The Burden of a Damaged Paycheck

February 1, 2023

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Andre & Mara Simoneau

Andre & Mara Simoneau

Financial Consultants

Lynx Creek Cir

Frederick, CO 80516

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January 2, 2023

Why do banks pay interest?

Why do banks pay interest?

When you deposit money into certain bank accounts, they’ll pay you interest.

Have you ever wondered why they do this? Banks perform lots of services. They’re holding your money for you, making it accessible at tens of thousands of points across the globe, facilitating purchases from e-commerce sites, processing automatic payments, etc. Oftentimes this is done for free or for a small fee. So why would they pay interest on top of all this?

Let’s find out.

Banks play both sides

We need a place to store our money. Some people might not like the idea of handing over their hard-earned cash to a financial institution, but storing their savings under the mattress might make it difficult to perform many transactions, especially online. Banks perform the essential service of giving much of the population a place to store their money while simultaneously facilitating payments between different participants.

Modern economies function on debt (so not all debt is necessarily bad). Corporate debt owed to a bank might be used to grow a business quickly by taking advantage of a great business opportunity.

People don’t always have the entire amount of money all at once to buy something very costly like a house, so banks can help out by lending them the money. To collect the money to lend out, banks receive deposits from other customers.

Thus banks play a fundamental role in the economy, but why do they pay interest? They obviously receive interest on loans, but on the other side, they already offer several free services, like facilitating payments and helping to safeguard cash. Why would they pay people to give them money?

Banks need depositors

Similar to other industries, the banking industry needs customers. This is not only true on the lending side, though. Banks also need customers on the depositing side, because they need to get their money for lending from somewhere. The more customers they have, the more money they can lend out, in turn generating more income.

Since banks compete with each other just like members of any industry, they need a way to attract customers. Sometimes they may offer more features for an account or more free services, but the most enticing incentive is usually the interest rate. And that is the simple idea behind why banks pay interest: zero interest in theory would attract zero customers.

Why more interest for longer deposit periods?

It seems like savings accounts usually pay better interest rates than checking accounts. Why is that? A person probably opens a savings account with the intention of storing their money over a relatively long period of time. The expectation is that the money wouldn’t frequently be removed from that account.

So why do banks generally pay more interest if they believe you’ll leave money untouched for longer? Here’s why. The money you deposit with a bank doesn’t sit idle. It’s lent out to other individuals and businesses in the form of loans. But every bank must abide by minimum reserve requirements,¹ and if they fall below the threshold, they can face serious consequences. Thus they are motivated to have their customers park their money for longer periods of time, and savings accounts are intended for just that purpose. The longer a customer intends to leave their money untouched at a bank, the more the bank might be willing to pay in interest.

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¹ “Reserve Requirements” James Chen, Investopedia, Aug 29, 2021, https://www.investopedia.com/terms/r/requiredreserves.asp

December 21, 2022

How to Know When You Need Life Insurance

How to Know When You Need Life Insurance

You might expect someone in the insurance business to tell you that anyone and everyone needs life insurance.

But certain life events underscore the reasons to secure a policy or to review the coverage you already have in place, to help ensure that it’s structured properly for your needs going forward.

Following are some of them…

You got married.

Congrats! If you have a life insurance policy through your employer, it probably won’t provide enough coverage to replace your income for more than a year or so if you pass unexpectedly. (You might want to find out the specifics for your policy.) It’s time to get a quote and learn your coverage options now that you have a spouse.

You started a family.

Having children is a responsibility that lasts for decades – and costs a lot. The average cost of raising a child until age 18 is estimated at $310,605.¹ That figure doesn’t include college tuition, fees, room and board, etc. It’s time to consider a coverage strategy.

You bought a house.

We don’t always live in the same house for the length of a mortgage, but a mortgage is a long-term commitment and one that needs to be paid to help ensure your family has a roof over their heads. In many cases, two incomes are needed to cover the mortgage as well as life’s other expenses. Buying a home is among the top reasons families buy life insurance.

You started a business.

Congrats, again! Starting your own business may be a terrific way to build your income, but it isn’t without risk. Business loans are often secured by personal guarantees which may affect your family if something were to happen to you. Also consider the consequences if you aren’t around to run the business. How much time and money would be needed to find a replacement or to close the business down? All things to consider when looking for coverage.

You took on debt.

Any sizeable debt can be a reason to consider purchasing life insurance. When we die, our debt doesn’t die with us. Instead, it’s settled out of our estate and paying that debt may require liquidating savings, selling assets, or both. In some cases, family members may be on the hook for the debt, particularly if the only remaining asset is the home they still live in. Life insurance can help put a buffer between creditors and your family, helping prevent a difficult financial situation.

Your birthday is coming.

Seriously. Life insurance rates may be more affordable now than they’ve been in the past – but every year you wait may cost you money in the form of higher premiums. Life insurance rates go up with age.

It never hurts to take some time and review the coverage that you have in place. To be sure, life insurance can be an essential part of a financial strategy and help provide a safety net for your family if something were to happen to you.

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¹ “What does it cost to raise a child?”, Abha Bhattarai, Dan Keating, Stephanie Hays, The Washington Post, Oct 13, 2022, https://www.washingtonpost.com/business/interactive/2022/cost-raising-child-calculator/

December 19, 2022

How Young People Can Use Life Insurance

How Young People Can Use Life Insurance

Sometimes life insurance doesn’t get the credit it deserves.

Most of us know it’s used to replace income if the worst were to happen, but that’s about it. If you’re in your twenties and just starting out on your own, especially if you’re single or don’t have kids yet, you might be thinking that getting a life insurance policy is something to put off until later in life.

On closer inspection however, life insurance can be a multi-faceted financial tool that has many interesting applications for your here-and-now. In fact, there’s probably a life insurance policy for most every person or situation.

Read on for some uses of life insurance you may be able to take advantage of when you’re young – you might find some interesting surprises!

