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financial planning

Living In Unprecedented Times

By | 2020, Executive Message, Money Moxie | No Comments

The last five months have been record-setting in more ways than we could have imagined. The impact has been wide-reaching – and I am not referring to the COVID-19 virus numbers.

Technology has provided opportunities that have businesses, including ours, to service clients and continue to run their operations while working from home. It allowed students to continue their studies remotely and check in with their teachers when needed. We have access to almost anything: news, shopping, connecting with family and friends, and investment markets, all of which are amazing. In fact, it is hard to imagine what we would have done without technology.

Newer technology has opened the doors for people to save and invest at entry levels without barriers, such as minimum investments. Apps have become popular among the DIY crowd, which are too often young and inexperienced investors.

Securities regulators have spent countless hours creating Regulation Best Interest, as explained in Mikal’s article. Regrettably, they have done little to educate and protect DIY investors who are not prepared for the leveraged risks and hidden fees of this new world. One of these investors even paid the ultimate price.

An app on a phone gives anyone fingertip access to investing. One of these apps offers game-like screen appearances, prompts users to place trades when looking up a stock ticker, and displays falling confetti to make them feel good when placing a trade. These apps even allow investors to leverage their investment through options – something professionals are required to have tested and trained for before offering them to their clients. What these apps do not offer is common sense or an advisor to help investors understand the associated risks of specific investments. They lack education and risk assessment before making speculative, high-risk investments.

We have heard disastrous reports of investors borrowing on credit cards and accessing home equity loans to invest, only to lose the lion’s share of their investment. As financial advisors, we find this very disheartening.

All investors should be educated about their investment options, risks, and costs. Smedley Financial makes a concerted effort to provide you with information and education regarding investing through our Money Moxie and Money Matters newsletters, regular webinars, seminars, and, most importantly, one-on-one meetings with clients. If you have questions or need more information regarding finances or investing, please reach out to our wealth management advisors.

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Living a Financially Balanced Life

By | 2020, Money Matters, Newsletter | No Comments

Applying a balanced perspective has an impact in many areas of our lives, from eating to working to playing. Finances, today and in the future, should receive the same balanced approach.

When thinking of our financial plans, we tend to look to the future, but what about today? It is important to establish financial goals and work towards them, but it is also essential to live your current life with joy.

We work hard and save wherever possible with a goal to enjoy life in retirement. This is commendable and vital if we want to maintain our lifestyle into retirement. However, it is too often that people plan for future adventures and then are not able to enjoy them because of health issues or even death.

Keep in mind the little things.
To stay balanced within your budget, or spending plan, be sure to give yourself some mad money. I am not proposing that you throw caution to the wind, but within your monthly budget, permit yourself to spend a predetermined amount on something that brings you joy even if that means getting an ice cream cone or pedicure. Nothing can take the wind out of your sails or blow up your spending plan quicker than eliminating all of the little things that make you happy.

Enjoy adventure along the way.
Rather than thinking you will take a huge trip when you retire, include adventure and fun in your life now. When you look back on your life, the memories you have with your family and friends will be what you remember. I can honestly say I have not had a client reminisce about days they spent in the office or attending business meetings, or cleaning the house. They talk about time spent with family, traveling, charity work, or doing something they love.

One of our motivations is to help our clients create Life Centered Plans. This is different from a typical financial plan because it focuses not only on saving for future goals but also helping clients use the money they currently have to do things that bring them joy now.

We all have a limited time left to live our lives. I challenge you to spend that time living a financially balanced life!

If you would like more information on Life Centered Planning, contact us at 801-355-8888.

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No One Can Predict The Future

By | 2020, Money Moxie | No Comments

No one can predict the future. Especially not me. On my LinkedIn page in March 2019, I posted: “I wouldn’t be surprised that we have some good growth in stocks for (2019). You usually have good growth right before a recession. However, 2020 could be a challenging year.” I had no idea it would be as challenging as it has been!

Even though I was right, I was not predicting the future. I was just following statistics and other economic indicators. Little did I know that a global pandemic would stall the U.S. (and world) economy and send it into a freefall. This yanked the 1st quarter into the red. Now, all we need to meet the technical definition of a recession is for the 2nd quarter to be negative as well.

Stocks are not the economy. There has never been a better example of this than the year 2020. The economy is hurting. Consumer spending is down double digits, and unemployment is near 20 percent.

Stocks, on the other hand, have been improving as the government has printed money. Some pundits think stocks have already bottomed and are just headed up from here. Others think we will head lower towards the mid-March bottom. Some have even suggested that this economy looks a lot like a depression. These are all conjectures. No one can predict the future.

This uncertainty leads people to question their financial future: Will I be able to pay my bills for the next 6 months? Will I be able to retire when I planned? Will my nest egg be enough to see me through retirement?

