January, 2021 | Live a Life By Design

The Millennial Perspective: Who To Trust?

Posted on January 29, 2021May 13, 2021 by Ashley Stieb

Millennials have been through the ringer in their short time on this Earth. Many of these events have had big effects on the financial system and institutions in our country. There also happens to be an extremely large gap in financial literacy in U.S. schools. As a result, we find that a good portion of millennials lack trust in said system, institutions, and even the educated professionals working in them. So, what reasons do we have to distrust these professionals and is there any chance of gaining or regaining that trust?

Think about how you handle your finances. Do you take advice from family and friends, or do you use a service, such as wealth management? When it comes to managing finances, a lot of millennials will turn to their friends and family for advice. This could be for a number of reasons, the most common reason you may come across is the cost of using a professional service. I’ve already discussed in previous articles why millennials can’t afford many of the things older generations could at our age. We make less money and things cost significantly more. So, would this be considered an “essential” cost for our generation? Probably Not.

The way we see it is, we simply don’t have enough money to manage, so why would a large portion of us spend money to manage what’s not there to begin with? We likely know that it may be helpful to work out a personalized budget with someone who is certified to do so. Knowing this, why would millennials still stick to family and friend advice versus a professional? The stigma.

There is a stigma working against financial professionals and it’s been determined that they are all in it for the money. They’re just salesmen that are out to make a buck and who cares about your personal finances. This just simply is not true in many, if not most, cases. It’s also why financial literacy is so important. With proper education, trust in the professionals can be built from a young age. You can learn what to look for when searching for a certified professional to know you are getting help from someone trustworthy. A good place to start, is looking at credentials. Are they a “CERTIFIED FINANICAL PLANNERô”, someone certified to have knowledge to help navigate finances? Are they a “fiduciary”, someone legally obligated to do what is best for the client? If so, these professionals would be a good option to help you with your finances and get on the right path.

Another reason millennials may not trust the financial systems in our country has become particularly relevant this past week. You may have heard about the chaos ensuing on Wall Street with a social media platform called Reddit, various stocks, such as Game Stop, and a trading platform called Robinhood. From what I have seen personally, not many of my fellow millennials know a lot about how the stock markets work, but they all seem to agree that Wall Street gets richer while the poor get poorer. So, a crew of Reddit users wanted to fight back and raise the stock of some soon-to-be shorted companies. As a result, these stocks went up in record numbers. Game Stop rose almost 2,500%! In the midst of all of this, Robinhood shut down trading shares for these particular stocks on January 28, 2021. If you had already invested in them, you could no longer invest more and if you had not invested in them yet, you may have missed your chance. The whole point of the Robinhood app is to allow the “common man” to participate in the stock market freely. As you can imagine, this made a lot of people angry. They felt as though the app created to help them was now working for the other side. There is a lot more that goes into this whole story, but to sum it up, the action that Robinhood took to stop people from trading these stocks is a solid reason why millennials don’t trust the financial system in our country and feel like the system works against those who do not already have a large sum of wealth.

I’m not saying that millennials should change their view of the financial world completely, but it’s worth educating yourself on certain things so that you can have a better understanding of how it all works. We all have different financial journeys. What works for your family and friends may not work for you. Do not be afraid to ask for help to build a plan that is designed for and works for you. There are professionals out there that want to help you and it is absolutely worth setting up a consultation just to talk things through and find the right fit for you.

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Difference Between Economy and Markets

Posted on January 22, 2021January 22, 2021 by Jimmy J. Williams, CPA/PFS, CFP®

What is the driver of our economy in the United States? Is it labor? Not entirely because our nation is suffering one of its highest unemployment rates in recent history based on a report by the U.S. Bureau of Labor Statistics dated January 8, 2021, and the world keeps spinning. The current United Stated unemployment rate of 6.7% is not the actual number that concerns me. When you understand the factors that compute the unemployment rate in our country, you must also consider those individuals who have simply dropped out the job market and resigned themselves to remaining unemployable. The true number of unemployed and underemployed individuals in the United States, the quoted unemployment rate would easily double.