Loan collateral

If you have your eye on entrepreneurship, life insurance can be of great service. Some types of business loans may require you to have a life insurance policy as collateral. If you have an eye on starting a business and think you may need a business loan, put a life insurance policy into place.

Pay off debt

A permanent life insurance policy has cash value. This is the amount the policy is worth should you choose to cash it in before the death benefit is needed. If you’re in a financial bind with debt – maybe from unexpected medical expenses or some other emergency you weren’t anticipating – using the cash value on the policy to pay off the debt may be an option. Some policies will even let you borrow against this cash value and repay it back with interest. (Note: If you’re thinking about utilizing the cash benefit of your life insurance policy, talk to a financial professional about the consequences.)

Charitable spending

If a certain cause or charity is near and dear to you, consider using the death benefit of a life insurance policy as a charitable gift. You can select your favorite charity or nonprofit organization and list them as a beneficiary on your life insurance policy. This will allow them to receive a tax-free gift when you pass away.

Leave a legacy of wealth

A life insurance policy can serve as a legacy to your beneficiaries. Consider purchasing a life insurance policy to serve as an inheritance. This is a good option if you are planning on using most or all of your savings during your non-working retirement years.

Mortgage down payment

The cash value of a whole life policy may be able to be used for large expenses, such as home buying. A whole life policy can serve as a down payment on a home – for you or for your children or grandchildren.

Key man insurance

Key man insurance is a useful tool for businesses. A key person is someone in your business with proprietary knowledge or some other business knowledge on which your business depends.

A business may purchase a life insurance policy on a key man (or woman) to help the business navigate the readjustment should that person die unexpectedly. A life insurance policy can help the business bridge that time and potential downturn in income, and help cover expenses to deal with the loss.

Financing college education

With the rising cost of college tuition, many families are looking for tools to finance their children’s college education. You may consider using the cash value of your life insurance policy to help with college tuition. Just remember to account for any possible tax implications you may incur.

Life insurance policies have many uses. There are great applications for young people, business owners, and just about anyone. Talk to a financial professional about your financial wishes to see how a life insurance policy can work for you.

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Read all of your policy documents carefully so that you understand what situations your policies cover or don’t cover. This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies for saving and/or investing that may be available to you. Before purchasing an insurance policy, seek the advice of a financial professional, accountant, and/or tax expert to discuss your options and the consequences with use of the policy.

December 12, 2022

Starting a business? Here's what you need to know.

Starting a business? Here's what you need to know.

Starting your business requires making a myriad of decisions.

You’ll have to consider everything from a marketing budget to the theme of your website to how you’re going to arrange your office. But if you give careful consideration to the financial decisions concerning your business, you’ll start off on the right foot.

What is your business structure going to be?

Business structures have different tax and liability implications, so although there are only a few to choose from, make your selection carefully. You may consider:

Sole Proprietorship

A sole proprietorship is the simplest of business structures. It means there is no legal or tax difference between your personal finances and your business finances. This means you’re personally responsible for business debts and taxes.

Limited Liability Company

Under an LLC, profits and taxes are filed with the owners’ tax returns, but there is some liability protection in place.

Corporation

A corporation has its own tax entity separate from the owners. It requires special paperwork and filings to set up, and there are fees involved.

Do you need employees

This may be a difficult decision to make at first. It will most likely depend on the performance of your business. If you are selling goods or a service and have only a few orders a day, it might not make sense to spend resources on employees yet.

However, if you’re planning a major launch, you may be flooded with orders immediately. In this case, you must be prepared with the proper staff.

If you’re starting small, consider hiring a part-time employee. As you grow you may wish to access freelance help through referrals or even an online service.

What are your startup costs?

Even the smallest of businesses have startup costs. You may need computer equipment, special materials, or legal advice. You may have to pay a security deposit on a rental space, secure utilities, and purchase equipment. Where you access the funds to start your business is a major financial decision.

Personal funds

You may have your own personal savings to start your business. Maybe you continue to work at your “day job” while you get your business off the ground. (Just be mindful of potential conflicts of interest.)

Grants or government loans

There are small business grants and loans available. You can access federal programs through the Small Business Administration. You may even consider a business loan from a friend or family member. Just make sure to protect the personal relationship! People first, money second.

Bank loans

Securing a traditional bank loan is also an option to cover your startup costs. Expect to go through an application process. You’ll also likely need to have some collateral.

Crowdfunding

Crowdfunding is a relatively new option for gathering startup funds for your business. You may want to launch an online campaign that gathers donations.

What’s your backup plan

A good entrepreneur prepares for as many scenarios as possible – every business should have a backup plan. A backup plan may be something you go ahead and hammer out when you first create your business plan, or you might wait until you’ve gotten some momentum. Either way, it represents a financial decision, so it should be thought out carefully.

Develop a backup plan for every moving part of your business. What will you do if your sales projections aren’t near what you budgeted? What if you have a malfunction with your software? How will you continue operations if an employee quits without notice?

How much and what kind of insurance do you need?

Insurance may be one of the last things to come to mind when you’re launching your business, but going without it may be extremely risky.

Proper insurance can make the difference between staying in business when something goes wrong or shutting your doors if a problem arises.

At the very minimum, consider a Commercial General Liability Policy. It’s the most basic of commercial policies and can protect you from claims of property damage or injury.

Make your financial decisions carefully

Business owners have a lot to think about and many decisions to make – especially at the beginning. Make your financial decisions carefully, plan for the unexpected, insure yourself properly, and you’ll be off to a great start!

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This article is for informational purposes only. For tax or legal advice consult a qualified expert. Consider all of your options carefully.

November 14, 2022

How much home can you afford?

How much home can you afford?

For most households, buying a home means getting a mortgage, which means lenders play a big role in declaring how much house you can “afford”.

Many people take that calculation as a guide in choosing which house they want to buy, but after you’ve signed the papers and moved in, the lender might not be much help in working out the details of your family budget or making ends meet.

Let’s take a look behind the curtain. What is it that lenders look at when determining how large of a mortgage payment you can feasibly make?

