I wanted to take a moment to wish you and your families a happy New Year and a promising 2023.
2022 was a challenging year in ways that nobody could have expected; we’re still recovering and adjusting to life with COVID-19. We experienced a prolonged financial downturn for the first time since 2008, with significant reductions in investment values. We are all facing a "new normal," in both our businesses and our daily lives. If anything, 2022 has taught everyone that no matter how hard we try, we simply cannot prepare for every single possibility.
It is easy to get buried in a mountain of debt, and it is much harder to shovel your way out. There is at least one method that people can use to help them clear the path to a debt-free future.
Known as the “debt snowball” strategy, it starts with listing each of your ongoing payment obligations. This includes almost any kind of consumer debt, like credit card bills, medical balances, student loans, and personal loans. The only thing that cannot be addressed directly by the debt snowball method is a mortgage. The reason will become apparent.
The television commercials for do-it-yourself (DIY) investment houses all focus on how investors can save on fees associated with stock and fund trading. They don’t emphasize the risks that come with day trading or that DIY investing is not for most people.
You know what you earn each paycheck. Do you know how much you allot for necessary expenses?
As a financial advisor, we live by the “50-30-20 rule” (see Figure): 50% of your income should be spent on necessary expenses, 30% on things you desire but don’t actually need, and the remaining 20% should go to savings.
For this post, we’ll focus on that largest percent, on which the other calculations depend: You should pay no more than half of your earnings on the necessities of life, like your mortgage or housing costs, utilities, transportation and health care expenses, basic clothing needs, and food. This is a standard for “living within your means.”
A recession is defined as an economic decline in which gross national product (GNP) falls for two consecutive fiscal quarters. Recessions are also typically associated with greater unemployment and lower personal savings rates (a measure of a person’s disposable income) compared with the periods before the recession.
The retirement calculators don’t lie: starting to save for retirement later in life is a real battle. If you just started to save or invest in earnest at age 50 and hoped to retire early, well, that’s a difficult proposition.
Your typical 401(k) plan offers strong motivation for participation: saving your money, matched by your employer (at some level), with pretax contributions. You do not pay taxes on the contributions you make to the account, but you will pay taxes upon withdrawal.
Last year was certainly challenging in ways that nobody could have expected, especially after the events of 2020. We are all finding ways to adapt to the “new normal," and if anything, 2021 has taught us that no matter how hard we try, we simply cannot prepare for every single possibility. Sometimes, events overwhelm us, and there is little choice but to pick up the pieces and press forward.
In mid-November, the Internal Revenue Service announced changes to the amount that people can put into certain retirement plans for 2022. What does it mean? Well, if you can take advantage of it, the changes can help pad your 401(k) savings, and save you even more on taxes.
In our December 2020 post, we detailed “investing with a purpose.” In that post, we stated, “Accumulating wealth is not a purpose. It may be an outcome, but it is not the reason why people make long-term financial decisions.”
With Your Investments, It All Boils Down to This
When investing your money for retirement, tuition expenses, or large purchases, people sometimes focus on topics that don’t matter too much. To achieve your investment goals, the brand of investments or the financial services company you choose matters very little.
After Your Death, Do You Want the State to Make Decisions About Your Estate?
The answer is NO (capital letters and italics intended)! Without an estate plan in place, the state’s probate court will decide how your assets are distributed—who gets what and how much—and even who shall be a guardian for your children. And the cost for probate proceedings will take a chunk out of your inheritable assets.
As our localities lift restrictions and open more fully, the COVID-19 pandemic will eventually cease becoming the dominant theme of our daily lives. The COVID-19 pandemic changed a lot of people’s plans, because it affected their ability to save money, plan for the future, and pay their ordinary expenses. If you’re like me, you may be eager to break out of “pandemic thinking.” For many, the pandemic was a painful financial learning experience. Loss of jobs, cuts in hours worked, significant slowing of business, and children schooling at home resulted in big impacts on our monetary reserves.
Ms. Bass is a single mother with two children, earning between $80,000 and $85,000 each year. She wasn’t falling behind in her debt payments, but she felt she was living paycheck to paycheck. She was contributing to a 401K at work, but she would take out loans on her 401K savings to cover any shortfalls she incurred. She contacted Isakov Planning Group, asking, “How can I save money for the future?”
Americans are straining under the weight of their credit card debt, auto payments, housing loans, and student borrowing. Total household debt in the US had reached $14.5 trillion by the end of 2020. Home mortgages were by far the greatest contributor ($10.3 trillion).
When speaking with our clients, we often mention the term “financial peace.” What is it? Like the name implies, it means achieving a sense of security that your financial needs are being met today and will be met tomorrow. That is pretty much the same definition for everyone.
When thinking about investing over the long term, most people will say that financial independence is a key goal. However, simply earning money and paying bills is not the best way to achieve that goal.
This year has been a strange one for all of us! In light of the alarming events that we’ve experienced in 2020, this is also the anniversary of my 10th year at Isakov Planning Group! This year in particular, it is easy to overlook the true basis of business relationships—our connection to you. We are grateful for our close association with you! Thank you for your trust in Isakov Planning Group and for your past referrals.