Someone once said, “Inflation means that your money won’t buy as much today as it did when you didn’t have any.” We may chuckle at this, but inflation is no laughing matter. Some people even think that a small amount of inflation is good, showing that demand is slightly higher than supply, indicating that the economy is growing.

By definition inflation is an increase in the price of a good or service without any corresponding increase in the quality of the good or service. In other words, you pay more money for the exact same item. I’m sure everyone has noticed the jump in prices at the grocery store and the gas pump, as well as in housing, cars, and even utilities, with electricity prices surging 4.2 percent in January alone. Inflation has risen 7.5 percent in the last year, which is the biggest spike since 1982.

As a teenager/young adult, I remember well the inflation of the 1970’s and early 1980’s. At that time housing was going through the roof in Los Angeles, where I was raised. Proposition 13 was put on the ballot to roll back property taxes and limit their increases, because property taxes had inflated so much due to the massive increase in home values.

During this same time period gas went up from about $0.36 per gallon in 1972 to over a dollar, around $1.19 per gallon in 1980. I did a lot of homework for my high school classes while sitting in gas lines on the odd numbered days of the month. Now we have a return to the highest inflation in the last 40 years.

Inflation is a regressive tax, meaning it is applied uniformly, taking a larger percentage from low-income earners than from high-income earners. This results in a heavier impact on people with lower-incomes or that are higher-consumers. This recent, steady rise in prices has left many Americans less able to afford food, gas, and other necessities.

It’s a bit like high blood pressure, known as the silent killer. It usually increases in such small amounts that a person doesn’t notice it, not until they look back and see how much it has increased over 20 or 30 years. Twenty years at two percent is a forty percent increase (not including compounding). It’s the large increases within a year that catches the attention. We all know what it does at the gas pump, here is how it works with investments.

Let’s say that your rate of return on an investment is 10 percent, and you are in a 24 percent tax bracket-how much of your 10 percent return vaporizes into taxes? Twenty-four percent of it. That leaves you with a 7.6 percent return. Now let’s say we have a five percent inflation rate. Your 7.6 percent return now becomes a 2.6 percent return, because five percent of it vanishes due to inflation. Do you see what just happened? You lost 74 percent of your anticipated return to taxes and inflation. In other words, if you are in a 24 percent tax bracket and inflation is at five percent, it’s like being in a 74 percent tax bracket. Your real return-after taxes, after inflation-is 74 percent less. Five percent inflation destroyed as much of your return as a 50 percent tax rate.

In spite of the dark shadow cast by inflation, there are ways to plan and protect your finances. You can establish a plan to overcome many obstacles created by inflation. Minimizing personal spending and creating a budget (and sticking to it) can create a cushion of security. Reducing housing costs by trading in a large home for a smaller one can reduce monthly outflow for items most subject to inflation: property taxes, utilities, insurance, and maintenance. Another tactic could be to add investments to your portfolio that are more likely to increase in value as inflation rises, while at the same time, balancing stock investments with conservative options to maintain stable returns. Above all, remember it’s how much you keep that matters most.

Since the pandemic erupted onto the scene back in 2020 government spending has again been on the rise, and so has their role in our day to day lives. The Federal Reserve (the Fed) is starting to reduce its holding of mortgages and Treasury securities. The Fed grew the money supply in 2020 by 26 percent, in 2021 they grew it by five percent. We are starting to experience the effects of this inflation.

With mounting regulatory burdens, higher taxes, out of control government spending, and all the new mandates, the government seems to have become the leading lady in our own individual stories. There are those that are determined to push Washington back to its pre-pandemic role. “Government, to me, should be in a supporting role, not a leading role; a watchdog, not a cow to be milked,” said Sen. John Barrasso (R-Wyo.). “The goal is to help people get back on their feet but not to make this the new normal.”

A survey done by Gallup in 2021 found that more and more Americans have shifted back to favoring a less-interfering approach when the government is addressing the nation’s problems.

In another survey Gallup found that at least half of Americans since 2005 have said that the government has too much power, peaking at 60% in 2013 and 2015.

So what does this all mean for our economy? There have been many academic studies which have shown an inverse relationship between the size of government and economic growth. For example, the economy of the U.S. used to grow at an annual rate of 3%, but the average rate has dropped to 2% in the last two decades, while government’s spending has increased. Since the terrorist attacks in 2001 big government got even bigger and has continued to enlarge its role ever since.

Government spending has increased from 35 percent to nearly 44 percent of the GDP over the last 25 years. While the National Debt has grown to 128.1 percent of GDP. Milton Friedman once said, “The thing you should keep your eye on is what government spends, because that’s the true tax.”

