February, 2022 | Live a Life By Design

The Millennial Perspective: Know Your Worth

Posted on February 25, 2022February 25, 2022 by Ashley Stieb

What makes a good manager and leader? There are plenty of different answers to that question depending on who you ask. Our 6^th United States President, John Quincy Adams, once said, “If your actions inspire others to dream more, learn more, do more and become more, you are a leader.” I could not agree more.

One of the things that has changed with millennials – and may be ruining work culture according to older generations – is job turnover. I remember being told that I would not be able to get a decent job if I started hopping around various places. This statement could not have been further from the truth. In the 11 years that I have been in the workforce, I have had a total of eight jobs. With each job change, apart from a few which we will get to shortly, I have left the position because of a combination of two things – better opportunity and poor management. These two reasons happen to be among the most common for people leaving their employment.

Let us start with the larger of the two causes for leaving employment – poor management. I, thankfully, learned early in my career that the way some of my managers acted towards their employees coupled with their lack of leadership skills resulted in most instances being resolved in the wrong manner. I simultaneously learned that other managers acted and resolved similar scenarios with employees in a much better manner and yielded better results. At the time I decided to resign from my third job, which was by far the most toxic workplace I have experienced, I knew my worth was not being appreciated through either the workplace culture or the pay that I was receiving. That was when I started to think about opportunity.

Here is a scenario that is, unfortunately, too common. A teenager is in their first week at their first job. The first half of the week has been dedicated to training. The business has certain policies about how much product is served to customers. The teenager, who is still learning the ins and outs of the job, accidentally gives a customer a little too much product and as a result, the manager on duty chooses to berate him in front of customers. Imagine you are that teenager, and this was your first experience at work. You would be embarrassed and disheartened. Would you make the same mistake again? It depends on the mistake and how easy it was to correct; however, you hope to never make the same mistake again. Would you be excited to return to work after that? Of course not! You would either wish you had a different job or, the more probable decision, you will get a different job.

A great leader would speak with the employee using a calm voice and explain why the rule exists including the impact of the rule overall to deliver the appropriate amount of product to customers. These situations should be about learning opportunities to build an employee’s confidence rather than the manager’s power and dominance.

Some of the most awkward moments for an employee is announcing her intention to leave the employer. When I think back to the moments where I have given my notice of resignation, a few key points stick out to me. One time my manager tried to tell me why leaving was a bad idea and how horrible my new job would be. That behavior was not helpful or professional. Another time my manager tried to talk me out of leaving for a stable, full-time job because she had a full-time position becoming available in the future for my skill sets. By adding, “we would hate to lose you” to the conversation required some thought. However, when I asked if she would grant me the new full-time position at that moment, she said “no.” My all-time favorite response to my timely and professional resignation notice was receiving a “not-so-nice” hand gesture in response to my notice. Was it in a playful manner? Sure, but it proved the point to me that the management team was unprofessional and fortified my decision to leave.

Last night as I was watching Ted Lasso, a great show on Apple TV+, a character named “Higgins” said, “a good mentor hopes you will move on. A great mentor knows you will.” That really got me thinking about how poor managers do not hope you will move on. There have been two out of all eight jobs where my manager was happy for me and encouraged me to go because they wanted me to have better opportunities beyond what they could provide. One case was just a prospective job change, but I felt comfortable enough to approach my manager to ask them for advice on how to proceed. These two managers rank among the best managers and leaders I have ever had. They embody the type of leadership that John Quincy Adams is referring to in the quote from my opening paragraph and I consider myself lucky to have had the opportunity to work with them

The correlation between employee turnover and quality of management is high. There is an old saying, “people don’t leave bad jobs, they leave bad bosses.” Do not be afraid to recognize your own worth when your leadership does not. The moment you start to wonder if you deserve better is how you know you do deserve better. Next time you are hunting for a job, be weary of listings that you have seen multiple times. Should you find yourself being interviewed for a job, ask the right questions to determine if it aligns with a work culture that you desire. An easy question would be to simply ask how long people have been there to get a feel for the general turnover. Another means of success in finding the perfect job is to be honest with yourself, defining what you seek in a role. Take command of your current happiness and future security. Only accept a position that contributes to your satisfaction that you are making a difference in the lives of others.

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The Best Medicine

Posted on February 17, 2022February 17, 2022 by Jimmy J. Williams, CPA/PFS, CFP®

One of the most effective medicines is becoming less available in the world. This formula for curing many of today’s illnesses such as depression, cancer and other potentially debilitating diseases has been around for a millennium and, most recently, has become a valued, yet limited, approach to healing. You may be wondering what powerful drug your doctor has never prescribed to you – laughter.

As a child, we implement this powerful anti-stress medication approximately 300 times a day according to Psychology Today. The average 40-year-old laughs on average 4 times per day. These statistics may be urban legend, but the outcomes speak for themselves. We are more happy, excited about life and healthier as a child that laughs a substantial number of times each day.