The 28-36 Rule

Lenders look closely at income and debt when qualifying you for a certain mortgage amount. One of the rules of thumb at play is that housing expenses shouldn’t run more than 28% of your total gross income.¹ You also may hear this referred to as the “housing ratio” or the “front-end ratio”. The 28% rule is a good guideline – even for renters – and has been a common way to budget for household expenses over many generations. Using this rule of thumb, if your monthly income is $4,000, the average person would probably be able to afford up to $1,120 for a mortgage payment.

Lenders also check your total debt, which they call debt-to-income (DTI). Ideally, this should be below 36% of your income. You can calculate this on your own by dividing your monthly debt payments by your monthly income. For example, if your car loans, credit cards, and other debt payments add up to $2,000 per month and your gross income is $4,000 per month, it’s unlikely that you’ll qualify for a loan. Most likely you would need to get your monthly debt payments down to $1,440 (36% of $4,000) or under, or find a way to make more money to try to qualify.

Buying less home than you can afford

While the 28% and 36% rules are there to help provide safeguards for lenders – and for you, by extension – buying a home at the top end of your budget can still be risky business. If you purchase a home with a payment equal to the maximum amount your lender has determined, you may not be leaving much room for error, such as an unexpected job loss or other financial emergency. If something expensive breaks – like your furnace or the central air unit – that one event could be enough to bring down the whole house of cards. Consider buying a home with a mortgage payment below your maximum budget and think about upsizing later or if your income grows.

A home as an investment?

A lot of people will always think of their home as an investment in an asset – and in many cases it is – but it’s also an investment in your family’s comfort, safety, and well-being. In reality, homes usually don’t appreciate much more than the rate of inflation and – as the past decade has shown – they can even go down in value. Your home, as a financial tool, isn’t likely to make you rich. In fact, it may do the opposite, if your mortgage payment takes up so great a percentage of your monthly budget that there’s nothing left over to invest, pay down debt, save for a rainy day, or enjoy.

Homes are one of those areas where many discover that less can be more. Whether it’s your first home or you’re trading in the old house for a new one, you might be better served by looking at how big of a mortgage payment you can afford within your current budget, rather than setting your sights on the house your lender says you can afford.

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¹ “How Much House Can I Afford?” David McMillin, Bankrate, https://www.bankrate.com/real-estate/new-house-calculator/

October 26, 2022

Personal Finance: Hire a Professional or DIY?

Personal Finance: Hire a Professional or DIY?

Contrary to popular belief, professional financial planning can potentially benefit people of all income levels.

So the question you may want to ask is not if you make enough money to need professional help, but rather, is your money working to create the life you want?

If your answer is “I don’t know” – no worries. There’s help!

A professional financial planner is, well, a professional

It’s true that personal finance is personal, but for many of us, it can be complicated too. Plus, it’s not something we usually learn about in school. So for many – even for those on the lower end of the income scale – a financial planner may have a lot to offer.

Even though there are some people who do just fine with financial planning on their own, many of us need help to connect the dots. Having a solid financial strategy often isn’t just coming up with a monthly budget and sticking to it. Many Americans don’t seem to have a grip on how personal finance intersects with their lives. In fact, about one-third of Americans haven’t even written down a financial plan at all.¹ (Are you one of them?)

Maybe you know exactly what you want – let’s say to retire by 60. But you don’t know how to get there. This is where a financial planner may help.

Maybe you don’t know what you want, even though you’re already a disciplined budgeter. You may still need a good financial planner who can help you imagine and create a strategy for the future of your dreams.

A financial planner can foster accountability

One of the most difficult things about creating and living by a financial strategy is accountability. Let’s be real. It can be difficult to find the discipline to consistently stick to a budget, save for retirement, and live within our means.

If you’re coming up short in the discipline department, hiring a financial planner may help create some accountability for you. This isn’t to say they’re going to wag their finger if you splurge on a spontaneous girls’ weekend in Cozumel, but they may help create a sense of accountability by checking in with you regularly to see if you’re on the right track. You might decide that girls’ weekend could be planned a little closer to home instead…

A financial planner offers expertise at every life stage

A financial strategy isn’t something you create and then forget about. A wise financial strategy changes as your life changes, so it must be revisited. A good time to take a fresh look at your financial strategy is during life events such as: • Getting a new job • Making a major purchase, such as a home • Starting a business • Getting married • Having a child

Every one of these milestones signals a time to revisit your finances. A professional financial advisor can help ease these transitions by taking the pulse of your financial health at every life change.

What a financial planner can’t do

If you’re not ready to deal with your personal finances, a financial planner won’t be much help to you. In other words, they can’t make you take initiative when it comes to your financial life. But if you’re ready to explore the world of personal finance, they may help make the difference between a dream and a reality!

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¹ “5 Ways Financial Planning Can Help,” Rob Williams, Charles Schwab, Jan 14, 2022, https://www.schwab.com/learn/story/5-ways-financial-planning-can-help

October 17, 2022

Consumer Debt: How It Helps And How It Hurts

Consumer Debt: How It Helps And How It Hurts

What exactly is consumer debt? It’s “We the People” debt, as opposed to government or business debt.

Consumer debt is our debt. And we, the people, have a lot of it – it’s record-breaking in fact. In May of 2018, U.S. consumer debt was projected to exceed $16.5 trillion in 2022.¹

That’s a lot of zeros. So, in case you’re wondering, what makes up consumer debt?

Consumer debt consists of credit card debt and non-revolving loans – like automobile financing or a student loan. (Mortgages aren’t considered consumer debt – they’re classified under real estate investments.)

So, how did we get buried under all this debt?

There are a few reasons consumer debt is so high – some of them not entirely in our control.

The rise of student loan debt: Much consumer debt consists of school loans. During the recession, many Americans returned to school to re-train or to pursue graduate degrees to increase their competitiveness in a tough job market.

