What Is Your Net Worth?

As a result of the economic disruption of the past two years, many people are becoming confused and concerned as to the sufficiency of their financial wealth in maintaining their lifestyle. Fear has a means of causing one to doubt previously acceptable strategies and financial reserves as supportive of your future. By focusing on the factors, you can control, you will regain your confidence and build competence to achieve your future no matter the market conditions.

First, it is critical that you understand your current financial state. To do this it is necessary that you look earnestly at your overall finances in a manner that provides you the most information. One document that will help you capture this information in a succinct manner is a personal financial statement. This report is a snapshot of your assets (the items you own), your liabilities (the amounts you owe to others) and your net worth (an arithmetic function of assets minus liabilities). Let’s assume you own assets valued at $3,000,000 and have liabilities of $1,000,000. Your current net worth, in the most simplistic of terms, would be $2,000,000.

By understanding what you own and how much you owe others, you may now start the planning process for the future. You know the old saying, “It is hard to get to where you wish to go if you don’t where you are.” This document can be a very useful tool for an individual planning for her future. Exam the personal financial statement and notice those assets that may create income and those that simply grow in value. Perhaps on your financial statement there are assets that are idle and incur expenses without generating income to offset their maintenance.

Examining the liabilities, you may calculate several important ratios or factors that will help you achieve greater net worth. For example, if your indebtedness is secured by collateral, what is the value of the asset? Is it sufficient to allow the indebtedness to be liquidated by selling the asset? What is my weighted average cost of borrowing? These are important questions to consider when creating a financial plan.

Taxes are often overlooked on a personal financial statement. This is one liability that must be considered in the statement since it is prevalent in our country and will require assets to achieve the payment. Taxes are owed in many forms – estate, sales, income, property, etc. I am reminded of the poem authored and published by the Adam Smith Institute that reads in part, “Tax his cigars, tax his beers, if he cries then tax his tears. Tax all he has, then let him know, that you won’t be done til he has no dough. When he screams and hollers, then tax him some more, tax him til he’s good and sore.” A little levity is always good when talking about a portion of one’s lifetime income being sent to a taxing authority.

The final step is to analyze the change in your net worth. Are you growing in net worth or are you losing ground? It is critical to understand the net worth you possess so that you can work with this amount for purposes of funding your future lifestyle. Review your net worth over the past ten years and note the growth trend you experienced. Are you consistently increasing in net worth prior to retirement? If not, adjustments must be made in your assets that you purchase and the indebtedness you incur.

To fully understand the development and uses of a personal financial statement, seek the assistance of a CERTIFIED FINANCIAL PLANNER™ professional. To create a pathway to success, you must first establish your current point in time and net worth. You owe it to your family and yourself to be as capable as you can possibly be to direct your efforts to the future of your design. See you on the gridiron!

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Lifetime Decisions on Social Security Benefits

Perhaps one of the “Top 10” retirement questions we receive is when to elect social security benefits. The question is one that is complicated to answer due to the fact that many unknown variables exist within this question. Just a few considerations are: 1) How long will I live? 2) How can I maximize my benefits? 3) What is the best strategy to gain the most household benefits? 

Let’s tackle the first question since it is preeminent to the prediction of mortality. The answer to the question of “How long will I live?” requires greater analysis than a simple number presented as the target date. What age were your parents and grandparents at their deaths? Do you have any comorbidities or systemic health issues? What are your current cash flow needs? Are you married? Widowed? Do you have a dependent child that has been diagnosed special needs? All of these factors, and many more, give rise to a greater amount of analysis to properly estimate your date of filing for benefits.

According to the U.S. Centers for Disease Control, in a study published in 2019, men enjoy a life expectancy, at birth, of 75.1 years and women 80.5 years. Of course, these are averages and many of us will live to 100 years of age and beyond. Curiously, the projected ages for men and women declined in the past year by approximately 0.9 to 1.2 years. Was this due to the effects of the pandemic or is this a normal fluctuation of the population cycle? 

