Saving | Live a Life By Design

Managing Cash Flow Is Critical

Posted on May 13, 2023May 13, 2023 by Jimmy J. Williams, CPA/PFS, CFP®

Cash is king! This is a statement I have heard my entire life. It is critical to a comfortable daily life but elevating currency to royalty status seems a bit hyperbole. There are many aspects to managing your cash flow that are simple to master. First, the old adage of “spend less than you earn” is an axiom of truth. For families that use credit cards to elevate their lifestyle beyond their means, the day of reckoning comes quicker than anticipated. Additional stress and challenges are encountered, and solutions are in short supply.

One of the best tools for managing your cash flow is to monitor your expenditures. Every penny spent should be tracked for a period representative of your lifestyle. For example, consider one of the apps on your phone as a method of recording your spending. Review the record every few days to determine where you are spending your money and compare it to your desired areas of spending.

A budget is necessary in all phases of life. Many people think a budget is needed only while you are younger and working toward your career goals. However, I am a big believer in the art of focusing your efforts in a manner that will provide you with the best outcomes. For example, if you are budgeting to save 10% of each paycheck for support in your future yet you spend first and save what is left, you will not meet your goal. The better method of saving is to emulate the wealthy and save the 10% first and live on the remainder. In this manner you are forced to curtail the spending of funds since you have fewer discretionary dollars to spend.

Only one entity exists in the United States of America that has the luxury of spending first and finding the cash flow to pay for it second – the U.S. Government. The leaders of our country are currently negotiating the increase of our debt limit (i.e., our borrowing capacity). Do not be confused. This is a mortgage on the future generations of our citizens. It is a fact that this balance has ballooned to more than $31,457,000,000,000. To meet our country’s obligation to maintain the debt requires 12% of the federal budget or $384,000,000,000 annually according to the U.S. Treasury Department.

The simple principles explained in this article to help your family manage cash flow can be applied to the federal government. By utilizing a balanced budget requirement through a constitutional amendment, the annual spending will match the annual receipts for a fiscal year. This will be painful, at first, but will yield a leaner government with far less fraud, waste, and abuse than that we currently experience.

To avoid cash flow problems, it is critical that you control your discretionary spending. Minimal use of credit cards should be your goal and the balance paid in full each month. Lastly, large purchases should be acquired only if you can place a substantial portion of the price at the time of the purchase.

Managing debt is a skill that must be learned early in life. Consider indebtedness only for those assets that are utilitarian and/or long-term use. For example, houses and land are suitable for borrowing purposes. However, a new mink coat or Rolex watch are not. Particularly useful is the borrowing of assets that generate cash flow such as rental properties. In this instance, the lessee renting from you will be paying your mortgage, taxes, and insurance on the property on your behalf. Isn’t this a great country?!?!

Cash flow is the most critical concern of retirees. Controlling your indebtedness as you transition to retirement will help you gain confidence in the years of your next phase of life. Do not approach retirement with the same attitude as your working years. Cash flow is possibly lower and comes in different frequencies than when you were working in your career. To help you develop a plan to increase your probabilities for success, it is vital that you seek the advice of a Certified Financial Planner™ professional. Sir Richard Branson, a billionaire and owner of more than 400 companies, said it well when he stated, “Every success story is a tale of constant adaption, revision and change.”

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Are My Bank Deposits Safe?

Posted on March 31, 2023March 31, 2023 by Jimmy J. Williams, CPA/PFS, CFP®

In the past couple of weeks, the news has carried a headline that shocks many of us – bank closings! Granted the subject banks of the stories have been much larger banks than those in our local communities but the concern for safety of deposits has continued to grow at a grassroots level.

To protect depositors’ accounts, most banks participate in the Federal Deposit Insurance Corporation (FDIC) for coverage like you purchasing insurance on your home or automobile. Participating banks pay a premium on a prescribed basis to retain this coverage for its customers. Silicon Valley Bank was no exception. However, in the present instance, the bank’s management bears more of the blame for failure than systemic banking processes. The United States’ banking system is secure and has functioned as it is designed since the 2008 housing loan crises.