Auto loan rates: The number of auto loans has skyrocketed due to attractive interest rates. After the recession, the federal government lowered interest rates to spur spending and help lift the country out of the recession. Americans responded by financing more automobiles, which added to the consumer debt total.

Is all this consumer debt a bad thing?

Not all consumer debt is bad debt. And there are ways that it helps the economy – both personal and shared. A student loan for example – particularly a government-backed student loan – can offer a borrower a low-interest rate, deferred repayment, and of course, the benefit of gaining a higher education which may bring a higher salary. A college graduate earns 56 percent more than a high school graduate over their lifetime, according to the Economic Policy Institute. So, getting a student loan may make good economic sense.

Credit card debt that won’t go away

Credit card debt is a different story. According one survey, 55% of people have revolving credit card debt.² Nearly two in five carry debt from month-to-month.

Still, the amount of credit card debt Americans carry has been on the decline, with the average carried per adult a little more than $3,000.

Credit card debt won’t hurt you with interest charges if you pay off the balance monthly. Some households prefer to conduct their spending this way to take advantage of cashback purchases or airline points. As always, make sure spending with credit works within your budget.

If you’re carrying a balance from month to month on your credit cards, however, there is going to be a negative impact in the form of interest payments. Avoid doing this whenever possible.

Stay on the good side of consumer debt

Consumer debt is a mixed bag. Staying on the good side of consumer debt may pay off for you in the long run if you’re conscientious about borrowing money, plan your budget carefully, and always seek to live within your means.

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¹ “Average American Household Debt in 2022: Facts and Figures,” Jack Caporal and Dann Albright, The Ascent, Sep 20, 2022, https://www.fool.com/the-ascent/research/average-american-household-debt/#:~:text=Data%20source%3A%20Federal%20Reserve%20Bank,the%20second%20quarter%20of%202022.

² “Jaw-Dropping Stats About the State of Debt in America,” Gabrielle Olya, Yahoo, Oct 11, 2022, https://www.yahoo.com/video/jaw-dropping-stats-state-credit-130022967.html#:~:text=A%20separate%20survey%20conducted%20by,balance%20from%20month%20to%20month.

October 12, 2022

Can you actually retire?

Can you actually retire?

Retirement is as much a part of the American Dream as owning a home, owning a small business, or just owning your time.

It’s built into the American psyche.

Many while away their working lives dreaming of the day they won’t have to wake up to a jarring alarm clock, fight rush hour traffic, and spend their days trapped behind a desk.

No matter your retirement dream – endless golf, exciting travel, or just hanging out with the grandkids – will you actually be able to pull it off? Will you actually be able to retire?

Sadly, about 59% of Americans say no, according to a poll by MagnifyMoney.¹

It turns out there are some reliable indicators that you may not be ready for retirement. It’s time for a reality check (and some tough love). So roll up your sleeves and let’s get honest. If you regularly practice any of the following financial habits, you may not be able to retire.

You spend without a budget

Do you have a budget? Are you spending indiscriminately on anything that tickles your fancy? Living day to day without a budget – especially if you are approaching your middle years or later – can wreck your chances of retirement. Commit to creating a budget and stick to it. Overspending now can turn your retirement daydream into a nightmare.

You’re not dealing with your credit card debt

If you struggle with credit card debt, you must have a plan to attack it. Credit card debt can cost you money in interest payments that could be funding your retirement instead. If you’re carrying credit card debt, get rid of it as soon as possible. Stick to a payment plan, be patient, and remain diligent. With time you’ll knock out that debt and start funding your retirement.

You’re not creating passive income

Being able to retire depends on whether you can generate income for yourself during your retirement years. You should be setting up your passive income streams now. Your financial advisor can inform you about options you might have, such as retirement investment accounts, real estate assets, stocks, or even life insurance and annuities. Make it a goal to formulate a strategy about how you can generate income later or you might not be able to retire.

You’re pipe dreaming

Ouch. Here’s some really tough love. If your retirement plan includes so-called “get rich quick” scenarios such as investment fads, lottery winnings, or pyramid schemes, your retirement could be in jeopardy. The way to retirement is through tried and true financial planning and implementing solid strategies over time. Try putting the 20 dollars you might spend each week on lottery tickets toward your retirement strategy instead.

A great retirement life isn’t guaranteed to anyone. It takes planning, sacrifice, and discipline. If you’re coming up short, make some changes now so you’ll be ready for your retirement life.

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This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies for saving and/or investing that may be available to you. Market performance is based on many factors and cannot be predicted. Before investing, talk with a financial professional to discuss your options.


¹ “59% of Americans Don’t Believe They Will Have Enough to Retire,” Deanna Ritchie, Due, Jun 1, 2022 https://due.com/blog/americans-dont-believe-they-will-have-enough-to-retire/#:~:text=Unfortunately%2C%20a%20majority%20of%20Americans,to%20save%20enough%20for%20retirement.

October 10, 2022

A Surprising Help After Buying a House

A Surprising Help After Buying a House

When I say “buying a house,” what kind of insurance do you think of?

Homeowners insurance. Obvious, right? But there’s another type of insurance you should consider with a few amazing-yet-unexpected benefits for new homeowners. Give up? It’s… life insurance.

Why? Because mortgage payments and the cost of upkeep won’t stop with an untimely passing.

Life insurance is a significant tool for homeowners because it’s a great way to help protect your loved ones from a sudden and unexpected financial burden.

Your family wouldn’t have to lose their home because of missed payments, and if you co-signed a mortgage with someone outside your nuclear family, the benefits of life insurance have the potential to cover your contribution for a time, not leaving that friend or business partner in a financial bind.

As for the upkeep of your home, a general rule of thumb is to set aside 1% annually of the purchase price of the house for routine repairs and/or maintenance.

For instance, if you paid $400,000 for your home, set aside $4,000 each year.

So if you’ve already had to convince yourself that the hole in the roof is almost, sorta, kind of the same as that skylight you always wanted to put in, just imagine what your family might experience if the income you or your spouse provides was no longer available.

