It’s no secret, times are tough. We have seen prices on gas, groceries, utilities, and other products go up, and, up, and up. Money is tight. Families are having to change, not just their spending plans, but their travel and family plans. People are having to say no to things on their wish lists. This certainly isn’t bringing smiles to the masses. In fact, all this may seem depressing and bring on feelings of uncertainty and even fear. It brings to question if the old adage, “Money can’t buy happiness” is wrong. But this isn’t the first time our country has seen tough times, nor is it even close, worldwide. And yet, happiness has prevailed throughout history. So how do those two ideas converge?

If simply acquiring money is your sole ambition, then you will inevitably be disappointed and enjoy little happiness. If you consider money (or the acquisition of it) to be evil or vain, you will be unable to find success in your monetary pursuits. But, if you consider the good things money can do, when you change your focus to what money can be used for, then you will start to see beyond the cold hard cash and find joy in the pursuit of happiness. It is when you become aware of the worthwhile causes and the enriching experiences that we are able to see how money can truly be associated with happiness.

You must be cautions, if you tell yourself you are pursing money and ambition for the sake of others, but you become prideful in that pursuit, you may discover that that path is empty and void of satisfaction. It’s all in your mindset.

So, what is your reason for pursuing or acquiring more money? What do you value? What is the end purpose for your money? If it’s simply to have more money, happiness may elude you, simply because money can only be a means to an end.

Ask yourself what are the most vital things you can acquire; are they temporal, or of a more lasting nature? What lasting value do your possessions have?

Our greatest happiness and fulfillment comes, not from our possessions, but from the relationships we form, the knowledge we gain, and the growth we experience as people. Are you investing as much into your relationships and yourself as you are your 401k?

In 2008 a study was done with a group of college students. Some were given money with instructions to spend it on themselves, others were given money to spend on someone else. They were asked in the beginning which group they thought would increase their levels of happiness more. Most thought it would be the group spending the money on something they wanted. However, they were dead wrong. The study found that, “people experienced happier moods, when they gave more money away-but only if they had a choice about how much to give.” And “thinking about money may propel individuals toward using their financial resources to benefit themselves, but spending money on others can provide a more effective route in increasing one’s own happiness.”

Similar studies have shown that when people give to charities, they tend to be more careful in their own spending, becoming more conscientious of frivolous spending. Givers tend to be more financially successful. Giving to others awakens our emotional connection to those around us and has physiological effects that make us happier and healthier.

If you find yourself feeling down and despaired over our current economy, instead of dwelling on those uncertainties, look outward and find a way to help someone. The results will be compounding. Eventually, we discover that it isn’t how much money we have acquired that brings happiness, but our attitude towards it and what we did with that money to benefit the lives of the people we love; it’s our gratitude, our challenges, and the service we gave.

Picture by Szilvia Basso

A prudent and effective tax strategy during your employment years will most likely need to be modified once you retire. When earned income ceases and income from retirement plans, investments, and Social Security commences, tax liabilities change. The impact of the changes is primarily driven by the assets that we have little tax control over once we reach 72 (70 ½ if you reach 70 ½ before January 1, 2020) which include IRAs, 401k plans, and pensions, which triggers RMDs (Required Minimum Distributions).

Distributions from tax deferred retirement accounts such as an IRA or a 401k are generally taxed at the ordinary tax rate. Distributions from a Roth IRA or Roth 401k are income tax free as long as the account has been opened for at least five years and the account holder is 59.5.

Investment income such as stock dividends and bond interest are taxed differently, especially when they are held outside of a retirement account. Realizing gains on stocks that have been held for one year or more can be taxed at a more favorable rate than the conventional rate. Interest on bonds and gains realized on short-term positions less than one year are taxed at the ordinary rate.

Retirement also introduces us to Social Security which, contrary to popular belief, can be taxed. Eligibility for Social Security benefit payments begins at age 62, but can be postponed until age 70. A key determinant as to when to start receiving Social Security may be contingent on the amount of retirement assets in retirement accounts subject to RMDs. This is where tax strategies can vary dramatically.

Retirees with excessive assets in retirement accounts subject to RMDs and with non-retirement investment income may want to confer with a tax professional to help determine when to take Social Security. Conversely, retirees with minimal assets in retirement accounts and investments may have little concern about paying taxes on their Social Security benefits.