In an April 24, 2020, article on VeryWellMind.com by Elizabeth Scott, PhD, the many benefits of laughter were evaluated. One of the most important outcomes from laughing is the lowering of stress hormones, such as cortisol, epinephrine, dopamine and growth hormone. Another finding was the number of antibody-producing cells increased in test subjects that laughed more per day than the group of individuals who did not.

What if you could become more physically fit simply by laughing? “A hearty laugh exercises the diaphragm, contracts the abs, and even works the shoulders, leaving the muscles more relaxed afterward,” according to the author. I am not saying you can eat all the carbs and fats that you wish and only laugh the pounds away, but it would not hurt for you to laugh, even at yourself, during the actual lifting of weights or running.

One of the most humorous stories of my life comes to mind. I was signed up to run a 5-K race for the first time. After running and working out for about 8 weeks, I was ready for the big day. Standing at the start line looking like a typical non-runner, bib fastened to my sweat-wicking running shirt, feet adorned with special running shoes for people of my talent and size (that’s what the skinny running salesman said at the store) and special running shorts that were longer than normal to hide the fact that I have not had any sun on my legs in a while, I faced the course with a determined look.

A few minutes before the starting pistol was to sound, a large woman with a clipboard comes over to me. She had a look in her eye like a TSA Agent finding something on my person while standing outside the body scanner. I will never forget her greeting – “Hi! This must be your first race.” I agreed with a proud smile on my face knowing that I had prepared and was mentally ready to take on the challenge before me. Her next statement, although funny today, was not so encouraging at the time. “You need to move to the back of the race pack.” I looked at her puzzled as to why she would make such a statement. I asked, “Do we start in bid number order or something?” She laughed aloud and replied, “No. Look behind you and you will see a man that will run up your back in the first twenty yards of the race.” Her quip was acknowledged as I turned and saw one of the runners that inherited the genes of the long-distance Grecians who ran from city-to-city without sweating or breathing hard.

As I gingerly walked to the back of the pack, a little dejected but also unable to contain the laughter of receiving advice about running from someone who obviously has never run a race in her life. After completing the course, within 31 minutes, I took my medal and walked over to the clipboard lady and said, “Thanks for the advice. I lost track of “Mercury” or whatever his name was after the first five minutes.”

Look for opportunities to improve your mental and physical health by simply laughing whether at yourself or circumstances you may find yourself. It is a non-lethal way you can improve your day without hurting your body.

Your longevity in life is determined by how much you laugh. Well, this is my hypothesis and I intend on living to be 124! I always seek opportunities to help people laugh when they are stressed, and it is an appropriate moment in time.

Your lifetime of financial security for your family is no laughing matter. To alleviate the stress from worrying about your finances, seek out a CERTIFIED FINANCIAL PLANNER^TM professional to help you build confidence in your future so you can laugh all the way to retirement and beyond.

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Inflation Perspective

Posted on February 11, 2022February 11, 2022 by Jimmy J. Williams, CPA/PFS, CFP®

If you are living in the United States at this moment and have purchased any food, gasoline, household goods or clothing in the past month, you have noticed an increase in the cost of these items. This unanticipated increase in pricing is due to inflation. The definition of inflation is the increase of demand for certain goods above their available supply to be purchased.

In 2021, the U.S. Government printed significant volumes of money and distributed it back (and yes, it is the citizens’ money) to the people of the country to mitigate the effects of the pandemic. Layoffs, terminations and underemployment were significant during the pandemic and families needed assistance due to a lack of savings (Lesson #1). Economics can be a puzzling subject to many of us but it is recognized immediately and understood at the checkout counter.

Last Thursday, the U.S. Bureau of Labor Statistics issued the most recent inflation statistic for our country. Inflation rose to 7.5% which is a height not seen in the index since President Jimmy Carter was in office. Food, a necessary staple for survival, rose 7.4% during the last 12 months, gasoline has risen 40%, electricity 10.7%, natural gas 23.9%, new vehicles 12.9% and used vehicles 40.5%. On a lighter note, if all of the stress from the higher cost of living causes you to enjoy greater amounts of libation, alcoholic beverages increased only 2.7% in the last year.

The tools of the U.S. Federal Reserve Board, charged with keeping the economy running smoothly without such inflationary impact, are to increase rates at which banks may borrow funds to make loans, buy back U.S. government bonds and increasing reserve requirements of its member banks. Each of these actions has a corresponding reaction. For example, by increasing the discount rate for which banks would pay to borrow money from the Fed, the consumer requiring the loan will pay a corresponding higher rate of interest so the bank’s margin, or spread, on the loan will be maintained to cover expenses.

An increase in the discount rate ripples through the economy and impacts most, if not all, types of borrowing. Credit card and other personal debt will be more costly resulting in fewer people using such credit. The effect of this lowering of activity is that companies will sell fewer goods and, thereby, lowering the inflationary impact because the balance of demand and supply are closer to equilibrium.

As a consumer, there are a few steps you can take to help your family combat this rising of costs. First, review your family’s budget to determine if you had planned any purchases of durable goods or automobiles in the next couple of years. If possible, delay those purchases until inflation has decreased to a more reasonable level allowing the pricing of the items to lower.