Not sure if you have the right policy to help out with your new home in the event of a sudden death? Be sure to talk with a financial professional to make sure you’re financing the future you want – and that you’re doing everything in your power to help your family stay in the house that you’re all working to make a home!

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October 3, 2022

5 Things to Consider When Starting Your Own Business

5 Things to Consider When Starting Your Own Business

Does anything sound better than being your own boss?

Well, maybe a brand new sports car or free ice cream for life. But even a state-of-the-art fully-decked-out sports car will eventually need routine maintenance, and the taste of mint chocolate chip can get old after a while.

The same kinds of things can happen when you start your own business. There are many details to consider and seemingly endless tasks to keep organized after the initial excitement of being your own boss and keeping your own hours has faded. Circumstances are bound to arise that no one ever prepared you for!

Although this list is not exhaustive, here are 5 things to get you started when creating a business of your own:

1. Startup cost

The startup cost of your business depends heavily on the type of business you want to have. To estimate the startup cost, make a list of anything and everything you’ll need to finance in the first 6 months. Then take each expense and ask:

  • Is this cost fixed or variable?
  • Essential or optional?
  • One-time or recurring?

Once you’ve determined the frequency and necessity of each cost for the first 6 months, add it all together. Then you’ll have a ballpark idea of what your startup costs might be.

(Hint: Don’t forget to add a line item for those unplanned, miscellaneous expenses!)

2. Competitors

“Find a need, and fill it” is general advice for starting a successful business. But if the need is apparent, how many other businesses will be going after the same space to fill? And how do you create a business that can compete? After all, keeping your doors open and your business frequented is priority #1.

The simplest and most effective solution? Be great at what you do. Take the time to learn your business and the need you’re trying to fill – inside and out. Take a step back and think like a customer. Try to imagine how your competitors are failing at meeting customers’ needs. What can you do to solve those issues? Overcoming these hurdles can’t guarantee that your doors will stay open, but your knowledge, talent, and work ethic can set you apart from competitors from the start. This is what builds life-long relationships with customers – the kind of customers that will follow you wherever your business goes.

(Hint: The cost of your product or service should not be the main differentiator from your competition.)

3. Customer acquisition
The key to acquiring customers goes back to the need you’re trying to fill by running your business. If the demand for your product is high, customer acquisition may be easier. And there are always methods to bring in more. First and foremost, be aware of your brand and what your business offers. This will make identifying your target audience more accurate. Then market to them with a varied strategy on multiple fronts: content, email, and social media; search engine optimization; effective copywriting; and the use of analytics.

(Hint: The amount of money you spend on marketing – e.g., Google & Facebook ads – is not as important as who you are targeting.)

4. Building product inventory

This step points directly back to your startup cost. At the beginning, do as much research as you can, then stock your literal (or virtual) shelves with a bit of everything feasible you think your target audience may want or need. Track which products (or services) customers are gravitating towards – what items in your inventory disappear the most quickly? What services in your repertoire are the most requested? After a few weeks or months you’ll have real data to analyse. Then always keep the bestsellers on hand, followed closely by seasonal offerings. And don’t forget to consider making a couple of out-of-the-ordinary offerings available, just in case. Don’t underestimate the power of trying new things from time to time; you never know what could turn into a success!

(Hint: Try to let go of what your favorite items or services might be, if customers are not biting.)

5. Compliance with legal standards

Depending on what type of business you’re in, there may be standards and regulations that you must adhere to. For example, hiring employees falls under the jurisdiction of the Department of Labor and Federal Employment Laws. There are also State Labor Laws to consider.

(Hint: Be absolutely sure to do your research on the legal matters that can arise when beginning your own business. Not many judges are very accepting of “But, Your Honor, I didn’t know that was illegal!”)

Starting your own business is not an impossible task, especially when you’re prepared. And what makes preparing yourself even easier is becoming your own boss with an established company like mine.

The need for financial professionals exists – everyone needs to know how money works, and many people need help in pursuing financial independence. My company works with well-known and respected companies to provide a broad range of products for our customers. We take pride in equipping families with products that meet their financial needs.

Anytime you’re ready, I’d be happy to share my own experience with you – as well as many other things to consider.

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September 14, 2022

Has Your Debt Outpaced Your Income?

Has Your Debt Outpaced Your Income?

Are your finances feeling tight? It may be because your debt has outpaced your income.

Your debt-to-income ratio is a key factor in determining your financial health. This ratio is simply your monthly debt payments divided by your monthly income, multiplied by 100 to make it a percentage.

Banks and other lenders will look at your debt-to-income ratio when considering whether to give you a loan. They want to see that you have enough income to cover your monthly debt obligations. A high debt-to-income ratio can make it difficult to qualify for new loans or lines of credit since it can signal that you’re struggling to keep up with your debt payments.

Fortunately, your ratio is easy to calculate…

First, add up all of your monthly debt payments. This includes your mortgage or rent, car payment, student loans, credit card payments, and any other debts you may have.

Next, calculate your monthly income. This is typically your take-home pay after taxes and other deductions. If you’re self-employed, it may be your net income after business expenses.

Finally, divide your monthly debt payments by your monthly income. Multiply this number by 100 to get your debt-to-income ratio.

For example, let’s say you have a monthly mortgage payment of $1,000 and a monthly car payment of $300. You also have $200 in student loan payments and $150 in credit card payments. Your monthly income is $3,000.

Your debt-to-income ratio would be (1,000 + 300 + 200 + 150) / 3,000 = .55 or 55%.

A debt-to-income ratio of less than 36% is typically considered ideal by lenders—anything more can signal financial stress.¹

If your debt-to-income ratio is high, don’t despair. There are steps you can take to improve it.

First, try to increase your income. That can mean working extra hours, scoring a raise, finding a new job, or even starting a side business.

Second, you can lower your debt. You can do this by making extra payments on your debts each month or by consolidating your debts into a single loan with a lower interest rate.

Making these changes can be difficult, but they can make a big difference in your debt-to-income ratio—and your financial health.