The IRS determines if and how taxes are owed on Social Security by the “provisional income” measure. Provisional income includes gross income, tax-free interest, and 50% of Social Security benefits. If the provisional income is above a certain amount, then a portion of the Social Security income becomes taxable.

One way to potentially lower taxes in retirement is to start taking distributions from tax-deferred accounts before it’s required. Again, once you reach age 59½, you can withdraw funds from those accounts without paying the 10% early withdrawal penalty. The withdrawals are still taxed as ordinary income, but over time they reduce the size of tax deferred accounts, and thus the size of your RMDs. Another reason to access those funds before 72 is that it could help you delay taking your Social Security benefit, which increases in size the later you take it, up to age 70.

Another strategy for reducing the potential tax consequences of RMDs is converting a traditional IRA or 401(k) plan into a Roth IRA before the age of 72. A Roth conversion may make sense when you’re certain you’ll be in a higher bracket when you eventually withdraw the money, which is often the case once RMDs and Social Security are factored in.

Many people may find Social Security IRAs complex and maybe even boring subject to look through, but it is definitely worth your while to study the details and information available and consult with a professional because it will make a big difference in how your income is preserved for your later years.

Photo by Kelly Sikkema

Most adults have some stream of revenue, which is necessary to cover all those adult expenses like mortgages, cars, and groceries. But do you really know how much money you’re spending? Sometimes spending money becomes mindless spending just like mindless eating. Before you know it, you’ve snacked over your daily calorie allotment, and you haven’t even had a real meal. Mindless spending on all the extra little things could put a budget over your total monies coming in before paying the necessary bills. The best way to avoid “over snacking” our money away, is to create a spending plan that maps out where your money should go.

Creating a spending plan starts with income, how much money is coming into your account. Next list the all the money going out, including savings and other financial goals. If you don’t know where your money is going it’s pretty hard to keep track of it. Listing out the places money goes helps prioritize how to allocate your money.

After doing a little math, adding up the money coming in, and subtracting all the money going out, you’ll know if you are living within your means. I had an old college professor say there are only two things you can do with the budget, increase income, or reduce expenses. Simple right? Rarely!

As spending is prioritized, separate the fixed expenses and the variable expenses. Things that will reoccur every month and generally don’t change like a mortgage/rent, car payments or other loans, insurance, and subscriptions are fixed expenses. Items that are flexible or variable expenses are things like utilities, food, gas, and fun items.

Another thing to consider are the needs vs. luxuries. It’s important to know the difference between the necessities and the things we simply want. Having this understanding will allow you to prioritize correctly and spend responsibly. This does not mean you can’t have the luxuries or wants; they just need to be planned for in the spending plan.

The most successful spending plans are created by people who pay themselves first. Once all the expenses are accounted for on paper, it’s important to list yourself first. Then follow through and pay yourself first. Set the money aside in a separate savings account that is a little harder to get to, maybe a different financial institution. Know that the only money that will be in your future, is what you send there now.

Another line item in a spending plan is the TIF. When I was 18 and in college, I worked for a building contractor. One day he taught me a little about biding a job. The last item on the bid was TIF … 10%. I asked what that was, he said, “Oh, that’s ‘Things I Forgot!’ And 10% usually covered it!” If every spending plan had a TIF for 10% of spending, there would likely be fewer people in debt! The TIF should go into another separate account.

Using a spending plan teaches financial self-discipline, which is the fundamental core of financial success. When followed, it is a wonderful tool to help individuals and families get out of debt, prepare for emergencies, plan for bigger purchases, and grow your savings. All of these things contribute to a healthy financial situation, relieving the stress and anxiety that occurs when over-spending is common. Try it out, create, then follow a spending plan for the next three months and see what happens, you’ll be glad you did!

Photo 1 by Nico Smit

Photo 2 by Sharon McCutcheon

In working to serve clients better, I use a tool to gain insights into preferences and tolerances people have towards investing. A Risk Profile Assessment tool helps me understand your ability and disposition towards taking on financial or market risks. It aids in determining the proper investments or portfolios to invest in; it helps align investors with the appropriate risk level associated with their personal goals.