In other words, if the government is spending half of what our country is producing, that’s half the money out of our pockets, which leaves us only half free. In the big picture, it's not always the deficit that is the critical variable, the key thing to note is how the government is financed. The government is clearly taking on more debt than is logical in any circumstance.

A healthy economy does need some government to enforce appropriate regulations, but where is the line? How much is too much? Most economists would agree that there are always circumstances when higher levels of government spending would have a positive impact. More often than not, real economic growth happens with less government interference, and more freedom to the people, and business owners.

There is always a price to be paid when government spending gets out of control. That price is paid out of the pockets of the citizens and the economy slows down. According to The Heritage Foundation, there is overwhelming evidence that shows when government spending is too high, America’s economy slows.

Growth happens when we the people, and businesses, keep more of our income. That is why tax planning is so important. The more you are able to keep, save, invest, and spend yourself, the more the economy grows!

For example, in a business sense, if a business saves 10 percent in taxes, on $1.0 million in profit, that extra $100,000 could be used to pay for additional growth opportunities, hiring employees or increasing wages, new machinery, or other opportunities to help the business thrive.

A healthy economy, generally grows north of three percent, less than that and it is more of an anemic economy. Our current economy is anemic! We need less government, so we can grow and prosper. How we achieve this, I am not sure, as it seems most of our elected officials continue to vote against the people. With all that is happening, perhaps the best thing we can do is hold our elected servants responsible for the job they are doing, and remember to save first and spend what is left over!

Most of you know me, as I have either worked with you for many years, or a few months, I have been in some aspect of the financial industry since 1987. Though based in McKinney, Texas, I am able to help clients all over the country.

Years ago, I was meeting with an easy-going couple. They asked me a question that could have been answered with either a “yes” or a “no.” Being a little silly, I answered, “Yes, you can’t.” We got a chuckle from my oxymoronic answer, as we addressed their needs. Explaining my answer helped them understand that depending on their choices and overall goals, they could choose either strategy. They could proceed with the “yes” strategy, but it would take them down a road that wasn’t advisable. The “no” answer would give them a more positive solution.

Since that conversation I have given that answer, or one similar, to thousands of different questions people have asked. “Yes, you could proceed, but it may lead to an unsound position and might not have the best results.” Or perhaps, “yes, you could make that choice, but there could be something better.” It seems we always have choices.

Some time later I was meeting with a good friend of mine to discuss some marketing ideas. I was trying to come up with a logo that would represent the foundational ideals of my business. One important thing that I have always believed in is the ability to act, do something, or make progress towards a goal.

Being that I am, what I would say, a realistically positive person, I really do like to tell people, “Yes you can do this!” Why not develop a mark or symbol that represents a “YES” answer? Our discussion led to creating something similar to the

exclamation point, hence the Y with a dot under it. It was during this brainstorming session we developed what we named a Yestion Mark™.

The dot represents each of us on a path, and just like in the Y, our path will diverge with choices we encounter on a daily basis. Some of those choices can seem small and insignificant, while others may seem big. It’s times like these that we all need more encouragement and support. The Yestion Mark means, “YES! You can do this; YES! You can accomplish your goals!”

Part of my mission as a financial advisor has always been to help people make choices that will solidify their future in an uncertain world. To do that I advise my clients to make choices that Yield a Secure Tomorrow.

It's not always easy to Secure Tomorrow. Thankfully, we as people are able to do hard things, it's in our nature. That’s how we grow. I love assisting people with this growth process. At the start of a new year, as we all look to improve our current circumstances, when questions arise, remember I am here to help!

Previously, we discussed risk management and how insurance is a tool we can use to minimize our financial risks. When thinking about your financial plan insurance might not be the first thing you think of, but it is an important element.

Insurance is a contract, represented by a policy, that safeguards you against loss. By collecting small amounts of money (in the form of premiums) from all their policyholders each month, an insurance company creates a large pool of money that can cover the steep costs associated with covered losses. Insurance companies analyze the risk potentials by using mathematics, statistics, and other financial theories. This allows them to price their policies based on how likely it is people will make a claim.

Like many things in the financial world, there are many details and options connected with insurance, so it can feel overwhelming. There are multiple types of insurance ranging from the usual home and auto to the less common wedding or alien abduction insurance. Essentially, if it has value you can find an insurance policy to cover it.

You obviously don’t need to have every type of insurance that’s available, but it is important to have appropriate insurance coverage. If you own a car you will need to have auto insurance, and if you own a home or are renting you should definitely have either homeowner’s or renter’s insurance. We’ve written about life insurance before on our blog and how important it is to cover your family in case something happens to you.