If you’re not sure where to start, contact me! I can help you develop a plan to get your debt under control and to start building wealth.

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September 12, 2022

Inflation is Massacring Your Savings

Inflation is Massacring Your Savings

Inflation isn’t just eating away at your purchasing power—it’s also ravaging your savings account.

If you’re like many people, the interest you’re earning on your money is being completely eroded by inflation. That’s because the annual rate of inflation has been outpacing the interest rates on savings accounts for years.

Let’s look at some numbers…

Let’s say you have $10,000 in a savings account that pays 1% interest. After one year, you would have earned $100 in interest, which sounds like a decent return.

But if inflation is running at 2%, then the purchasing power of your money has declined by 2% over the same period. In other words, the $10,100 you have in your account can buy less than what $10,000 could buy a year ago.

As a result, your real return on investment—or the return after inflation is taken into account—is actually negative 1%.

Now, let’s bring that to the real world—in 2022, the total inflation rate has been 8.5% thus far,¹ while the average interest rate for savings accounts is just .13%.²

That means for every $100 you have in a savings account, the purchasing power of that money declines by $8.50 while the value of your money only grows by $.13.

In other words, inflation is absolutely massacring your savings account.

So what can you do about it?

Simple—find assets that grow at a rate that outpaces inflation.

One option is to invest in assets with high compounding interest rates, such as certain types of bonds. Another strategy is to invest in options that have the potential to generate high returns, such as stocks or real estate.

You could also start a business that can scale quickly and generate a high return on investment.

Whatever strategy you choose, the key is to find an asset that will grow at a rate that can outpace inflation.

So don’t sit idly by and watch as inflation destroys your savings account—take action and find an investment that will help you keep up with the rising cost of living. Otherwise, you’ll end up losing ground financially.

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This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies for saving and/or investing that may be available to you. Any examples used in this article are hypothetical. Market performance is based on many factors and cannot be predicted. Before investing or enacting a savings or retirement strategy, seek the advice of a licensed and qualified financial professional, accountant, and/or tax expert to discuss your options.


¹ “Kevin O’Leary’s No. 1 money mistake to avoid during periods of high inflation,” Nicolas Vega, CNBC Make It, Apr 21 2022, https://www.cnbc.com/2022/04/21/kevin-olearys-no-1-money-mistake-to-avoid-during-high-inflation.html

² “What is the average interest rate for savings accounts?” Matthew Goldberg, Bankrate, Aug. 4, 2022, https://www.bankrate.com/banking/savings/average-savings-interest-rates/#:~:text=National%20average%20savings%20account%20interest,ll%20earn%20on%20your%20savings.

August 15, 2022

5 Challenges for Entrepreneurs

5 Challenges for Entrepreneurs

Starting a business can be an exhilarating experience.

It may seem like the next logical step for someone who’s looking to grow and develop their career. But before you take that leap, it’s smart to consider the pros and cons involved with entrepreneurship. In this article we’ll explore five things that budding entrepreneurs should think about before starting a new business venture!

The first thing to consider? Startup cost.

Depending on your idea, take some time to research what equipment or things will be necessary for getting started. Every penny counts. For example, if you’re opening an ice cream shop— which may seem simple enough—you’ll need freezers, scoopers, a storefront, and, of course, ice cream. That’s a lot of upfront investment for a little ice cream shop!

The second thing to consider is competition.

It’s wise to research what types of businesses already exist in your space before jumping into entrepreneurship. For example, what if there are five dog parks within a couple of miles from where you live and you want to open up a sixth? This may be fine if there’s a large population of dog owners in your area. But unless you’ve got a unique idea or innovation that will blow your competition out of the water, you may want to consider another type of business or a different location to get started.

The third thing to consider is customer acquisition.

How will you reach your customers? Do you know your exact market, their needs, desires, and insecurities? What’s the strategy for getting them in and keeping their business over time, even if there are competitors nearby with similar products/services?

At first, you might be able to rely on your friends and family as your first customers. But eventually, you’ll need to develop a marketing and brand strategy to acquire and keep new customers.

The fourth consideration should be building product inventory.

If you’re producing goods, do your finances allow for significant inventory investment? What if it’s a service-based business—will customers need to wait weeks or months before they receive the first round of services from their purchase with no cash flow in between?

When you first open, stock your business with every service or product you can possibly offer. Then, track which ones seem most popular and how much they sell. Then, start building inventory accordingly. You may need to scrap the services or products that aren’t making you money.

Finally, think about compliance with legal standards.

Some industries are regulated in ways that you may not anticipate. Food and beverage businesses need to follow health codes. Construction contractors must be bonded for their work on public projects like schools. And the financial industry is heavily regulated to protect clients. Whatever your industry, make sure you understand the legal requirements you’ll be asked to meet as a business owner.

There’s more to starting a business than excitement and glamour. It’s hard work that requires careful research and diligent preparation. Tackle these considerations before you start so you can lay the foundation for your business’s future success.

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August 10, 2022

Four Types of Self-Made Millionaires

Four Types of Self-Made Millionaires

A 5 year study of hundreds of self-millionaires has revealed their paths to achieving wealth. The findings reveal key insights that anyone can adopt and apply.

Starting in 2004, Tom Corley interviewed 225 self-made millionaires. His goal was simple—discover strategies, habits, and qualities that unite the self-made wealthy.

Along the way, he discovered four distinct types of self-made millionaires.

These are more than abstract archetypes—they represent actionable strategies and attainable goals that you can imitate, starting today.

Here are the four types of self-made millionaires…

Saver-Investors

These wealth builders come from all walks of life. What they have in common is that they save, save, and save. Add a dash—or heaping spoonful—of compound interest, and their savings grow over the course of their career into lasting wealth.

Company Climbers

It’s simple—score a job at a large company, and climb the ladder until you reach a lucrative position. Then use your significant income, benefits, and bonuses to create wealth.