Years ago, questions like this led us at SFS to create a system that is simple yet powerful. It is designed for times like these. The goal is to provide an inflation-adjusted income for the rest of your life, regardless of the storms that may come. It helps remove a lot of the uncertainty around the security of your finances.

We call it a Lifetime Income Plan. The concept is simple: you segment your assets into time frames based on when you will need income. The assets set aside to generate income for the next 5 years should be conservative and protected.

The successive 5-year time segments should be moderate to aggressive, depending on the time frame and your personal risk tolerance. This system can be used whether you are already in retirement or just starting to save for the future.

While the design is simple, the application can be much more complex. As always, we recommend consulting with one of our Certified Financial Planners (CFP®) who are well versed in income distribution strategies.

No one knows exactly how things will turn out with the Coronavirus and how large or long-lasting the impact will be. However, with careful planning, you can help prepare your financial future for any storm that comes.

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A Tribute to Money Smart Women and Moms

By | 2020, Money Matters | No Comments

May brings a time to reflect on women and the influence they have or have had in our lives. Whether it is a mother, grandmother, sister, daughter, or a good friend, we can all think of someone we love that has inspired us.

Helping others is an innate, nurturing quality of most women. If we have the knowledge, we want to share it with those around us. This is especially valuable when it comes to sharing our knowledge of money.

It was not that long ago that people did not talk openly about money. Thankfully, times have changed. Money has an impact on each of us, from earning a living, to buying groceries, to paying for college, to saving for retirement. It touches almost every aspect of our daily lives, and at some point, we developed ideas and values surrounding money.

Looking back, I can see how the lessons I learned at an early age helped to create a foundation for my financial decisions today – saving, living within my means, investing in my future, and giving back, all principals that were taught to me when appropriate. The lessons do not stop there. How we earn money is important as well. Do something you enjoy, give it one hundred percent, and treat others fairly, are some of the cornerstones I try to build on.

The decisions we make surrounding money are unspoken examples to those who are watching, and the message we send is important. Think of your situation, who helped form your financial values?

You can share your money smarts with others by talking openly about money and sharing your experiences, good and bad. Stories are a great way to do that. It helps others connect with the message you want to convey, and it makes you seem more relatable. Remember, no one is perfect; sharing your hardships and failures is just as important as sharing your successes.

We make a difference in the lives of others, even if we are not mothers. If we share our experiences, we can help others make better financial decisions and become successful, financial speaking.

I admire you for mentoring those around you. You are generous beyond measure, with your time, talents, knowledge, and, when possible, your money.

I wish each of you a wonderful Mother’s Day.

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Happy Spring 2020!

By | 2020, Money Matters | No Comments

The year seems to be moving at a fast pace, and May will be here before we know it. Mark your calendars and plan to attend our annual Just for Women conference.

Just for Women Conference
The Gathering Place at Gardner Village
Friday, May 8th, 2020
9:00 a.m. to 12:30 p.m.

This year’s event will be packed with fun. We will start the morning off with a delicious breakfast, followed by educational and entertaining sessions.

Women love to nurture. We find satisfaction in helping other women improve their lives. We are excited to announce our 2020 Just for Women giving back partner – Days for Girls.

This remarkable non-profit organization helps many women and girls around the world find health, safety, and dignity. During the conference, we will have the opportunity to provide hands-on help.

If you have not heard their story, take a minute and visit their website at https://www.daysforgirls.org or watch this short video:

Days for Girls – Every Girl. Everywhere. Period.

Watch for your invitation to arrive in April. Seating will be limited, and RSVP is required.

We look forward to seeing you there!

Sincerely,

Sharla J. Jessop, CFP®
President

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A Newlywed’s Guide to Financial Success

By | 2020, Money Moxie, Newsletter | No Comments

I’m sure most people reading this article have heard that money is one of the leading causes of divorce. That can be disheartening to hear when you’re planning a wedding. Being a newlywed myself, I have thought a lot about myself and my husband’s financial success and how to achieve our personal financial goals. I also know from observing friends and former classmates that young people often don’t even know where to start when it comes to making good money choices, especially when you add another person to the picture. As I’ve thought about all of this, I have come up with a list of things that will help newlyweds be successful in their financial endeavors.

1. Talk about it – This first one is arguably the most important. Money is often a taboo subject, but it is important to have open communication about money, especially in marriage. It is best to talk about money before you get married, but if you haven’t, talk about it as soon as possible. Make sure you both understand each other’s expectations for your money. For example, let your spouse know if you expect them to talk to you before making purchases over a certain amount. It is essential to be honest with your spouse, especially about any debt you may have.

2. Build an emergency fund – Having an emergency fund should be a top priority for newly married couples. The general rule of thumb is to have 3-6 months’ worth of living expenses saved up for emergencies such as a lost job, family illness, natural disaster, or major home repairs. This will bring security in case disaster strikes.