The easiest way to discover your risk profile is through a Risk Profile Assessment, like the one you can find on Yieldfa.com. It’s like a financial personality quiz that reveals a person's ability or willingness to take on risks. It consists of questions that measure your attitude and understanding of financial markets. It also helps gauge how you might react to certain investment scenarios. Your calculated responses determine your risk level. The results are used to develop a portfolio. 

Typically, there are five types of investors. Your Risk Profile Assessment score will determine which type of investor you are. 

Conservative

Conservative investor’s focus is on protecting principal instead of seeking higher returns. They are comfortable accepting lower returns for a higher level of security and more liquidity of their investments. Overall, a conservative investor minimizes risk of loss.

Moderate-Conservative

Moderate-conservative investor’s objective is principal preservation but is comfortable accepting a small degree of risk to seek some degree of appreciation. This investor is willing to accept lower returns, and is willing to accept minimal losses.

Moderate

Moderate investor permits some risks in an effort to enhance returns. They are prepared to accept modest risks to seek higher long-term returns. A moderate investor can endure a short-term loss for the trade-off of long-term appreciation.

Moderate-Aggressive

Moderate-aggressive investor places a higher value on long-term returns and is willing to accept significant risk. This investor believes higher long-term returns are more important than protecting principal, and may endure large losses in favor of potentially higher long-term returns. 

Aggressive

Aggressive investor prizes profitability and is willing to accept substantial risk. This investor believes maximizing long-term returns is more important than protecting principal. An Aggressive investor may endure extensive volatility and significant losses.

Because people change over time, it is important the risk assessment is updated on a regular basis. If it has been a year or more since you have completed one, I highly encourage you to take our risk assessment on our website, www.yieldfa.com (scroll down a tad to find the assessment). Knowing your risk tolerance gives us, as we work together, an understanding of what’s important to you as an investor, and will help in reaching your overall goals.

We’re nearing the time when the school year ends and seniors graduate, eager to start the next stage of their lives. But what does this mean for their parent’s insurance? There are pros and cons for keeping your kids on your family plan. Regardless what direction you choose to go listed below are a few age limits regarding insurance to get you planning for this new phase of life.

Auto Insurance

Kids can stay on their parents' auto insurance even if they have moved out and they’re away at school and still listing the parent’s home address as their primary residence. In addition, children not enrolled in school, considered an eligible dependent (insurers have different definitions), still drive a vehicle owned and insured by a parent, are eligible to stay on their parent's insurance.

If an adult child has a driver's license and is living in at home, then normally your auto insurance company may require that she or he is listed on your policy, regardless of their age.

People living in the same household have access to the insured vehicles, so insurance providers want all licensed household members placed on your car insurance policy. This allows your auto insurance company to look at all drivers' risk factors and calculate car insurance rates accurately.

Health Insurance

Per federal law, a child can remain on their parents' health insurance until their 26th birthday in most states. There are no restrictions before then, so the child is eligible for coverage under their parent's plan even if married, and/or not in school.

Claim As Dependent For Taxes

The Federal Government allows you to claim dependent children until they are 19. This age limit is extended to 24 if they attend college. If your child is over 24 but not earning much income, they can be claimed as a qualifying relative if they meet the income limits and/or if they are permanently disabled. In order to be claimed as a dependent, a child cannot have a gross income of more than $4,300 in tax year 2021 or (2022.Source: IRS)

These days more and more Americans are finding themselves in debt. Debt is a heavy burden to bare. The more in debt we become the heavier that burden feels. Once in debt the borrower becomes a slave and their debt is bondage. How is it so many people become trapped by debt? Usually it comes down to the interest you incur on that debt.

“Interest never sleeps nor sickens nor dies…it has no love, no sympathy; it is as hard and soulless as a granite cliff…Once in debt, interest is your companion every minute of the day and night; you cannot shun it or slip away form it; you cannot dismiss it. It yields neither to entreaties, demands, or orders; and when you get in its way or cross its course or fail to meet its demands, it crushes you.” -J. Reuban Clark, Jr.

Debt is something that has followed mankind from ancient times to modern day. Countless leaders have advised against the plague of being in debt and the shackles it places on our abilities to progress and do the things we’d like to. Benjamin Franklin counseled, “Think what you do when you run in debt. You give to another power over your liberty.”