The most important election many of us will make that has a lifetime impact is the election to receive social security benefits. Much confusion exists around the timing of this election. We highly recommend that each client examine their needs, lifestyle and circumstances when determining the filing date for benefits. For example, if your lifetime savings is not projected to meet your cash flow needs due to the lower returns from the current market cycle, you may wish to analyze the lifetime loss of SSA benefits by electing earlier than your Full Retirement Age (FRA). It is not ideal to make lifetime decisions based on short-term needs. For an individual who is age 62 and would reach FRA at age 67, if benefits are elected at any time from age 62 to 66 years and 364 days (provided it is not leap year), his or her benefits will be reduced permanently by 30%. Depending on your lifetime earnings report, this may be a significant loss of benefit.

Lastly, the best strategy for your household is to determine the ages of each spouse and then review the earnings reports for each by obtaining them on www.ssa.gov . If the higher earned benefit spouse were to delay benefits until reaching age 70, instead of claiming at age 67, a 24% increase in monthly benefits would be availed to the surviving spouse upon the death of the higher earner. The bonus earned by the higher-earning spouse is material in the fact that many spouses may live to be 90 years of age or more which allows significant time for the collection of the bonus payments. Upon the death of the higher benefit spouse, the survivor would “step in the shoes” of the deceased and receive their benefit (while forgoing the survivor’s original earned benefit).

It is critical that you make the best decision for your family. A proper analysis of the hundreds of options of benefit elections is necessary to give you confidence in this lifetime decision. If you wish to plan appropriately for your SSA benefits, contact a CERTIFIED FINANCIAL PLANNERTM professional to assist you in this important lifetime decision.

Today is another 24-hour period for you to find gratitude and happiness. Spread your smiles to those around you and you will reap what you sow. I have a saying that may be appropriate – “If smiles were contagious, would you start a pandemic?” See you on the walking trail!

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Thriving in Volatile Markets

Do you dread challenging markets?  Do you break out into a cold sweat when your investment statement arrives in the mail?  Many of us don’t understand the positives, yes, I said “positives”, of the opportunities that present themselves in volatile markets.  Retail investors exhibit several common traits.  First, they typically like to “buy high” and “sell low” based on fear and not sound research.  Second, their idea of diversification is to own several different accounts with a myriad of investment positions in each one.  This is not only a complicated method of living but fraught with issues such as investment overlap and possible sector concentration.

A better method of achieving your long-term investment goals is to develop a plan of investing that does not change with market cycles.  This type of approach will serve you well in the long-term since you are dollar-cost averaging by investing each month (or some predictable cycle).  In a market expansion, your constant investment amount will buy fewer shares or units of a particular investment.  However, in a declining market, such as the one being experienced in the United States at this time, your consistent investment amount will buy more shares of a particular investment due to the lowered buy price.

Dollar-cost averaging doesn’t guarantee success of your portfolio but it does utilize the natural market cycles to help you achieve a potential lower average cost in the shares/units you purchase over time.  For example, if you are investing $1,000 each month in your portfolio and the shares are $50.00 each, you may buy 20 shares during the month.  However, if the market is declining and shares are now $40.00 each, you may buy 25 shares during the period.  Over time you may experience a lower average cost of investment in each share.

In our previous example, assume the investment is a company that has a history of paying excellent dividends and has weathered many difficult business cycles.  The company’s management gives you confidence that it will, once again, keep the company moving in a positive trajectory despite the economic hardships.  By focusing on facts and not emotions, the probability that you will achieve your investment goals is much greater.  Remember the quote from the “Oracle of Omaha” Warren Buffett, “If you don’t feel comfortable owning a stock for 10 years, you shouldn’t own it for 10 minutes.”