One of the more critical questions is how will the FDIC handle the claims from the affected depositors? This is where the confusion for most citizens begins. Generally, the maximum amount of coverage for an FDIC-insured account is $250,000. There are many different methods of protecting your accounts should you wish to maintain a greater amount than $250,000 in your local bank. For example, if your spouse and you maintain a joint account and add your three children as beneficiaries to the account, the FDIC coverage increases to $750,000 for the beneficiaries.

Before depositing your funds in a prospective bank, you should inquire as to the bank’s participation in FDIC coverage. You may do so by performing a quick search of the bank name at https://banks.data.fdic.gov/bankfind-suite/bankfind or call FDIC at 1-877-275-3342. Banks are required to inform you of such coverage availability when opening your new account. Most often you will see a sign on the bank’s logo or front entrance displaying “Member FDIC” reflecting the bank’s participation in the program.

Should you deposit your funds in a brokerage account, you will automatically receive coverage by a similar program called Securities Investor Protection Corporation (SIPC). However, the two programs differ in coverage amounts and types of coverage. For example, the FDIC limit of coverage is $250,000 per account. SIPC coverage limit is $500,000 per account. Many custodians, another word for “bank”, that hold securities and cash for investment purposes for customers will provide additional coverage through reinsurance. For example, the custodian we utilize for our clients’ assets is Pershing, LLC, a wholly owned subsidiary of the Bank of New York. Pershing, LLC

The key to gaining and maintaining confidence in your bank is to speak with the professionals about your accounts and learn what coverage limits apply to your accounts if more than one account is funded. Personally, I bank with local banks because of the relationship of the professionals, knowledge, and faith of management as well as accessibility to funds. In this modern era, internet banking is becoming the norm and will soon supersede the desire for anyone to travel outside their home to perform banking tasks. Until then, I prefer to shake their hands, speak with the people, and understand clearly who holds my money.

If you are concerned about the news you have heard pertaining to banking challenges in the United States, seek out a Certified Financial Planner™ professional to help you gain understanding about the process. You can sleep better at night understanding the coverage limits for your various accounts and the operations of your local bank. Another of my favorite quotes by William Feather is, “Business and life are like a bank account. You can’t take out more than you put in.”

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Controlling Your Debt

Posted on January 5, 2023January 5, 2023 by Jimmy J. Williams, CPA/PFS, CFP®

A new year always suggests the opportunities to create the world we truly wish to live in and the strategies we must implement to achieve success. Too many of us write down meaningless resolutions on January 1 that have no measurable qualities to denote actual commitment from the writer. This year will be different for you. As Jim Rohn often said, “We all face the same environmental disturbances and life challenges. We can either let the wind blow us where it goes, or we can reset our sail to go in the direction we desire.”

After Christmas, the reality of the expenditures we made comes to our attention. Credit cards that were used to make purchases are now due. Our economy is subjected to the highest inflation we have experienced in 40 years. You will note the impact of this inflation in your gasoline, food, clothing, medical and other items you purchase for everyday living. To counter the increasing inflation impact, the Federal Reserve Board of Governors continues to raise the rate it loans monies to participating banks. This process creates an impact on the economy to discourage the use of credit which will slow the demand of cash in the country.

One of the most noticeable areas of your life in which the Fed’s interest rate raises appear is your credit card bill. When opening your card statement, you will notice the increased interest rate for any balances not paid in full by the due date of the statement. Compare the interest rate from a year earlier to the one you received this month. Most likely the rate will have increased significantly.

The key habit to build into your lifestyle is to pay the monthly balance owed on your card in full each month. Two benefits will result from this habit. First, you will notice your credit score may rise due to the excellent payment record and management of your credit line. Second, you will maintain better control of your monthly budget since you will need the cash to pay off your card balance each month.

