, reassess your investment strategy to align with your financial objectives.

 

4.     Update Beneficiaries:

Talking about wills might feel morbid, but it's like an insurance policy for your family's peace of mind. Keep your beneficiary info updated; life happens.

 

5.     Maxing Out HSA Contributions:

HSAs are like secret savings accounts. Max them out if you can. And if you've got a flexible spending account (FSA), use that leftover cash; it doesn't roll over.

 

6.     RMD’s:

If you're enjoying retirement and hitting 73 or older, remember to take out your required minimum distributions (RMDs). Missing it means penalties, big penalties.  You have until December 31st to complete RMDs for 2023.

 

7.       Updating Insurance:

Time to check your home and auto insurance. With things going up, make sure your coverage is on point.  Get a free quote and consider bundling home and auto insurance for potential discounts.

 

8.       Paying Off Debt:

Got some extra cash from holiday bonuses? Think about wiping out some debt. It's like giving yourself a head start for 2024. Less debt, less stress. Cheers to financial freedom!

 

9.     Goal Setting:

Plan out your money goals for 2024 and beyond and jot them down. Seriously, you're 10 times more likely to make things happen when you put them on paper.

 

These are just a few friendly suggestions. Your money, your rules. But a bit of financial TLC can make a world of difference.

 

Sincerely,

Spencer Miller

12/21/2023

How to Budget on a Sales Income


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.


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.


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.


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.


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.


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.