I understand it is difficult and takes great courage to weather some of the more difficult economic cycles the United States has suffered.  However, remember that you will be using the totality of your investments for supporting your lifestyle in retirement and it took you many years to accumulate the funds.  One or two negative market cycles will give way to more positive cycles at some point.  The future isn’t hard to predict if you create it yourself. 

Establish your investment plan based on sound logic and economics.  Don’t attempt to time or “outsmart” the markets.  Many bankrupt individuals have attempted these approaches.  If you have questions on establishing an appropriate strategy for your lifetime accumulation of retirement funds, contact a CERTIFIED FINANCIAL PLANNERTM professional.  The best counter to emotional disruption during a negative market cycle is to think long-term and stay with the plan you developed. Now, go out and enjoy your day.  You got this!

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Why Your Loan Interest Rate Is Going Up

If you have attempted to purchase a new car, new home or pay on your credit cards, you may notice the interest rates being charged you are higher than you experienced earlier this summer. Inflation has been a tremendous force on the budge of families in the United States in the past year. Currently, the year-over-year inflation rate is 8.5%. This number impacts most financial matters where lenders are involved.

The Federal Reserve Board is the responsible agency for establishing a monetary policy and to promote stability in the banking system of the United States. Based on the money supply in the country, as we are currently experiencing, demand for consumer goods and real estate are higher but the supply of these same goods is limited. This is the definition of inflation. Although you can’t see “inflation”, you experience it everyday when buying groceries, filling up the tank of your automobile, borrowing money on a home or requesting a credit card.

The rate controlled by the Federal Reserve is known as the discount rate. This is the rate of interest charged to banks to borrow from the Federal Reserve. If the rate of borrowing rises for your community banks, the rate of interest charged on loans to you by the bank might be higher than you previously experienced. Loan rates to consumers (you and I) are based on manner factors:  your credit score, your debt-to-income ratio, collateral offered for securing the loan and general payment history with the lender.

In the past several years, the Federal Reserve allowed the discount rate to remain near zero percent. This fueled an aggressive amount of lending and money supply to become more liberal for borrowers while rates charged the borrowers were exceptionally low. For example, to some of the most credit-worthy borrowers, automobile financing companies such as General Motors Acceptance Corporation would loan funds to buy automobiles with terms such as no interest for sixty months. Why would the lender extend such a loan to anyone? The reason is that the inventory of automobiles was increasing, and manufacturers (and the related dealers) needed to sell more inventory.

Credit card companies were maintaining extremely low interest rates during the past several years as well.  I am not a fan of credit cards as a means of borrowing unless the full payment of the card will be paid each month. Interest rates for unsecured, personal credit can be as high as 22% – 25% annually. 

When the Federal Reserve raises the discount rate, it impacts the prime rate (the rate of interest that banks loan its customers with good credit) by causing an increase approximately a few weeks after the Federal Reserve announcement. Shortly, after the prime rate increases, mortgage rates and other lending will increase commensurately. 

Unless it is necessary, purchases of large items on credit during a time of rising rates is not recommended.  For example, your home may be valued much higher today than it was two years ago. However, the home you would need to buy for your family, if you sold the primary residence, would cost you more for the same home than it would have two years earlier. It is the natural cycle of value and borrowing. 

As the money supply in the United States begins to tighten (less money in circulation), inflation will begin to lower. It is an economic certainty that the U.S. markets will expand and contract. This is the manner in which it has always performed.  The hardest questions to answer are: When will the economy expand (boom)? When will the economy contract (recession)? The person that knows the answers to these futuristic questions may sell you some ocean-front property in Arizona. 

Economics is a difficult subject for many of us. It is critical that risk be considered in all financial transactions, including loans. For additional information, and planning for your future, contact a CERTIFIED FINANCIAL PLANNERTM professional. Be careful, it’s a jungle out there!

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How To Remain Prudent During Market Cycles

What goes up must come down! Whoever authored this statement of life events and business activities should receive the award for the Most Obvious Statement. However inane the statement, it does contain a little truth when applied to our current economic cycle in the United States.