One group of professionals that track credit card usage is the American Bankers Association. According to the data collected by the association, 40% of all Americans utilized a credit card and maintained a balance on the account at some date within the second quarter of 2022. Experian, one of the major credit monitoring agencies in the United States, reported that the average balance, reported by credit card issuers, owed by Americans in the third quarter of 2022 was approximately $6,004. In most instances, the reasons for using a credit card are to bridge cash flow needs during the month. However, it is highly recommended that credit cards are not used for purposes of increasing one’s lifestyle.

To control your life, you must take command of the variables that impact you. Your credit should be reviewed annually and loans with the highest interest rate should be liquidated first. Continue this process until all debt is paid in full.

A funny, but true, story that happened to me last summer related to the purchase of an automobile for our daughter. Based on our excellent credit score, our family has not paid interest on a vehicle in more than 20 years. Knowing that our credit score was higher this year than the last vehicle we purchased, I confidently walked into the dealership in her city and introduced myself. Our daughter had researched the type of vehicle she wanted, and the dealership possessed a similar one in its inventory.

We informed the salesman of the amenities she desired on the vehicle and was informed one that she wanted was being shipped to the dealership within a couple of weeks. Remember, this is still a supply chain issue in the U.S., and I informed my daughter to give them a month before expecting delivery. We negotiated the price; I shook hands with the salesman and ask him to write the purchase contract. What happened next completely caught me by surprise!

I had researched the financing options with the manufacturer and noted that there were no zero-interest financing available due to the economy and the demand for vehicles. To counter this economic impact, we were going to write a check for the automobile. As I began to write the check, the salesman noted that I was writing it for the total agreed sales price. He said, “you can’t write a check for the sales price, or we will have to raise the price $1,000.”

Imagine the shock on my face that we would be charged an additional amount for paying the car in full instead of financing the vehicle! I understood what the gentleman was explaining and thought that the dealership would be grateful to work with someone who has such stellar credit and pays up front for their vehicles. Alas, these are different times.

The moral of this story is “cash isn’t always king” and “supply and demand” play a heavy role in the operations of businesses.

Review your current debt and find a means of paying off the largest interest rate loans. If your credit card is carrying a balance, I would recommend you start by paying the largest amounts available on the balance. To assist you with your family’s cash flow planning and other future needs, consult your local Certified Financial Planner™ professional. Hope you enjoy a successful and prosperous New Year!

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Lifetime Decisions on Social Security Benefits

Posted on August 1, 2022August 1, 2022 by Jimmy J. Williams, CPA/PFS, CFP®

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 PLANNER^TM 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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Staying Focused is the Key

Posted on April 14, 2022April 14, 2022 by Jimmy J. Williams, CPA/PFS, CFP®

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 PLANNER^TM professional. Take control of your future and you will enjoy less stress in life. See you on the pickleball court!

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Buy or Sell?

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

Life has a way of keeping things interesting. After a long cycle of bull returns, the time for profit-taking has arrived. This is the process of capturing the gains in the investments that have performed well. I will explore some of the factors that are currently active in the economy, the markets and what you can do to maximize your family’s best interest.

The overall economy is improving in the United States. When I state that comment I sort of cringe thinking about the impact that is being felt by the families of our country. Inflation has reached a 40-year high at 7.5% according to tradingeconomics.com. Some of the factors leading to this excessive rate are labor shortages, soaring energy costs and supply chain disruptions. Based on a review of ktvz.com, March and April, 1980, inflation had risen to an unprecedented peace time level of 14.6%. Acknowledging that this rate is extremely high by today’s standards, the highest inflation factor in the United States was experienced in 1778 at 29.78% (Investopedia.com).

Improvements in market controls, inventory production, delivery methods and banking policies contributed to maintaining a more reasonable inflation experience for many decades. It is not unusual for the people of the United States to be subjected to a 2% – 3% inflation rate in our overall economy. However, in our modern world where we rely on transportation and housing that must be heated and cooled with natural gas or electricity, an inflation rate above 4% begins to reflect on people’s lifestyles.