Is our economy built on industries? Yes. The five most productive industries in the United States, for 2019, are healthcare, technology, construction, retail and durable goods. Each month the Bureau of Economic Analysis, an official agency of the United States Department of Commerce, reports on the various components of the economy both domestic and internationally. Due to the lack of business operations in the second quarter of 2020, caused by the impact of COVID-19, the gross domestic production in our country fell by more than 31.4% but rebounded sharply when businesses reopened and employees went back to work in the third quarter of 2020.

If the economy has been so volatile, why have the markets been so robust? The answer is not a simple one but allow me to offer a response. Based on a report in Barron’s published on January 2, 2021, the Standard & Poor’s 500 Index (S&P 500) returned 18.4% for the calendar year 2020. This index is representative of the overall economic condition of the United States. Consider the fate of smaller, less capitalized companies primarily based in our country. The return of the Nasdaq Composite for 2020, based on the same Barron’s report, was 45%. Smaller companies have the ability to adapt to economic conditions but may not have the funding necessary to survive economic downturns.

One word of caution when considering any investment is to think long-term. In the past couple of weeks, I have received requests from individuals for the “hottest” stock or “one that is priced low and guaranteed to rise in value in a short time”. The answer I provided each of these individuals is to think long-term, diversify to lower risk and consider your current needs. One of the individuals commented that he “didn’t have much time until he wants to retire” and intimated that he would have to earn excellent returns over the next two years to meet his goals. I am not one to trample on others’ goals but I can assure you that one should not expect the markets to behave in a predictable manner for the short-term to payoff big investments.

The most probable method of reaching your goal for investing is to start early, invest consistently in good and bad markets and stay focused on the long-term. It will reward you to discount the suggestions of those that promise “no risk” and “excellent returns” when the real world of investing contains no such attributes. All investments have risk. One of the safest investments you can make is to place cash in a savings account. However, that investment has significant purchasing power risk. Your money’s ability to buy goods and services in the next ten years will be impaired due to the impact of inflation. Think about it in an economic sense, your money is earning less than 1% and inflation is greater than 2%. Not a good outcome for your future.

To provide yourself peace of mind, it is critical you stress test your portfolio by measuring performance during market cycles that are not at the peak. If I had a crystal ball, I could inform you of market movements and the world would be swimming in butterflies and unicorns. That is not reality. What is real is financial advice given you in a fiduciary manner that addresses your needs, goals and risks. Wouldn’t you sleep better if you knew you could weather a financial storm? Seek out a Certified Financial Planner™ professional for a complimentary consultation and analysis. Sleep well, my friends.

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New Year, New Opportunities, New Tax Laws

Posted on January 15, 2021January 15, 2021 by Jimmy J. Williams, CPA/PFS, CFP®

If there is one thing in life you can count on, that would be income tax changes! Over the past few months, we have seen changes in our world that create anxiety for many people – elections, natural disasters, COVID-19, etc. One of the best methods of understanding the factors of anxiety is to acknowledge who controls the process – you. I’ve said it many times, but it is most important that you invest in yourself by taking care of your mental health. By feeding on a diet of negative news on the TV, you implant in your brain the thoughts that control your psyche for the day. Rather than listening to or watching these events that cause you to be anxious, consider reading a good book or walking in the park to gain a fresh perspective about life.

We can’t totally ignore life because we do owe a duty as citizens of the greatest country on the planet. Annually you are asked by the federal, state and local governments to report certain assets, income and other activities for purposes of paying your fair share of the burden to live in a civilized society (well, somedays it may not seem civilized, but it is). Former Justice of the Supreme Court, Oliver Wendell Holmes, coined the phrase applying taxation as the price for a civilized society but, as citizens, we are owed a duty by those elected to represent us to utilize our taxes in a meaningful way that brings order to our world.

Before you file your 2020 individual income tax return, you may want to consider these important changes that may help your family. President Trump signed the Consolidated Appropriations Act, 2021on December 27, 2020. The law impacts individuals in a manner that helps provide family support and small businesses with additional payroll assistance.