There is also umbrella insurance, which covers personal liability beyond what a homeowner or auto policy would cover. It's designed to cover any injury or damage you may have caused to someone else or something outside the coverage of your other insurance coverage. Umbrella policies create another level of risk management. If you are a part of anything that increases your risk of liability, umbrella coverage may be a smart choice.

We all know that life can be unpredictable. Would anyone have guessed how these last couple of years were going to turn out? Life will always throw the unpredictable at you, but if you are prepared and plan for some of those uncertainties you will have a much better chance of weathering financial storms and protecting your assets. Having the right insurance plan in place can help make sure you don’t drain your emergency or saving funds when life gets stormy.

What financial question keeps you up at night? Reach out at questions@yieldfa.com.

“I don’t believe in taking foolish chances, but nothing can be accomplished without taking any chance at all.”

-Charles Lindbergh p.49 The Maxims of Wall Street by Mark Skousen

Life is inherently risky. We run the risk of something going wrong daily. Most of the time we can avoid risks by the good choices we make or by planning ahead. When it comes to our finances we can apply the same thinking. Many financial risks can be avoided by doing research and making wise decisions. However, some unpredictable things fall outside of our control. This is where risk management really comes into play. There is no way to eliminate all risks, but we can minimize and even circumvent many risks that could affect our financial security.

It’s all about your choices:

If you’re the kind of person that likes to take a little more risk in your life you may feel comfortable taking a walk during a thunderstorm, acknowledging that there is a chance of getting struck by lightning. But if you tend to avoid the riskier paths, you would probably stay inside during the storm where you know you will be safe. This same principle applies to our finances. There are some things we know will carry more risk than others, and depending on how well we tolerate risk we can either embrace that risk or avoid it. (You can read more about risk tolerance here).

There are different ways that we can approach risk:

When we assume risk we are not doing anything to minimize a potential loss. For example, if you don’t have car insurance and you get into a wreck, you will have to cover the full cost of damages yourself.

Sometimes we can share risk (also known as risk distribution) so that we don’t carry the full weight of potential financial burdens. If something bad happens, sharing the risk helps spread the effects and reduces the impact you may feel. This works well when you have a financial partner backing you.

We can transfer risk to others- like insurance companies- and they assume the responsibility (as long as you are paying your premiums). Insurance companies use the Law of Large Numbers and mathematical and statistical formulas (actuarial science) to assess risks they are taking on. We’ll talk more about insurance in our next article.

If we make efforts to avoid risks we can circumvent some problems altogether. Avoiding risk means you steer clear of choices that could lead you to potential problems. This can be a great way to prevent large losses, however, while avoiding riskier possibilities you might also miss out on other options and opportunities.

The whole idea behind risk management is to limit potential damage and protect your assets. If you have questions about risk management or any other financial concerns you can send them to qestions@yieldfa.com and we’ll write up a response!

“Think risk first, then reward.”

-Anthony M. Gallea

Pg.51 The Maxims of Wall Street by Mark Skousen

We all know someone who, as the old saying goes, is now pushing up daisies! Nobody likes facing their own mortality. A friend, and a good estate planning attorney, titled his book, Why Should I Care, I’ll Be Dead, (available on Amazon). The reality is estate planning is an integral part of your life. Why leave what you have built your whole life, to be wasted. If you care what happens to your assets now while living, why not care about them after you die?

While not as fun as planning a vacation or the fun things you’ll do during retirement, having your estate planned will spare your loved ones a lot of frustration and protect them from potentially angry or hurt feelings with other family members. These family soap opera dramas are all too often real. They happen when dividing up a deceased loved one’s possessions and assets. Having an estate plan in place means you get to designate who gets what and save your family from potential fights over who should have your favorite collections. If you don’t make the decisions now you won't have any control over how your estate is divided up once you are gone.

Don’t make the mistake of thinking that estate planning is just for old people. Every adult should have at least a will. If you have a young family, it's very critical to have a will in place to protect your little ones just in case the unthinkable happens and there is no longer a surviving parent to take care of them. No one I know was given a guarantee on their length of life. You can make sure your children are raised in the manner you want by naming their guardian. If this isn’t done the state government where you live will make guardian decisions for you. Many times, it’s someone you would most likely never have chosen!

Reducing the tax and financial burden for your loved ones is a common goal for many people. At times, many assume that because they don’t have mass amounts of wealth they don’t need an estate plan, but if things aren’t properly arranged beforehand it can leave your heirs with some hefty tax or legal issues. Not only could your heirs have to deal with estate taxes, there could also be income tax ramifications, both federal and state.

If you don’t create an estate plan, and the distribution of your earthly possessions, don’t worry the probate judge will publicly announce how he or she will distribute your assets. Oh and your heirs will have to pay the bill. Remember, it’s easy to divide up a dollar between your heirs; the one and only, cherished family photograph, or piece of art, not so easy!