Don’t ignore your debts. When you are in debt you become a slave. In essence the debt becomes your task master and it owns you and your commitment until the bill is paid in full. Ignorant or irresponsible borrowers may find themselves ensnared by this financial captivity, struggling desperately to escape its clutches. Debt is inflationary. When you buy on credit you’re really buying at a higher price. This is in part due to rising inflation rates in the economy, but even more so with our own personal inflation rate- the escalating cost of living for our own families. When we purchase things on credit, not only do we pay interest, but we end up purchasing an item far greater than we can afford in the first place. Over time, this contributes to the inflation rates for our individual families. It can seem like a long dark endless tunnel. No one should have to feel helpless in their finances. Remember that little steps, small changes, and dedication is all it takes to start the process of regaining control of your finances. The next step is to stop borrowing and focus on saving. If there is something you want to purchase exercise self-control and set money aside for it.

Keep track of your spending and use a budget. By setting a budget and living within that budget obstacles created by debt will crumble away and the light at the end of the tunnel will begin to shine through. “If there is any one thing that will bring peace and contentment into the human heart and into the family, it is to live within our means,” insurance executive Heber J. Grant once expressed. “And if there is any one thing that is grinding and discouraging and disheartening, it is to have debts and obligations that one cannot meet.”

One way to avoid debt in the first place is to make purchases with cash. By doing so we can put a brake on our spending. People who have the cash or can write a check for the purchase of an item usually end up making much more modest purchases than those who buy on installment credit.

Avoiding debt bondage is a “happiness law.” When we undertake debt it’s often for things on our “want” list. Uncontrolled wants are insatiable. If you allow your wants to preoccupy your mind, you will never be satisfied. You will never find peace of mind, security, or happiness, only bondage and misery, thus we diminish our capacity for “happiness” experiences. Understand that freedom, peace, and contentment come into our hearts when we live within our means. Peace, prosperity, and success come to those who have interest working for them rather than against them. Pay your debt and enjoy the freedom that comes from it.

Global geopolitical events have historically affected oil and gasoline prices worldwide as production and supply issues evolve. As the largest oil producer in the world, the Unites States accounts for roughly 20% of total world production. Saudi Arabia accounts for 12% and Russia accounts for 11% of total world production. Even though Russia only produces 11% of total production, it accounts for over 10% of total world oil exports, making it one of the largest exporters of oil and a key global provider.

After their invasion of Ukraine, the imposed sanctions on Russia affects these markets since essential payment methods have been restricted, thus not allowing Russia to fulfill ongoing transactions. The result is a butterfly effect, affecting the rest of the world. The International Energy Agency noted that global oil markets were already tight before the Russian invasion, and commercial inventories have been at their lowest levels since 2014, thus compounding global supply constraints.

According to Eurostat, European countries import about 30% of their petroleum products and about 40% of its natural gas from Russia. The major gas/oil pipelines make their way across Ukraine from Russia to European countries in the western part of Europe. Ukraine has been charging Russia billions to use these pipelines since Ukraine broke free of Russia in the early 1990’s. It’s not just Europe that is feeling the ramifications of current events, we’re experiencing it here in the United States as well.

Even though the U.S. has curbed much of its appetite for oil and gasoline over the past few years, demand among emerging economies has increased. Fossil fuels, including natural gas, petroleum, crude oil, and gasoline still account for roughly 80% of energy consumption worldwide according to the International

Energy Agency. Since oil is a primary energy source, rising oil prices can quickly translate into higher prices in different parts of the economy.

Inflation, as measured by the Consumer Price Index (CPI), is made up of various components, including energy, food, and transportation. These three components represent about 20% of the CPI, all of which are directly affected by oil prices. As a larger portion of consumers’ budgets is spent on these three, the less disposable funds consumers will have to spend on other items.

Crude oil is priced in two primary markets, international Brent and as domestic West Texas Intermediate (WTI). Both are priced per barrel and determined by multiple factors, including production, supply, demand, economic growth, weather, and geo-political issues. Unfortunately, Brent and WTI prices had already been rising due to supply constraint issues and increasing demand. The emergence of the Ukrainian conflict has propelled prices even higher, eclipsing $100 per barrel for Brent in February, a level not reached since 2014.