3. Design and track a budget – Start by reviewing your joint budget for the last few months and assigning dollar limits to each spending category. Remember, a budget is a work in progress. It is okay to make adjustments, especially in the first few months. Tracking your spending after creating a budget is just as important as making the budget. There are many ways to track your spending. Some people use apps; some people use spreadsheets; some people use the envelope method. The envelope method is primarily just using cash for your budget, and once the cash is gone, you’re done spending in that category for the month. This is especially helpful in areas in which you tend to overspend. Try out a few different methods and find the one you like best.

4. Save for retirement – This one is not something newlyweds often think about. Retirement can seem like it is so far in the future you don’t need to worry about it. However, starting to save for retirement when you are young really gives you a leg up. Having time on your side helps you take advantage of compounding interest. Even if you start small, saving something toward your retirement early on can have a big impact. Contributing to your employer-sponsored 401k plan is an excellent place to start.

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How Do You Stack Up?

By | 2020, Money Moxie, Newsletter | No Comments

It is no secret that Americans need to save more for retirement. The amount of money an individual or couple will need to carry them through their retirement years varies based on numerous factors, including age, standard of living, location, expected fixed income sources – like a pension and Social Security – and more. Everyone needs to know where they stand based on their specific needs. Have they saved enough, or do they need to save more? Here are some shocking statistics that illustrate that Americans are falling short.

Source: Federal Reserve’s Survey of Consumer Finances

This chart shows the average retirement savings account balance of active savers. Averages can be deceiving as there are many balances far above the number shown. The issue lies in the realization that there are a significant number of accounts with balances far below the average. This creates a future financial crisis for these savers. Living today on the income they receive is doable. However, it will be almost impossible for these savers to maintain their standard of living in their elder years if they continue at the same rate of saving.

We are not proponents of Rule of Thumb planning. We prefer planning using actual key information specific to each client’s situation. But, in this situation, it helps us illustrate a reality. This chart shows how much someone should have in their retirement savings based on age. The amount shown is a multiple based on a $100,000 income.

Rule of thumb would say, based on the desired income amount you want in retirement, you should have saved a multiple of your current income. The amounts illustrated are multiples of a $100,000 income. For example, if you are age 45, you should have already saved 3 to 4 times your income. If you are 65, you should have saved 9 to 11 times your income. How are you doing?

The good news is there is always hope. If you are not on track, regardless of your age or situation, we can help create a roadmap to get you back on track, one step at a time. Contact one of our Wealth Advisors for more information.

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The Congruity of the Annuity

By | 2019, Money Moxie, Newsletter | No Comments

Too often we have people come into our office after having just attended a free dinner that preceded the purchase of an annuity. “A guaranteed return with no downside risk” is what they believe they now own. That sounds great. I would purchase that too. However, it isn’t until after a lengthy conversation that they begin to understand how their annuity truly works.

An annuity can be a great financial product if it is congruent with the overall portfolio. There are times we use annuities to accomplish specific objectives and are pleased with how they perform in these situations. The problem we often see with the annuity is not the product itself, but how it is used. In other words, the ambiguity of the annuity can lead to incongruity, and the solution could require some ingenuity.

Annuities can be complicated. If you are considering an annuity, make sure you understand how it fits into your financial plan…and also its policies, fees, expenses, commissions, terms, benefits, exclusions, riders, investment options, and waiting periods. Due to their complexity, they can be easy to misuse, which can create significant financial problems.

An annuity is a contract between you and an insurance company. There are three main types of annuities: fixed, indexed, and variable. Each type has its own objectives and fits into a financial plan differently. Each type also carries its own expenses, level of risk, and earning potential. Even within their individual types, they can vary greatly depending on the insurance company that issues them.

Annuities can be expensive. The average annuity costs approximately 3% per year. It is important to understand that there are often expenses you don’t see. Unfortunately, too many salesmen do not clearly explain the costs, nor how they are applied. I have seen annuities advertised with “No Fees!” In truth, however, these same annuities carry large expenses.

It is also important to understand that annuities are illiquid. This means you can’t access most, if not all, of the money in your annuity without surrender charges for a significant period (usually 7-10 years). Annuities are long-term investment contracts and you’ll pay hefty fees if you take your money out too soon.

Again, we believe annuities are great at doing what annuities do. It just isn’t often we meet with people who have a need for them. If you are wondering whether an annuity is right for you, come and see us. We will always be upfront and honest about the cost and structure of the products we sell. If an annuity does make sense in your financial plan, we’ll help make sure you purchase the most appropriate and cost-efficient annuity for you.

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Year-End Tax Strategies

By | 2019, Money Moxie, Newsletter | No Comments

We are closing in on the holiday season. Before you slip into the holiday mode, let’s talk about a few ways you can wrap up the year!