Virtuosos

Got a knack for an in-demand skill? Then you may have serious wealth building potential. That’s because businesses will gladly pay top dollar for specific talents. Just remember—the virtuoso path to wealth requires both extreme discipline and extensive training.

Dreamers

From starting a business to becoming a successful artist, these are the people who go all-out on their passions. It’s an extremely high-risk solution—often, it can lead to failure. But those who succeed can reap substantial rewards.

The types may seem intimidating—after all, not everyone is positioned to drop everything and become a successful entrepreneur. But anyone can apply the basic strategies of the self-made wealthy to their finances…

Income is of the essence

The more you earn, the more you can save. Whether it’s by developing your skills or starting a side business, every bit of extra income can make a crucial difference on your ability to build wealth.

Save, no matter what

Unless you’re set on starting a business, you must save. Corely’s research suggested that saving 20% of your income is the benchmark for the self-made wealthy. Do your homework, meet with a financial professional, and start putting away as much as you can each month.

Invest in your skills Your skills dictate what you can earn. Take a note from the virtuosos—get really good at something that businesses need, and reap the benefits.

What type of self-millionaire could you become?

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¹ “I spent 5 years interviewing 225 millionaires. Here are the 4 types of rich people and their top habits,” Tom Corley, CNBC Make It, Aug 1 2022, https://www.cnbc.com/2022/07/31/i-spent-5-years-interviewing-225-millionaires-3-money-habits-that-helped-them-get-rich.html

August 3, 2022

Now's The Time for Future Financial Planning

Now's The Time for Future Financial Planning

What happened to the days of the $10 lawn mowing job or the $7-an-hour babysitting gig every Saturday night?

Not a penny withheld. No taxes to file. No stress about saving a million dollars for retirement. As a kid, doing household chores or helping out friends and neighbors for a little spending money is extremely different from the adult reality of giving money to both the state and federal government and/or retiring. Years ago, did those concepts feel so far away that they might as well have been camped out on Easter Island?

What happened to the carefree attitude surrounding our finances? It’s simple: we got older. As the years go by, finances can get more complicated. Knowing where your money is going and whether or not it’s working for you when it gets there is a question that’s better asked sooner rather than later.

When author of Financially Fearless Alexa von Tobel was asked what she wishes she’d known about money in her 20s, her answer was pretty interesting:

Not having a financial plan is a plan — just a really bad one! Given what I see as a general lack of personal-finance education, it can be all too easy to wing it with your money… I was lucky enough to learn this lesson while still in my 20s, so I had time to put a financial plan into place for myself.

A strategy for your money is essential, starting early is better, and talking to a financial professional is a solid way to get going. No message in a bottle sent from a more-prepared version of yourself is going to drift your way from Easter Island, chock-full of all the answers about your money. But sitting down with me is a great place to start. Contact me anytime.

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July 13, 2022

Leaders: “Emotional Intelligence” Is Not Enough

Leaders: “Emotional Intelligence” Is Not Enough

Have you read an article about emotional intelligence and leadership recently? There’s a strong chance it’s misleading you.

That’s because there’s been serious confusion about how emotional intelligence works, especially among business leaders.

Often, there’s an unstated assumption that emotional intelligence measures the grasp you have on how others feel.

It’s become common to see emotional speeches, sincere apologies, and leadership styles all bathed with the label “Emotionally Intelligent” since they all employ basic human emotions to be effective.

But there’s one problem—having high emotional intelligence is a far more nuanced state of awareness than merely understanding how emotions work.

Daniel Goleman, the guy who literally wrote the book on emotional intelligence, gives emotional intelligence four dimensions:

  1. Self-awareness
  2. Self-management
  3. Social awareness
  4. Relationship management

But, as Goleman explains here, those qualities require empathy to cohere. In fact, sans empathy, they can become toxic.

It’s easy to see why, when you think about it.

How do you categorize a leader who’s aware of how others feel, but exploits those emotions to their own ends?

At best, they’re skilled at what the ancient Greeks called Rhetoric, the art of persuasion.

At worst, they’re garden variety psychopaths…

Here are two takeaways for you:

  1. Beware headlines that peddle examples of emotional intelligence. Plenty of publications will try to get your click with articles about emotional intelligence in action. Maybe they’re worthwhile. But maybe they’re using a buzzword to grab your attention.

  2. Develop your empathy along with your charisma. Without empathy, you’ll find yourself manipulating others with little concern for their wellbeing. Not only is it wrong, but it can have disastrous outcomes over the long haul.

And here’s a bonus takeaway, just because I care (see the rhetoric at work?)…

Just because someone speaks to your emotions doesn’t mean they care about you.

In fact, those emotional appeals can be indicators that a bad actor is exploiting you.

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June 8, 2022

Tax Now or Tax Later?

Tax Now or Tax Later?

If someone asked if you’d rather pay taxes now or later, what would you say?

Paying later is tempting. After all, who likes paying taxes at all? As with most inconveniences, it’s easy to delay, delay, delay.

But here’s an important question. When do you think taxes will be greater—today, or years from now?

It’s impossible to answer.

Looking to history doesn’t really help—income taxes are actually far lower now than they were in the 1930s, 40s, or 50s.¹ So if you pay now, you may miss out if taxes sink even further.

But no one can predict the future. If you opt to pay later, unforeseen circumstances may create a higher tax environment down the road.

So if you’re comparing tax now vs. tax later, it may feel like you might as well toss a coin to determine your strategy. Not a good place to be!

But fortunately, there’s an alternative. Tax never.

And no, that doesn’t mean buying shady nail salons, opening businesses in the Cayman Islands, or committing a felony. It simply means working with a licensed and qualified financial professional to identify time-proven—and 100% legal—financial vehicles.

These include…

Roth IRAs/Roth 401(k)s Health Savings Accounts Indexed Universal Life (IUL) Insurance 529 College Savings Plans Municipal Bonds

Each vehicle has specific rules, limitations, strengths, and weaknesses. It’s absolutely critical that you consult with a financial professional before you start leveraging these tools. Remember, you don’t need to flip a coin to make financial decisions!