No doubt you have watched the news lately and determined that your bank account may contain $600 more than you originally noted. For those individuals who filed electronic returns for 2019, and whose bank information was on the return, many received their stimulus payments the first week of January. One misunderstanding about the Recovery Rebate Credits of $600 is that the payment is a credit against 2020 income taxes. Individuals with adjusted gross income in excess of $75,000, or joint filers with adjusted gross income in excess of $150,000, are not eligible to receive the stimulus payment.

Teachers also receive additional relief for personal protective equipment costs that may be deducted as qualified educator expenses. This above-the-line deduction is helpful to reduce adjusted gross income which lowers the overall hurdle of other expenses the family may incur such as medical expenses that are deductible as itemized deductions.

If you are unable to itemize deductions but wish to continue to support your local qualified charitable organization, you may do so. The law changes in 2020 allows an above-the-line deduction for qualified charitable donations in the amount of $300.

As we begin a new year for our lives to enjoy, it is critical that we recall the reasons for the founding of the United States of America. The preamble to our constitution provides us a goal for which we must, in a collective manner, strive toward: 1) establish a system of laws and justice equally applied to all citizens; 2) create and maintain a defense of our nation from enemies; 3) promote the general welfare of our citizens; and 4) secure the blessings of liberty. We are a nation of people with one common interest – freedom. Our nation is the beacon to all other nations on the planet as an example for true independence and the opportunity for every citizen to be successful on their own terms. Happy New Year!

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The Millennial Perspective: Ending New Year’s Resolutions for Good

Posted on January 8, 2021May 13, 2021 by Ashley Stieb

“My New Year’s resolution is…” I cannot tell you how many times I have said that phrase and I do not think I have ever really fulfilled those resolutions. Goal setting is a fundamental part of life, but it can also be a source of great disappointment and anxiety due to the restrictions we often place on ourselves to achieve these goals. Because of this, myself and many others are switching things up this year. Sure, we all have baggage that we carry with us into the new year that we would like to resolve, but sometimes the way it is stated is not helpful or healthy. Rather than setting resolutions we are setting intentions.

Instead of saying, “I need tolose 20 pounds,” or, “I need to go to the gym every day,” try saying, “I will do my best to lose 20 pounds,” and, “I will do my best to go to the gym every day.” We are not robots. We cannot be perfect. Setting such grand expectations for ourselves can lead to undue stress and with everything else going on day-to-day, why should we cause stress for ourselves? Remember my article about stress last year? Worry about the things you have control over and do the best you can do when you can. Besides, stress can often disrupt our day-to-day actions and the make your goals even harder to achieve. I am not saying you should not set goals at all because you must have something to work towards. Goals are the end game, the bigger picture. Intentions are the day-to-day actions you take to work towards that goal, like mini goals.

I have found that writing my intentions down every day, or however often, helps to serve as a reminder. Again, you must keep in mind that nothing is perfect. Your day may not go exactly how you want, and those intentions might change as the day progresses, and that is okay. If I wake up and intend to take a walk outside, but the forecast suddenly changes, as it often does in Oklahoma, I am not going to beat myself up about it because I cannot control the weather. I will just scratch that off my list and do laps in my living room! Or I can take it as a sign that it just was not meant to happen today, and I will use that opportunity to do something else on my list instead.

It is okay to slip up sometimes. It is okay to skip a workout and eat the cookies at the work luncheon. You can do these things and still reach your goal. There is no need to beat ourselves up when we give into to a few temptations here and there or just simply have a dreadful day. Changing the way our minds think of the things we wish to achieve is huge. It can turn your whole attitude towards an action around. If I say I need to do something that makes it feel like it is a chore and a burden which, in turn, makes me not want to do that thing. When I recognize that I cannot be perfect and messing up from time to time is inevitable, then it feels more like motivation. I am more motivated to do the things I intend to do to achieve my goal when I take a positive and realistic approach. That is what setting intentions to achieve a goal is all about. So, give setting intentions a try this year. Change it up and see how it works for you. You might surprise yourself and be thankful you did it in the end.