Factors such as inflation, supply chain disruption, interest rate increases, U.S. Government fiscal policies and continued underemployment in our country have caused significant volatility in the markets. It has been a literal rollercoaster for the various market indices used to measure performance of the exchanges in the U.S.

At the start of 2022, the S&P 500 Index was at 4674.77 and closed on May 6, 2022, at 4175.48. This decline of 16.26% has caused investors to worry about the future of their retirement assets. To mitigate the emotional impact of such a decline, consider past market declines and learn from the period of time after the correction. For example, by remaining calm and investing in a well-diversified portfolio, you will recover your unrealized losses in the future. If you are planning to make a large purchase during a market downturn, it may be fiscally more responsible to consider bank loans which carry a much lower rate of interest. Once the markets recover and the value of your portfolio is an unrealized gain, sell a portion of the investments to liquidate your debt.

Another measure of thriving during market cycles is to utilize noncorrelated investments that respond better to inflationary pressure. For example, real estate is a sector of the economy that maintains cash flow and value during market declines. Think about this approach to your income needs during a period of market contraction. Real estate investors continue to collect rents on a monthly, or some other predictable period, basis no matter the state of the economy. 

Of course, no investment is immune to such historic market events as the Wall Street Crash of 1929 or Black Monday in 1987. The key to facing any market disruption is to not allow emotions to control your decision making. One of my favorite quotes of Warren Buffett, “Be fearful when others are greedy and greedy when others are fearful” comes to mind during times we are currently experiencing.

Lastly, remember that you most likely took several decades to amass your retirement assets. The intention of these assets is for them to last you several decades in the future. Unless the need for capital was immediate at retirement, your portfolio will grow and contract as market conditions change. By maintaining a long-term perspective, you will be better suited to investing in positions that are below their book value and allow for a growth opportunity in the future. There are positions that are available for you to make reasonable long-term returns while the overall economy is in contraction.

Keeping perspective and maintaining a well-diversified portfolio will help you weather the storms of the economy much better than attempting market timing. Predicting markets is not an approach that serves you well. If you wish to evaluate your portfolio, contact a CERTIFIED FINANCIAL PLANNERTM professional. Worry never solved a challenge.

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Staying Focused is the Key

Ask any all-star athlete the secret to their success and they will tell you – focus. This past weekend at The Masters in Augusta, Georgia, Tiger Woods initiated his triumphant return to professional golf. During his post-round interview after he finished the tournament, Woods used the word “focus” several times to describe to the interviewer what his secret was in returning to competitive golf after such a devastating automobile accident.

Life is similar to a sport, perhaps a marathon race. It is difficult for many of us to see the long-term impact of initiating and maintaining a savings plan from age 20 to age 67. As my dad often used the “stick and carrot” analogy, the younger investors can’t taste the carrot due to the overwhelming length of the stick. For those that can maintain the zeal for living a life prepared for unexpected instances that require substantial resources, success is often the outcome.

Younger people look at me with disbelief when I explain the power of compounding to them. To paint the picture in a manner that “shortens the stick and sweetens the carrot”, I ask them to look at their investment account every six months. One of the first statements they utter is “Wow! Look how much I saved and I didn’t miss the money.” Albert Einstein, the great physicist, was credited with a quote about compound interest: “Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.”

To create a system of focus pertaining to your finances, it is critical that you automate as much of the process as possible. For example, if you are participant in an employer-provided retirement plan, your investment funds will be automatically deferred from your paycheck and invested in the manner you direct your employer. This is a simple method of automating your savings and also receiving consistency in the process.

If you work in a company that does not provide an employer plan, you can accomplish the same automation with an ACH (automated clearing house) election. This process works very similarly to that of your employer election. By filing a form with your wealth advisor to transfer a certain amount of money at a fixed frequency, you will not be required to physically write a check, prepare an envelope or worry about finding a stamp to mail the deposit. Your life will be much simpler from an investment standpoint and you can worry about things such as fishing, golf or running.