The unemployment rate is at historic lows for our country. This rate often touted by politicians to show their outstanding work on the economy is misunderstood by the mass of Americans. To properly understand the application of the rate to the economy, you must consider that underemployed and those individuals not actively looking for work are not considered in developing the rate. For those individuals seeking employment, there are currently more job opportunities than workers to fill them. This is a big plus for our economy. During times of high demand for skilled workers the hourly wage rises. It is simple economics – supply and demand. When demand for something (or someone) rises and the supply (people looking for work) is static or lower, the price for labor will be higher.

Rising wages are good for workers until they realize the costs of goods rise along with them. Companies will increase prices on goods to cover the increased cost of labor while maintaining the profit margin necessary to continue operations.

Another factor affecting the economy is the supply chain disruption. Goods that are manufactured outside the United States must be imported for sale by businesses to the public. Recently, the shelves of some of the largest retailers have been limited or out of products demanded by the public for their functions in life. Don’t get me started about the “Toilet Paper Run of 2020”. There was plenty of the product for the current needs of people in our country. However, a rumor on social media stoking the fears of people caused a panic to buy greater quantities of toilet tissue. Some of the memes on social media were hilarious! At one point it appeared that toilet tissue would become the currency of choice due to the high value it held in the public’s mind.

All these factors create economic conditions of expansion or, more recently, contraction in the economy. People are subjected to many emotions in life. However, in my 34-year career, I have discovered two emotions that are most prominent when it comes to financial decisions about a person’s retirement and investment accounts – fear and greed. Memory fades quickly from the very positive returns of only a few months earlier when a market correction appears. People who have enjoyed almost 14 years of positive returns in their portfolios are suddenly stricken with the fact that markets can (and often do) go down.

Recently, I asked a client if she would sell her home if it went down in value. The look on her face was as if I had asked her to donate a kidney! Her response was “that is a long-term asset and has tremendous value to me”. I then asked the simple question, “Your retirement account is your lifetime asset. Why do you want to sell it when it is down?” She simply stated, “You are right.” The stock market is the only investment I am aware that people buy when its high and sell when its low. This is the opposite to increasing your overall lifetime return and cash flow.

Buy or sell? Each person must deal with their fear or greed. By remaining calm when others are frantic and scared, you will be rewarded with greater opportunity for growth over a lifetime. Make certain your risk tolerance is properly reflected in a diversified portfolio and your cash reserves will accommodate 90 – 120 days of living expenses. This correction will pass.

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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How To Secure a Happy Retirement Life

Posted on January 12, 2022January 12, 2022 by Jimmy J. Williams, CPA/PFS, CFP®

One of the most asked questions from our new clients is “How much wealth do I need to last my lifetime?” The obvious answer is “depends.” To help you quantify your needed savings for lifetime income, we will provide you three areas of life that must master to live the life you choose.

First, you must become a saver, not continue as a consumer. The highest savings rate in U.S. history was reached during the pandemic. Not surprising as most people did not feel safe shopping at local stores and malls but rather ordered online. Granted the online experience for shopping has improved exponentially, it is still not the experience most shoppers seek when a day is planned for the exchange of goods and currency (that is the phrase I use when my wife and daughters go shopping).

The savings rate for U.S. citizens in 2021 was a whopping 13.7% (www.statista.com)! This level of savings exceeds the 11% experienced in 1960. Is it enough to meet the demands of rising costs of living for most people? Perhaps if this savings trend were to continue for a period of 40 years representing the work life of most people, their post-career years would be sufficiently funded.

To bring another statistic into this discussion, the total savings of U.S. citizen in 2021 exceeded $2.3 trillion. This is a staggering amount of money considering the U.S. Government has distributed $4 trillion dollars during the pandemic. The average balance maintained in the 401(k) plan of a 65 years of age and older person is $216,720 according to www.personalcapital.com.

If you seek a lifetime of income, in the realm of reasonable support, it is important that you become a saver on a consistent basis to allow the compounding of investments to perform over a significant period of time.