Second, increase your savings. The reason for the government sending families in the U.S. thousands of dollars in stimulus and additional, protracted terms of unemployment benefits is due to a lack of savings for these families. Americans are poor savers compared to citizens of other countries. According to statista.com, for the period of 2010 through 2020, the following countries’ households, and their respective average savings rates, are the highest in the world: 1) Austria – 17%; Belgium – 14.3%; Canada – 15%; Czech Republic – 8.1%; and Denmark – 7.7% round out the top five countries.

The United States, in comparison to the above savings rates by countries, had a savings rate in December 2021 of 7.4% according to ycharts.com. To help our families lessen the impact of inflation, which will continue for approximately two years by my research, reduce spending and increase savings as significantly as possible. Further, delay any large purchases of durable goods unless it is absolutely necessary. Increase deferrals and contributions to retirement accounts to help reduce the outlay of funds for taxes.

There are many “tools” that families can use to mitigate inflationary pressure on their retirement accounts, reserve savings and family budget. A CERTIFIED FINANCIAL PLANNER^TM professional can help guide you with your cashflow planning and management process. You should be seeking confidence and comfort during inclement times of the economy. Don’t allow your family’s comfort to be blown about like a ship out at sea when the financial winds blow. Take charge of your financial situation today.

See you on the jogging trail!

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Bringing Clarity to Gift Taxes

Posted on February 3, 2022February 3, 2022 by Jimmy J. Williams, CPA/PFS, CFP®

Many of us have worked extremely hard in life to accumulate a substantial amount of assets to fund our future retirement. The younger generation is buying homes, attending college, and beginning their lives in a way they had been accustomed from their parents. However, in the words of the great songwriter, Bob Dylan, “these times they are a changin’” accurately describes the economic environment for Millennials and Gen-Zs in 2022.

To ease some of the fiscal burden experienced by our children and grandchildren, gifts are often given to them. As you are aware, there are no free lunches in life – even if you paid tax on the funds when you earned them – and you wish to gift funds to your heirs. Each year the annual exclusion, an amount the IRS deems to be free from reporting as a taxable gift, is announced. In 2022, the amount a person may give another without reporting the gift is $16,000.

If your spouse and you wish to help your child’s family purchase a new home, while keeping the monthly mortgage payment at a level the child can service, many resort to gifting cash to the heir. Assume the child is purchasing a $250,000 starter home (yes, I know that is a lot of money for a starter house but re-read the Bob Dylan quote in the first paragraph of this article) and the required deposit is 20% of the purchase price. To accumulate the $50,000 down payment would require considerable time and savings for your heir.

To reduce the timeline for saving the funds, you simply wish to gift the funds to your child and her spouse. If the structure of the transaction is performed correctly, your children will be in a house before you can say “straight amortization.” One parent may give each of the children, your daughter, and her spouse, $16,000 each or $32,000 in total. We are still short of the down payment amount but let us keep designing our gifting plan. The other parent may gift the same amounts to the daughter and spouse and – voila – we now have $64,000 available for the down payment of the new residence.

Now, the question arises, how do you report these gifts on a return to the IRS? An IRS Form 709 is required to be filed by April 15 of the year after gifts have been transferred to a donee. However, you are only required to file this form if your total gifts per donee exceed the annual exclusion amount ($16,000) in the calendar year. In our previous example, you will note that the parents gave only $16,000 to each of the donees thereby preventing the need for filing a gift tax return.

What happens when you gift a total of more than $16,000 to a donee? How much tax is owed on this transaction? Good news, again! Should you give a donee more than $16,000 in a given calendar year, a gift tax return is filed but the excess amount over the $16,000 is offset by your lifetime exclusion of $12.06 million. My point is that you have a considerable amount of gifting to be performed before taxation occurs in most cases.

Another strategy we employ with our clients is the funding of a grandchild’s education. By making a gift to fund the entire education estimated costs, the grandparent may gift five years of annual gifts in one year and elect to be prorated over the five-year period. For example, Grandpa Bob wishes to send Timmy to the University of Oklahoma in 15 years. Bob may gift a total of $80,000 to a fund that will grow and provide for Timmy’s educational needs when he reaches the age for college. Bob will file a Form 709 and pay no gift tax under the previously stated strategy.

Another misconception of gifting is that the donee believes she owes income tax on the gift. By its definition and nature, a gift is something given to another without consideration being transferred to the donor. In simple language, you can receive a million-dollar gift and pay no income tax. Is this a great country or what?!?

To avoid estate and gift taxes, as well as the reduction of income taxes, it is vital that you plan accordingly prior to transferring your gift. Certain assets contain characteristics that may require special treatment under the Internal Revenue Code. It is critical that you consider the tax implications prior to effecting the transaction. A CPA and CERTIFIED FINANCIAL PLANNER^TM professional can help guide you in the gifting process in conjunction with your overall estate planning desires. Taxes may be a part of life, but they do not have to be the primary part of your life.

See you on the jogging trail!