If you wish to automate your savings for retirement, it is critical that you have a plan in place to accomplish your goals. See the advice and create a plan for your future by visiting a CERTIFIED FINANCIAL PLANNERTM professional. Take control of your future and you will enjoy less stress in life. See you on the pickleball court!

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Know Where You Will Land Before You Jump

What if you purchased an investment that the insurance salesman informed you would give you annual payments for your lifetime? What if you were 83 years of age? The reasons for the preceding questions are due to the factual case of a client that came to our office.

One of our retiree clients began asking questions about an insurance product that paid annual lifetime payments and earned an unusually high rate of return the first two years. Puzzled by the initiation of the conversation on this topic, I asked her why she was interested in this product. What transpired was a conversation that both shocked and irritated me.

The client’s mother is a widow and 83 years of age. She began to regale me with a story of her mother and a friend attending a free luncheon where they were introduced with a story about “guarantees” and “lifetime income”. Of course, with no understanding of what she was buying, her mother was informed by the salesperson, or she understood him to state the fact, that her money was insured.

We asked the daughter to bring her mother to our office to personally discuss the matter and confirm the facts of the purchased investment. After a few minutes of her mother describing the event and “nice young man” that spoke, she provided a copy of the contract for our review. Quickly I noticed the product came with a 12-year surrender period. Keep in mind, the lady was 83 at date of issue. 

Complicating matters was that she had placed all her liquid cash except for $50,000 in this investment. After our discussion, she was quite upset and acknowledged that she and her friend had made a mistake buying the long-term, illiquid product.

The story doesn’t end with our conversation. Due to the recent purchase of the product, we informed her that she was in her 20-day Free Look Period and that she could cancel the product purchase with proper notice given the insurance company. We assisted her in the cancellation process, and she thanked us for helping her understand the investment more comprehensively.

These types of incidents occur too frequently to the elderly in our communities. Without knowledge of the products in which money may be invested, the elderly are prime targets for unscrupulous salespeople.

I should point out that the person selling the long-term investment to the elderly lady had a proper insurance license and wasn’t a CERTIFIED FINANCIAL PLANNERTM professional. 

The lesson learned is that nothing in life is free. This has been borne out from my father’s teachings when I was a little boy. There is always someone paying the bill for the service or product you supposedly receive for free.

Want to know how the story ended? The elderly lady received her sizeable amount of investment back and was provided a plan for her future that addressed cash flow, estate, and tax matters to empower her to make good decisions. She has a reasonable amount of reserve for potential emergencies and no longer eats free meals offered her by strangers. So, as the storybook always reports, all lived happily ever after.

Investing requires understanding, education, and awareness about the strategies you employ for your future. Don’t invest your money in sophisticated strategies that are incomprehensible. Consistent investing over a period of time in a fully diversified portfolio that is easily monitored and rebalanced gives you greater comfort and confidence in your future. Seek out the advice of a CERTIFIED FINANCIAL PLANNERTM professional to help you understand your investment portfolio. One of my favorite quotes of Abraham Lincoln applies in this situation: “The best way to predict your future is to create it.”

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How Geopolitical Risks Affect the Markets

Today, we live in a global economy. Although appearing insulated to the disagreements between countries on the other side of the globe, U.S. markets are negatively impacted nonetheless. How could a political conflict between Taiwan and China create market disruption in the U.S.? This type of risk to markets is called Geopolitical Risk.

One of the most critical factors of any economy is the ability to maintain a steady flow of capital through the production and sale of goods and services to respective markets. When this flow becomes interrupted by governmental policy, military action or social interaction, markets become concerned that buyers and sellers of these goods can continue to make profits, hire employees, obtain raw materials, etc. Recently, political relations deteriorated between China and the United States. Differences in economic goals and outcomes, fair treatment of workers and use of natural resources, or the lack thereof, can impact the flow of goods and services in a significant manner.

