Goals Are Important…

Goal setting is one of the cornerstones of Financial Planning.  Sometimes something in my own life reminds me just how important.  While this isn’t Facebook, please allow me to share.

I have always been a runner.  It was necessary in my younger athlete days for stamina and great for my health as I have aged.  I also find I do some of my best thinking while I am running – if I could only remember everything I think of when I get back. 

About three decades ago, I started logging my running.  I can still look up every day I ran, where, how far and how fast.  The only goals I would set were how far, or how fast on a daily basis.

As 2020 came to a close, I noted that in all the years I had never run more than 320 days – meaning I always averaged one day or more a week off.  Those would be rain days, snow days (up north), illness, injury, business travel, or just plain laziness/lack of motivation.  I decided that I would try to run every day in 2021 – not missing a single day.  It quickly became an obsession and I just ran on those days I formerly would have skipped a day or week or more.

At the end of the year I had successfully completed my goal.  I decided to do it again in 2022.  Another success.  This year I realized that I would soon have run for 1,000 consecutive days.  That day was today!  I ran every day through thunderstorms, in the dark on those early start days, with minor injuries, and even when I finally caught Covid a few months back.  We didn’t get one, but I’m pretty sure I would have gone for it had we had a hurricane.

This process reminded me how powerful goal setting can be.  My goal was defined, reachable, measurable, and I kept pushing it higher.  I made myself accountable.

It reminds me how important goal setting is with my Financial Planning clients.  Financial Planning is a process.  Goals are where you want to go.  Once you establish that, discipline and execution are how you get there.

Successful Financial Planning demands definable, reachable and measurable goals.  It is the motivator to be disciplined and sometimes do the things that are not easy, like living within a budget.  If you are willing to set goals, and be disciplined and accountable, you are a candidate to succeed in your Financial Planning journey.  Are you ready to try?

What Are Your Goals?

The Bottom Line:  Goals are important both in life and your Financial Plan.

Attention Florida Homeowners…

If your home is currently insured by Citizens Insurance (the State run company), you may be one of the 304K policy holders that will receive a “takeout” letter from Citizens.  This will contain an offer from a private insurer to take over your insurance from Citizens on October 17th.

If the offer is over 20% greater than your current Citizens premium, you can opt to stay with Citizens.  You need to notify them by October 10th if you wish to stay.

If the offer is less than 20% greater than your current Citizens premium, your insurance with Citizens will end on October 17th.  If you do nothing, the takeout insurer will become your new insurer on that date at the new premium.  You also have the option to find another carrier on your own, but you will need to notify Citizens by October 10th.  An insurance agent representing the new company you select should be able to do the notification for you.

It is important that you do not ignore this letter.  As a closing thought, I’m not sure why they would do this during hurricane season.  The chaos of so many new policy holders having claims just days after the switch date would be insane.

The Bottom Line:  Read the takeout letter, and explore your options.

–Michael Ross, CFP®

Resist The Temptation…

It’s finally time to get a new car.  The supply shortages have eased and there is inventory. 

But, a few things have changed…

Prices are much higher, and interest rates have skyrocketed.  The average new car sells for over $45K and interest rates are in the 8-10% range.  Even used cars are far more expensive.

If you have a 401(k) plan, you may be able to take a loan from your plan to finance the new car.  Most 401(k) plans allow for participant loans.  Some rules and rates are set by your individual plan, but regulations say a plan loan cannot exceed 5 years or $50,000.  You also must make level payments at least quarterly.

There are some alluring advantages to using a plan loan to finance a vehicle purchase.  Interest rates are often lower than bank sourced auto loans.  You are paying interest to yourself, in a period where your portfolio may not be growing much due to market and economic conditions.  It doesn’t affect your credit score, and there is no lean on the vehicle title.  What’s not to like?

The plan loan comes with a big risk.  If your employment terminates for any reason, the entire loan balance becomes due.  Depending on the plan, it’s usually immediately or at months end.  It does not matter, why your employment terminated.  Whether you quit, got fired, or laid off, it’s all the same – the balance is due.

If you do not repay the loan, it will be considered a plan distribution.  That means it becomes taxable income, subject to ordinary income tax and a 10% penalty if you are under age 59 1/2.  Depending on your financial situation, that can range from an annoyance to a nightmare.  It carries risk under good economic times, and can influence a decision on whether to switch jobs.  Now that the economy faces some risk of a recession, a layoff is not when you want a large bill, either loan repayment or tax.

Everyone has their own financial situation and plan.  Depending on yours, you may be better off resisting the temptation of a plan loan.

The Bottom Line:  Evaluate all the risks of a 401(k) plan loan.