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¹ “History of Federal Income Tax Rates: 1913 – 2021,” Bradford Tax Institute, https://bradfordtaxinstitute.com/Free_Resources/Federal-Income-Tax-Rates.aspx

May 23, 2022

What's a Recession?

What's a Recession?

Most of us would probably be apprehensive about another recession.

The Great Recession caused financial devastation for millions of people across the globe. But what exactly is a recession? How do we know if we’re in one? How could it affect you and your family? Here’s a quick rundown.

So what exactly is a recession? The quick answer is that a recession is a negative GDP growth rate for two back-to-back quarters or longer (1). But reality can be a bit more complicated than that. There’s actually an organization that decides when the country is in a recession. The National Bureau of Economic Research (NBER) is composed of commissioners who dig through monthly data and officially declare when a downturn begins.

There’s also a difference between a recession and a depression. A recession typically lasts between 6 to 16 months (the Great Recession was an exception and pushed 18 months). The Great Depression, by contrast, lasted a solid decade and witnessed unemployment rates above 25% (2). Fortunately, depressions are rare: there’s only been one since 1854, while there have been 33 recessions during the same time (3).

What happens during a recession <br> The NBER monitors five recession indicators. The first and most important is inflation-adjusted GDP. A consistent quarterly decline in GDP growth is a good sign that a recession has started or is on the horizon. Then this gets supplemented by other numbers. A falling monthly GDP, declining real income, increasing unemployment, weak manufacturing and retail sales all point to a recession.

How could a recession affect you? The bottom line is that a weak economy affects everyone. Business slows down and layoffs can occur. People who keep their jobs may get spooked by seeing coworkers and friends lose their jobs, and then they may start cutting back on spending. This can start a vicious cycle which can lead to lower profits for businesses and possibly more layoffs. The government may increase spending and lower interest rates in order to help stop the cycle and stabilize the economy.

In the short term, that means it might be harder to find a job if you’re unemployed or just out of school and that your cost of living skyrockets. But it can also affect your major investments; the value of your home or your retirement savings could all face major setbacks.

Recessions can be distressing. They’re hard to see coming and they can potentially impact your financial future. That’s why it’s so important to start preparing for any downturns today. Schedule a call with a financial professional to discuss strategies to help protect your future!

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¹ “What Is a Recession?” Kimberly Amadeo, The Balance, Apr 6, 2022, https://www.thebalance.com/what-is-a-recession-3306019

² “What Is a Recession?” Amadeo, The Balance, 2022

³ “Recession vs. Depression: How To Tell the Difference” Kimberly Amadeo, The Balance, May 4, 2022, https://www.thebalance.com/recession-vs-depression-definition-causes-and-stats-3306048

May 4, 2022

How Insurance Companies Stay In Business

How Insurance Companies Stay In Business

Here’s a mystery—how in the world do insurance companies stay in business?

After all, their business model seems… odd. Their main product is cold, hard cash. In some cases, those payouts are substantial—for life insurance, it’s recommended that people buy 10X their annual income. That can mean payouts of well over $500,000. That’s a huge chunk of cash! The premiums you pay over your lifetime likely don’t even scratch the surface of that amount.

So what’s the secret? The answer is minimizing risk. Here’s how it works…

Let’s say you run a mom-and-pop life insurance company. You find 20 clients, and charge them each a $100 monthly premium for $500,000 of protection.

Your business earns $24,000 per year, and for the first five years it’s smooth sailing.

But what would happen if just one of your clients died? Suddenly, you would have to pay out $500,000. And unless you had some other income, that would mean the end of your business.

Here’s an even scarier proposition—what if you decided to exclusively market towards the elderly? And what if two of them died in quick succession? Suddenly, you’re on the hook for a million dollars, and your business is toast.

This is why insurance companies are so risk-averse. They have to be, or they’ll go bankrupt.

Their solution? They evaluate every person they insure. Actuaries plug the amount of coverage, age, history, health, and even the zip code of prospective customers into complex algorithms to determine their risk level. It’s why life insurance is often vastly more expensive for smokers than non-smokers—their risk of death is simply higher.

Then, the actuaries hand the results to underwriters who determine the premium amount.

Let’s consider your hypothetical business again—this time with proper risk protection.

You still have 20 customers, each with $500,000 of protection. But now, you’ve evaluated each customer for risk, and adjusted their premiums.

You charge 5 clients $100 per month, 5 clients $250 per month, and 10 clients $400 per month. Plus, you’ve had to decline serving the highest risk customers. Now, you’re earning $69,000 annually. And because of your new qualification process, you don’t have to make your first payout for 10 years. Now, you can easily cover the cost, with some to spare!

And as you expand your client base, you’ll have a larger and larger pool of low-risk customers to help offset the cost of payouts for the high-risk ones.

This is the secret to how insurance companies stay in business. By carefully evaluating and managing risk, they can keep their costs low, and ensure they have the cash on hand to make payouts when needed.

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April 13, 2022

Can You Create a Will Without An Attorney?

Can You Create a Will Without An Attorney?

The short answer is YES. You can create a will without an attorney.

There are dozens of templates you can download and use to draw up your estate plan. It’s fast, easy, and convenient.

But the real question isn’t IF you can create your own will. It’s if you SHOULD.

Your will is fundamental to your financial legacy. It’s a legal document that must meet specific qualifications and standards because it’s going to control how your loved ones will receive the wealth and assets you’ve worked so hard to amass.

Any oversight with your will could result in the mishandling of your estate. Your assets could end up in the hands of the wrong people. At the very least, it could cause a legal headache for your family.

If your estate is simple, you might be able to navigate those challenges alone.

But you’ll most likely need an attorney if you…

  • Own a family-run business you want to pass to your children.
  • Plan to pass your wealth to a step-child or step-children.
  • Want to disinherit someone in your existing will.

In other words, you should hire a lawyer if your will is anything more than boilerplate. Otherwise, the risk and consequences of errors become too high.

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