Diversification of a portfolio requires far more than simply allocating your assets among different styles of investments such as large capitalization and small capitalization companies. To properly diversify your portfolio, it is critical you analyze the inherent risk in foreign markets including developed and emerging countries. An investor would be required to understand and accept greater risk involved with investing in an emerging market country where transparency and lack of efficient trading occurs more so than a sophisticated and developed efficient trading country.

Based on the World Economic Forum’s Global Risks Report 2020, economic confrontation between major powers is the most concerning risk for 2020. Most recently, the invasion of Ukraine by the Russian Federation presents significant attributes of market disruption. The markets for fertilizers and other natural resources located in Ukraine, in substantial quantities, have been disrupted in the past month. Fertilizer prices rose due to continued high demand and supplies were lowered by the political disruption caused by war.

The pandemic caused by Covid-19 continues to disrupt the free flow of goods from manufacturers in China and the Far East destined for the United States. How does the pandemic affect the flow of goods and materials? In China, a zero-tolerance policy exists in the manufacturing sector. This simply means that the discovery of one case of Covid-19 diagnosed in a worker requires the entire closure of the facility. Let’s assume a plant in China manufactures automobile replacement parts. Demand for these parts remains very high in the U.S. economy. By closing the plant for a period of a week (or for a month as done during the Chinese New Year) will generate less supply for consumers and greater demand for the parts. The result of this imbalance between demand and supply is inflation.

Investing requires an understanding of the functions of foreign and domestic markets, taxation of international imported goods and the impact of geopolitical risks. Most individuals feel ill equipped to make such investing decisions or where to research the matter. Seek out the advice of a CERTIFIED FINANCIAL PLANNERTM professional to help you analyze the risk in your portfolio and provide you opportunities and guidance to reach your lifetime goals. Matt Haig said it best, “Never underestimate the big importance of small things.”

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Prudent Steps to a Secure Future

Our world is experiencing disruption on a global basis. War in Ukraine, inflation at a 40 year high, gasoline prices reflect the 70s, and continued impact of a rampant virus. Have you had enough? Yes, me too. However, my father taught me that words are cheap and action is riches. This was his statement to, “quit griping and start working” to achieve better results.

The people of Ukraine are suffering in ways that U.S. citizens cannot relate. All of us can sleep tonight in a warm bed, eat a nice dinner and drink water that is potable. Medical care is available and jobs are plentiful. Why I am stating the obvious? To provide you some perspective. Life is good in the United States even in the midst of all this disruption.

When experiencing moments of potential recession, it is critical that you review your future plans to determine if small adjustments are needed. It is important that we understand the current economic environment will pass (no, I don’t know when) and life as we know it will return for us. The resilience of our republic continues to amaze me.

The following steps should be considered to provide your family a more secure future. First, review your cash flow spending and determine the priority of these items. Do you actually need a new laptop or is it a want? Is a new car needed or do you simply want one? Also, remember it is better policy to make sound financial decisions based on your current cash flow, savings and needs rather than surrendering to the fancy marketing of the gadgets that make us more comfortable.

Next, reduce debt balance to zero as quickly as possible. The purpose of this is to relieve the pressure on your family’s budget. Any credit card balances should be paid monthly to eliminate the potential cost of credit through high interest rates. Federal Reserve Chairman Jerome Powell is recommending, next week, a 0.25% increases in the discount rate to be implemented for purposes of slowing the rampant inflation rate in the U.S. Additional rate increases are anticipated through 2022.