1. The market has had an incredible run. This is an excellent time to look at your non-retirement accounts to see if you can take advantage of tax harvesting.

If you have an investment that has gained $10,000 and another that has lost $10,000, you can sell both investments and avoid paying tax on the capital gains. This matching of gains and losses is known as tax harvesting.

The gains and losses do not have to match exactly, but your gain and loss have to both be long term or short term. If you have held an investment for more than a year, it is considered a long-term capital gain and would be taxed at capital gains rates. If you have held the investment for less than one year, it is considered a short-term gain and would be taxed at the higher ordinary income tax rates. Either way, the resulting tax savings can be significant.

2. Here’s a win-win strategy. If you don’t have losses to offset your gains, you can still get tax relief by donating to a cause about which you are passionate or your favorite charity: church, school, food bank, hospital, etc. Consider this – donating an appreciated investment directly to your charity of choice will avoid taxes.

To qualify, you must have held the investment for more than one year, and it must have appreciated in value. You avoid paying taxes, and the charity receives the full value of your donation tax-free. The money you would have donated can be used to purchase another investment to start the process over again.

3. Current tax rates are at historic lows. Consider converting money from a traditional IRA to a Roth IRA. You can choose how much to convert. For example, if you have room for another $10,000 of income before you hit the next marginal tax-bracket, make it count.

Before the year ends, convert $10,000 from your traditional IRA to a Roth IRA. If you are under 59 1/2 years old, you will have to pay tax on the conversion with other money – say from a savings account. If you are over 59 1/2, you can have taxes withheld from the distribution.

The benefits of Roth IRAs are tremendous. Roth IRAs grow tax-free, meaning you never pay taxes on the earnings, there are no required distributions at any age, and if you do not use the money during your lifetime, your beneficiaries receive the money tax-free!*

4. If you are over 70 1/2 years old and you have an IRA, you can donate part or all of your Required Minimum Distribution (RMD) to your favorite charity and pay no taxes. This distribution is called a Qualified Charitable Distribution (QCD). The distribution still satisfies your RMD. This cannot be done from a 401(k). If you have a 401(k) and want to take advantage of this next year, you need to roll out your 401(k) before the end of the year.

*Tax-free withdrawals if certain conditions are met: a five-year account aging requirement and attaining age 59½, becoming disabled, using up to $10,000 to buy a first home, or upon death. SFS and its representatives do not provide tax advice; it is important to coordinate with your tax advisor regarding your specific situation.

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The Biggest Threat To Your Retirement

By | 2019, Money Moxie, Newsletter | No Comments

Admit it. Your adult children still live in your basement. Talking about the effects of caring “too much” for adult children by financially supporting them is an uncomfortable conversation, but it is an important one.

When there are no financial boundaries set between parents and adult children, the ensuing relational volatility could be a far greater threat to retirement than market volatility. Now, I’m not talking about helping fund a child’s education or paying for a wedding. The real problem begins when parents pay for their adult children’s cars, insurance, food, or even vacations. This may sound ridiculous to some, but studies suggest that 79% of parents provide some form of financial support to their adult children. In fact, just over 50% of parents say they have even sacrificed their own retirement savings to help their adult children.

So, what should you do??

(1) Separate your retirement money from your other money. Keep it off-limits. Retirement money should only be used for retirement! Try to think about retirement money as untouchable.

(2) Try changing up the way you are helping your adult child. Try to figure out ways to help that don’t include giving money, like helping with a resumé or reviewing their budget with them. Don’t come to the rescue too quickly. Rushing in to fix or solve your adult child’s challenges will hinder their opportunities to develop and practice independent problem-solving skills.

(3) Set clear expectations. Helping your adult children get on their feet when they’re down and out is not a bad thing. Just make sure they know what is expected of them. You could tell your children you will help them for a certain amount of time and during that time you expect them to do things to improve their life situation. Keep reminding them of the deadline, talk with them often about their progress, and keep them accountable.

(4) Don’t take on the blame for their struggles. Irrationally blaming yourself for your child’s struggles will likely lead you to enable them by impulsively solving their problems. Parents, of course, are not perfect, but most try their hardest to be supportive and provide their children with a loving home. It is not uncommon to see children who were raised with many advantages end up struggling to thrive as adults, just as it’s not uncommon to see children who have had adverse family lives achieve impressive things.

(5) Remember to take care of yourself too. Parents of struggling adult children are often wracked by guilt and worry, which leads to poor sleep, unhealthy eating, and problems focusing. Worrying yourself sick will not help your child. Don’t be afraid to reach out for help from a professional counselor, friends, family, or support groups for family members of people with addictions or mental illness.

References for studies mentioned:
https://www.cnbc.com/2018/10/02/parents-spend-twice-as-much-on-adult-children-than-saving-for-retirement.html
https://www.bankrate.com/personal-finance/financial-independence-survey-april-2019/

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