–Michael Ross, CFP®

ESG Investing

ESG investing is a popular theme today.  It involves allocating investment capital to companies that operate on policies of Environmental, Social & Governance (ESG) principals fitting progressive, liberal, socialist, or woke criteria or values.  These policies are often put ahead of earning profits. For profit corporations exist to make money for their shareholders.  They have an obligation to act lawfully and ethically, but other than that, their responsibility is to the shareholders.  Other “stakeholders”, be they employees, customers, communities, nations, etc. should only have their wishes considered to the extent doing so has a direct or indirect benefit to the profitability and growth of the company.

That said, in the absence of a directive by the client, any Fiduciary Advisor with the power to invest in, or influence or vote shares in a company supporting ESG, Equity, or Affirmative Action, without being able to draw a direct line on how that vote or initiative specifically benefits that company, is in violation of their fiduciary duty.  Failure to put the best person in a job, taking actions to reduce sales or revenue, or increasing costs in the pursuit of ESG policies, have no direct benefit for the company, and is rarely if ever, in the interest of the investor.

The Bottom Line:  Fiduciaries have the obligation to put the investors interests first.

–Michael Ross, CFP®

Pennies On The Dollar

In a capitalist economy, recessions are a good thing.  Just like in nature, the weak put a drag on the strong.  Well capitalized businesses can benefit from a recession.  It is their reward for being well run.

A recession or economic downturn is a painful thing.  People lose their jobs and income.  Assets are often reduced in value.  Businesses that sometimes took decades or generations of development go belly up.  But they are also a healthy process.  Excesses are reduced or eliminated. Resources are freed up for investment in more productive and new endeavors.  Efficiency is rewarded. 

Whether you are looking for places to invest, or you are an entrepreneur seeking to grow your business, a recession can be an opportunity.  Sometimes you have to take one step backward to take two steps forward. 

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Transient Inflation – LOL

The government has expanded the money supply by over 35% since the Covid Pandemic began.  The printing press was being run 24/7 and the output was dropped out of helicopters on everyone, whether they needed it or not.  In addition, they forced huge sectors of the economy to shut down for months and even longer.  What we have is more money chasing fewer goods and services.  A recipe for inflation in any scenario.

To make things even worse, they impaired domestic energy production by cancelling the XL pipeline.  This has forced us to import more oil and gas at much higher rates.  And labor costs, were not spared.  People were paid more to sit home than return to work, minimum wages were raised significantly, and unions were given unprecedented preferences and privileges.

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The Clock Is Ticking On Year End Tax Planning

It appears as I write this that any modifications to our tax laws and system will not be enacted nor take effect until 2022.  Additionally, there is very little likelihood that any tax rates will be lower in 2022 than they were in 2021.  While it’s usually beneficial to defer taxes when possible, it can be even more advantageous to pay taxes at the lowest rate possible.  It is clear that for some taxpayers 2021 will be the lowest rate for the foreseeable future.


It’s not too late to do some year end tax planning.  Based on my assumptions above, some of these actions and strategies may be beneficial for you.

There are three basic strategies in play…

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Traditional Medicare v. Medicare Advantage

It happens every year.  We are bombarded on TV with commercials enticing seniors to enroll in a Medicare Advantage Plan.  This year the notable celebrity pitchmen are Joe Namath and Jimmy “JJ” Walker of Good Times fame.  They promise and imply the world if you just sign up.  Sometimes I think they would tell you that you will live to be 100 if they could get away with it and it was on the cue card.

But, are they really a good option?  Here is the good, the bad, and the ugly…

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Is Your Car Lease Coming To An End?

If your car lease is expiring in the coming months, it MAY have a buyout purchase option.  This means you have an option to buy the car at a previously set price.  This price was set based upon the predicted residual value of the car at the end of the lease when you entered into the contract.  Check your lease to see if yours has a buyout.  If it does, you may want to consider executing the buyout for a number of reasons.

  1. New cars are in short supply mostly due to chip shortages.  As with anything in short supply, they are more expensive than usual.  By buying or leasing a new car now you would be locking in a high price.
  2. The prices of used cars are way up due to the new car shortage.
  3. Your current leased vehicle may have lower mileage due to curtailed driving in the pandemic.
  4. The buyout price may be well below the current market value of the vehicle.
  5. By buying the car you avoid the damage inspection and assessments for often minor issues when a leased car gets turned in.
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You Might Want To Wait To File Your 2020 Tax Return

The $1.9 Trillion Covid Relief Bill (American Rescue Plan Act) appears headed to passing the House and Senate with at least the $1,400 per person direct checks to many Americans remaining in the bill. In the House version, the full payments will go to all filers with incomes under $75,000 Single and $150,000 Joint. The payments would begin phasing out at incomes above that until reaching $100,000 Single and $200,000 Joint respectively.

The Senate version lowers the eligibility numbers to $50 – 75K Single and $100 – $150K Joint. In either case eligibility will be determined by the most recent of your 2019 and 2020 Tax Returns. It recognizes that many people have not filed their 2020 returns yet.

Here in lies a planning opportunity for some people. If your income will allow you to qualify for the payment(s) in only one of those tax years, make sure that the lower income is the latest return you have filed.

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