Another step is to review your portfolio to determine your true risk inherent in the underlying positions you own. In the past 12 years, the U.S. markets have rewarded equity investors. In the current market contraction, it would be advisable to review your positions for possible gains to protect the overall balance in the account. I am not suggesting market timing. However, I am recommending that you determine a price you would wish to reach before selling your investment positions. For example, lets assume we buy AstroWorld common stock, a fictitious company, for $35.00 per share and set a price of $70.00 at which we would sell the position. One of the greatest investors in history was a man named Peter Lynch. As the manager of the Magellan Fund of Fidelity Investments, his fundamental approach to investing was to perform the same process on each position he bought in the fund. If it was a good approach for him and the fund he managed, perhaps it may be good for your family.

Lastly, keep calm during market correction periods. Panicking only increases the probability that you will make poor decisions that could harm your family’s future for many years. By thinking about your financial decisions with a cool head, the likelihood of taking advantage of market declines allows you to “buy low and sell high”. 

Of course, these steps will not ensure great returns or eliminate risk of loss. However, you will give your family and you the best chance to attain your retirement goals and security for the future.

One of the best methods of gaining confidence that your family’s finances are on the right track is to seek a complimentary “financial checkup” from a CERTIFIED FINANCIAL PLANNERTM professional. Your investments, like your body, may suffer if proper attention is not given. See you on the jogging trail!

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The Millennial Perspective: Planning Ahead

Disruption can arise at any moment and oftentimes there is nothing we can do to avoid it from happening. There has been a lot of disruption in the last two years and it has left countless people jobless, on unemployment, or sent home for a few weeks to recover from COVID-19. With the most recent COVID-19 spike I have heard stories of several people who feel that they cannot miss work because of the money they would lose despite being ill. It now seems that more and more people are finding themselves between a rock and a hard place, money or the safety of others. I am certain that the majority would prefer the latter. However, having a plan in place can make the decision easier.

Looking back at the start of the pandemic, employers were afforded the ability via tax credits to pay for an absence due to COVID-19. This allowed employees to stay home without having to worry about missing out on wages while even those who lost their jobs were able to draw unemployment at a higher rate than usual. With most businesses no longer offering “COVID pay,” employees have felt obligated to make the tough decision between going to work and being extra careful around others. This can easily become a liability for the company because of safety protocols and spiraling COVID quarantines which can force companies to temporarily close their doors because of staffing issues or to ensure the quelling of outbreaks. Thus, leaving all the employees to miss out on wages while forcing the company to miss out on profits.

Many who are sick are not able to know that they have COVID-19 because some may have simply thought it was the common cold or just allergies. Regardless of the cause of their symptoms, no one should be put in the position of having to determine if their symptoms are due to a relatively benign issue such as allergies or a contagious disease without being able to consult a medical professional or have diagnostic testing performed, especially now when the stakes are seemingly high. It is therefore important to have a plan for when life happens. Building a plan to save for a rainy day can be very intimidating for some. Working with a CERTIFIED FINANCIAL PLANNER® (CFP®) can help make the task feel less daunting. A CFP® can often help you build a budget that is customized to your needs and can help you set aside money without stretching your account too thin.

Building these savings will not happen overnight. Some people may have to decrease their debts before they can save. Paying down debt with higher interest rates (avalanche method) or smaller balances (snowball method) is always a good place to start. By lowering the amount you have to pay each month you free up funds that can be set aside to start saving or even pay off more debt. Some people may prefer to pay all of their debts off before saving, but this doesn’t help out much when disruption arises and may indeed decrease their available cash for emergencies

My dad (the smartest man I know) frequently uses the phrase, “Hope for the best, but plan for the worst.” That philosophy has really stuck with me these last two years with all the disruptions we have had in our day to day lives. It doesn’t sound very optimistic to always plan for the worst, but you never know what kind of disruption life will throw at you. It is never a bad idea to be prepared. No one has ever wished they were less prepared for when an emergency arises. No one ever wishes that they had planned and managed their finances without proper considerations. A CFP® has been trained specifically to look at each person as an individual and set them along the right path to plan for these disruptions while still living a lifestyle that is enjoyable.

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