Second, you must determine what happiness is for you in life. One of our clients was an older woman whose husband predeceased her while she was in her career. Her position was mostly clerical, and she enjoyed her work. During her career, she had the opportunity to invest in the company’s stock through a plan where the employer matched her contributions to buy the stock. The highest salary she earned during her career was $51,000, which was two years before her retirement from the company. Granted she worked for a good company and was fortunate to begin her career with the company while it was a fledgling start up organization.

At the age of 66 and 4 months, coincidentally her full retirement age for Social Security Benefits, we assisted her in filing for her benefits and prepared her for retirement. When we opened the most recent envelope containing her statement from the employee stock ownership plan, she could not help but grin at my expression. Her stock value was $1.5 million! She also was prudent and saved money through her employee retirement plan. The sum of this account exceeded $700,000. She looked at me and asked, “Is this enough for me to retire and keep my lifestyle?” Of course, we needed to perform our analysis and testing but offered her some probabilities that she would be simply fine in retirement.

The moral of the story is that time, once again, is the greatest impact on lifetime savings. Start early, be consistent with contributions and treat the account as your next income stream by never borrowing from the account for current lifestyle needs. Happiness for her was continuing to live in her home, travel to worldly destinations and help her grandchildren with college expenses. She, by thoughtfully planning, is still doing all the things that make her most happy in life.

Lastly, you must protect your health as you prepare for an active retirement. My father was one of those people that worked hard all his life and genuinely enjoyed his career. He suffered a heart attack in his early 40’s that opened his eyes to better care for himself so his future would be enjoyable. After finally retiring at 72 years of age, he has lived a wonderful life in retirement. He is reasonably healthy, has enjoyed cruises to Alaska and continues to do whatever he chooses to keep a smile on his face.

His father, my grandfather, died in his early 60’s. I always told dad that he would need to take advantage of the opportunities to maintain his health so that he could break the average mortality for males in our family. He smiled that sheepish grin and said, “I am setting a new bar for the Williams men!”

Exercise regularly, save consistently and find your happiness in life. By preparing prudently today, your tomorrows will be most enjoyable!

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More Than Numbers

Posted on December 9, 2021 by Jimmy J. Williams, CPA/PFS, CFP®

Your personal physician gives you honest and candid information to help improve your physical health. A Certified Financial Planner^TM professional provides you the same type of consultation about your financial health. You are more than a number to a wealth advisor. Your family’s current financial state, future security and transition of assets are the focal points to a sound financial plan.

The basic level of fiscal management is the utilization of your annual household income in a manner that provides for your needs today while saving for your future. In a utopian world, we could simply spend all that we earn, and the retirement phase of life would be funded by someone else. The problem with this thought is that the “someone else” is you!

By applying guidance of cash flow management, your family will enjoy a lifestyle that creates happiness today. The physiological needs such as food, shelter and clothing are the very primal items that help your family simply survive. By appropriately allocating your resources to allow for current living needs and accommodating for your future will instill confidence in your capabilities.

While working through life, you become clearer on what you seek after your career. It is vital that you properly fund your retirement or the pleasure you see in all those vacation posters will evade you. Time value of money is an accounting concept that states, “a dollar today is worth more than a dollar tomorrow.” To maximize the probabilities of accumulating sufficient capital to fund retirement, it is critical to work with a wealth advisor to, first, determine what is the target amount of funds you should save and, second, what is the most efficient approach to saving these funds.

This approach is illustrated with our older daughter’s lifestyle. Our daughter is working in her first career position after graduating with her master’s degree. While helping her with a budget for this new paradigm she is living in, I will never forget her comment of “Wow! It takes too much money to live the way I wish.” After I realized she was being serious, I started the “dad talk” and reminisced about 1987, my first year out of college and working in my career. As her eyes rolled, I could literally hear her think – “Not another “back in the old days” story.”

