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April 2022 Client Profile

Danielle wants to begin teaching personal finance to her 12-year-old daughter. What are some topics and resources she can use?

Sadly, personal finance is not taught in all schools, leaving parents the job to educate their children. Starting the money conversation at home will help Danielle’s daughter become financially literate. Developing financial skills will help her daughter when the time comes to manage her own finances.

Danielle can begin by talking about financial decisions and explain her own spending habits and how she manages the family budget.

They can implement a hands-on joint project to help her daughter get first-hand experience. For example, Danielle can let her daughter help with grocery budgeting.

And Danielle can help her daughter save her allowance, earnings, or money gifts in a savings account that she can then use for a special purchase.

Client Profile is based on a hypothetical situation. The solutions discussed may or may not be appropriate for you.

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Surviving a Bear Market

When markets take a tumble, it’s natural to feel uneasy. But keep these tips in mind to navigate an extended decline.

SLOW DOWN

When markets drop, it can be tempting to jump out until asset values stabilize or start climbing. But this can lead to costly mistakes that lock in permanent capital loss. To optimize your returns, time in the market is critical. Avoid making knee-jerk reactions.

REVISIT GOALS

If you’re counting on your assets to meet a short-term goal or plan to retire in the next few years, it might make sense to dial back the risk in your portfolio. Investors with longer time horizons can usually withstand some market volatility. But if you have immediate or short-term needs, a more conservative asset mix may be needed.

CALL FOR HELP

If you aren’t sure what to do, schedule a meeting with your financial professional to review your portfolio and various investment options that may help limit the impact a market downturn could have on your short and long-term goals.

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Getting FIRE’D

FIRE stands for Financial Independence, Retire Early. It’s a financial movement growing in popularity as more and more people seek to eliminate debt and build savings so they can retire earlier than usual. Regardless of your target retirement date, this movement focuses on some smart financial strategies:

REDUCE

One of FIRE’s focus is on eliminating all debt and reducing expenses. Paying off debt is the first step with a focus on not accumulating new debt. Start by scrutinizing how you spend your money to identify unnecessary expenses.

INCREASE

FIRE followers also look for ways to increase their income. Things like switching jobs for a significant pay increase, working side gigs or generating passive income from owning rental property add money toward the early retirement goal.

INVEST

The last tenement of FIRE involves sound investing strategies. Start by maxing out retirement plan contributions. And if your employer offers a matching contribution, be sure you’re saving at least the minimum amount to get the maximum contribution.

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April 2022 Questions and Answers

QUESTION:

What is blockchain technology?

ANSWER:

Blockchain is a digital ledger that is used to record transactions and track various assets. The information is distributed on a business network and can be accessed only by permissioned users. Unlike regular databases, information in the blockchain format cannot be altered, deleted, or destroyed, making it a trustworthy source of information. Once recorded, the information is irreversible and can be seen by all users. Blockchain is also known as distributed ledger technology (DLT).

Although it’s widely used in the cryptocurrency sector, it has many uses, including cross-border payments, contract management, real estate transactions, supply chain management and healthcare.

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April 2022 ClientLine Newsletter

Trusts and Your Estate – a trust can offer additional benefits to you and your family

IRS Audit and Your Business – knowing what to expect from an IRS audit may help settle your nerves

Qualifying Business Leads – the process of identifying, organizing and nurturing incoming leads so you ca focus your efforts on prospects best suited for the products and services your business offers

Stand Out in a Crowded Market – your clients want a positive experience when interacting with your company, its services and its products

April 2022 Client Profile

Surviving a Bear Market – keep these tips in mind to navigate an extended decline

April 2022 Questions and Answers

Getting FIRE’D – regardless of your target retirement date, this movement focuses on some smart financial strategies

Status of Personal Finance Education Across the Nation 2020 – survey of states

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Are You Above Average

Here’s a snapshot of the average U.S. household’s finances. See how your finances compare.

  • Gross Household Income: $87,864
  • Checking Account Balance: $10,618
  • Monthly Spending: $5,102
  • Household Debt: $145,000
  • Social Security Monthly Retirement Benefit: $1,514
  • Credit Card Debt: $6,194
  • FICO® Score: 711
  • Savings Rate: $13.7%

Average 401(k) Balance: $106,478

BY AGE GROUP:

  • Under 25: $5,419
  • 25-34: $26,839
  • 35-44: $72,578
  • 45-54 $135,777
  • 55-64: $197,322
  • 65+: $216,720

Average Retirement Savings: $407,490

BY GENERATION:

  • Gen Z $35,197
  • Millennials: $166,430
  • Gen X: $568,750
  • Baby Boomers: $1,029,840
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March 2022 Question and Answer

QUESTION:

How do I report my fantasy sports league winnings?

ANSWER:

With the Super Bowl over and March Madness in full swing, winning the betting pool means paying taxes. Gamblers must report all winnings as taxable income. That includes the fair market value of any prizes won, such as cars or trips. Generally, you’ll receive an IRS Form W-2G if your winnings are at least $600 and the payout is at least 300 times the amount of your wager.

If you itemize deductions on your taxes, you can deduct any gambling losses incurred during the year on Schedule A. But you are limited to deducting only to the extent you have winnings. So if you won $1,000 from your fantasy football team but lost $1,500 on your basketball brackets, you’ll only be able to deduct $1,000 of those losses.

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Hiring Your Kids to Lower Company Taxes

If you are self-employed, hiring your children as legitimate employees is a tax-saving strategy.

IT’S STANDARD

The standard deduction for 2022 is $12,950, which means the first $12,950 your child earns is tax-free. So you can shift income from you to your child, who is likely in a lower tax bracket than you.

Go one step further and insist your child contribute the majority of earnings to a college fund.

EMPLOYMENT TAX WIN

Children under age 18 are exempt from federal unemployment tax (FUTA) and FICA tax. Once they turn 18, you’ll be responsible for paying the employer portion of FICA, but the children remain exempt from FUTA until they turn 21. That means if you pay your 17 year old $12,950 a year to run your social media marketing, you’ll save over $1,400 a year in employment taxes.

CAVEATS TO KEEP IN MIND

Your child must be an actual employee doing necessary work for your business, and must be paid a reasonable salary. Also, you’ll need to onboard your child as you would any other employee. That means having them complete Form W-4 and I-9, sending them a Form W-2 at year-end, and having them fill in timesheets if they’re being paid hourly.

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Understanding Inflation

Inflation affects all aspects of the economy, from consumer spending, business investment and employment rates to government programs, tax policies, and interest rates.

PRICE INCREASES

It’s normal in a stable economy to see various price increases. However, inflation happens when prices continue to increase over a sustained period. When the demand for products and services exceeds availability, producers increases prices.

DOLLAR VALUE DECLINES

Because the amount of goods and services a given amount of money can buy falls with inflation, the dollar is less valuable. Commonly known as the time value of money, inflation decreases the value of the dollar over time, making what you have today worth less in the future.

STEALTH THREATS

Inflation poses a hidden threat to investors because it chips away at investment returns. Fixed income securities are especially vulnerable since the interest or coupon payment generally stays the same until maturity. That decreases the purchasing power of the interest payments as inflation rises. For example, an investment that returns 2% before inflation in an environment of 3% inflation will actually produce a negative return (-1%) when adjusted for inflation.