After a brief discussion, I gave her the secret formula to accumulating wealth for the future while living a happy life today. In remarkably simple terms, invest 10% of your earnings for the future, give 10% away to qualified charities and/or church, invest 10% in yourself through education and other skill-building programs and, lastly, live on the remaining 70%. When she received her first performance bonus, she was so excited! The amount of money she earned was more than she had imagined. Immediately, she began talking about a new car or furniture for her townhouse. I interjected the 10/10/10/70 formula she is currently using to help her live an abundant life. After convincing her that she may not wish to expand her lifestyle with funds that are not consistent, she did something that made my chest swell with fatherly pride – she invested the money in her future

Do not assume that a Certified Financial Planner^TM professional only works with investments. Many of us possess expertise in behavioral finance and other psychological functions of wealth. Just like your doctor, we examine your total picture and provide advice and coaching to reach your highest goals in life in a manner that you choose. With a short conversation, you will discover that a wealth advisor is far more than numbers – you will find a lifelong advisor and friend.

It is an honor to share stories, tax laws and other financial information with you each week. Most importantly, it is critical that each of us share the blessings we possess with those in need. This Christmas Season focus your energy and resources on others and you will receive the most valuable gift on this planet – joy!

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IRA Planning for 2021

Posted on November 11, 2021 by Jimmy J. Williams, CPA/PFS, CFP®

The pandemic of the past two years has brought a tremendous amount of pain to many lives but there is a positive aspect in that dark cloud of gloom. One of the best attitudes, when performing tax and financial planning for your family, is to seize opportunities that are given you. In other words, capitalize on the negatives that impact your life and make the proverbial “lemonade from lemons.”

Many businesses are suffering net operating losses during 2021. If you are an owner of the business and the operation is conducted as a sole-proprietorship, partnership or S-Corporation, you may have a valuable tax saving asset in your future. The net operating losses of these entities are claimed on the tax returns of the owners. For example, if you were a fifty percent (50%) partner in a partnership that lost $100,000 in ordinary income for 2021, you would receive the benefit of $50,000 loss to be reported on your personal return.

With your personal return reporting a loss, or much lower income than you otherwise typically report, your Traditional IRA is holding a great value in it beyond its balance. Consider the conversion of your Traditional IRA, in whole or in part, to a Roth IRA prior to the end of 2021. A taxable event will be triggered when the conversion is performed but your tax computation is based on your taxable income which, when claiming your share of the net operating loss, may be lower than your typical year sheltering the income from the conversion from taxation.

The purpose for converting your Traditional IRA to a Roth IRA is to change the future taxability of the account. You will be taxed on distributions received from the Traditional IRA in the future. The Roth IRA does not mandate required minimum distributions to you at age 72 as a Traditional IRA. Also, you may use the benefits of the Roth IRA to accumulate tax-free income streams from a very young age.

If you believe tax rates are going down in the future, you may wish to contribute to a Traditional IRA to enjoy the current tax savings. However, if you think tax rates will be higher in the future, you may wish to forgo the tax deduction of today and contribute to a Roth IRA.

Both types of IRA may invest in many different types of investments – stocks, bonds, mutual funds, etc. The structure and taxation of the two IRA types are the distinguishing benefits each allows for a taxpayer. The IRS continues to close loopholes such as “back door” Roth IRA conversions and other planning opportunities.

To maximize your opportunities for most challenges in life, it is always an innovative idea to allocate your investments between qualified and nonqualified accounts. Qualified accounts such as IRAs and 401(k) plans are generally taxable upon distribution of the assets to the owner. However, nonqualified accounts such as transfer on death accounts and joint accounts pay taxes during the growth of the assets. When you wish to retire, the type of account may play heavily in your financial plan design.

IRAs are tremendous tools for tax planning. Don’t assume that you simply invest in the IRA every April to save taxes. There are so many other uses of IRAs for estate planning, gifting and lifetime income planning that are often overlooked. As retirement planning experts, we have witnessed a tremendous number of people who fail to maximize the benefits of IRAs.

Proper allocation of your assets is necessary to stage a retirement plan that will serve you well in life. Seek out the assistance of a CERTIFIED FINANCIAL PLANNER^TM professional to help you plan for the future that you wish to achieve. Remember, when you fail to plan, you plan to fail. Be the exception. Take a pragmatic approach to your lifetime of income and enjoy the best of life on your terms. See you on the walking trail!