In the end, literally, if you want your loved ones and assets protected, take the time to set up an estate plan to ensure it happens according to your wishes.

Certain aspects of planning can be harder than others. Don’t be that person in school that’s too afraid to raise their hand. If you have a financial question(s) we’d love to hear it. Send your questions to questions@yieldfa.com and we will respectfully answer it in a post!

“You must devote some time every day to the subject of investment.” - Gerald Loeb p116 The Maxims of Wall Street by Mark Skousen

It’s easy to put off thinking about retirement when you’re young and life is good, but like most things, the sooner you start the better off you will be. There are many different aspects of retirement, because of emotions and lifestyle choices, no two plans will be the same. Every individual will have different needs and wants for their retirement years. You will need to determine your retirement goals, and then structure your plan around those using different financial strategies for saving, investing, and (once you retire) distributing your money.

You will need to identify sources of future income and start transferring money to those accounts. One of the easiest ways to kick start your retirement plan is to participate in any employer sponsored retirement programs like a 401k.

The timeline for retirement planning starts as early as your first job or your first saved or invested dollar. Young adults at the beginning of their careers typically don’t have as much money to invest, but with time on their side, they only need to invest a small amount to amass a large amount of money. When compared to someone even ten years older, that person would need to invest nearly three times the amount. This is where compounding shines.

By your mid thirties you may have more money coming in, but there's usually more money going out as well as families and responsibilities grow. This is a pivotal time to be a little more aggressive in putting money into your retirement accounts. Again, the interest and growth on these assets will begin to provide more security once you retire.

By your fifties you should be trying to max out your contributions to your 401k or IRA. Towards the end of your career you will want to focus on being more conservative with your investments. You should also assess what your Social Security benefits will be, and begin learning about those benefits, including how and when to access them.

Retirement planning is an ongoing effort. As life changes, flexibility is key, pivoting when needed. Remember that these retirement years are the “golden years.” Plan accordingly so you can enjoy them.

We’d love to answer your financial questions, I know what y’all are thinking- its just a silly or dumb question. We’ve all said that before, right? I really cannot remember the last time someone asked a truly “dumb question,” even though that is what they said just before asking their question! . Send your question(s) anyway here: questions@yieldfa.com and we’ll respectfully answer them in a post!

“There is only one success - to be able to spend your life in your own way.”

-Christopher Morely pg.129 The Maxims of Wall Street by Mark Skousen

Have you ever gotten to the end of the month and wondered where all your money has gone?

One of the primary steps to becoming financially secure is to gain an understanding of your cash flow and set yourself a budget. To begin you should understand where you stand now and visualize where you want to be financially in the future. There’s no point in setting out on a journey if you don’t know where you're going. Creating a cash flow budget is not always easy, it can take some time, but if you take it step by step you’ll be able to create a functional budget and use it as a road map to your financial goals.

The first step you need to take is to calculate all your money coming in. Then tally up all the money that you spend. These two numbers will give you your net cash flow.

Total Income - Total Expenses = Net Cash Flow

Ideally, you need to have a positive cash flow. This means there is money left over to be saved, invested, or can even be used to treat yourself. If you end up with a negative cash flow, it’s an indication that you are living beyond your means and are incurring debt. This is a dangerous place to be, and can be difficult to free yourself from if the negative cash flow continues. The only way to get out is to assess your spending habits and make proper adjustments.

Cash flow management really comes down to understanding the different components that make up your financial picture and acting accordingly. Once your cash flow has been established you can turn that information into a budget. This next part is easiest if you categorize your spending. Start by identifying your components of income-things like your paycheck or investment sources.

Then list the components of your spending; there are different categories of spending that will help you to determine all of your expenses.

• Fixed and periodic expenses are things you must pay each month like your rent/mortgage, loan payments, recurring bills, and payments like utilities, cell phones, or memberships.

• Variable, or discretionary expenses are the things we have more control over like groceries, eating out, retail/online shopping, vacations, etc.

The final component of your budget is savings. The better you are at managing the other categories, the more money you will have to save. Money saved and invested allows you to grow your money, which results in more financial security.

Designate the amount needed to cover each category, and stick to it. By cutting back on discretionary spending you can turn your financial course around. If you have a negative cash flow this is where you will really start to see a difference.

Maintaining a budget will help you when making financial decisions and gives you set parameters to live within. It’s a good idea to revisit and assess your budget at least quarterly. This allows you to stay on track and make course corrections when needed. Remember, budgeting is an ongoing, active process.

When in doubt don’t hesitate to ask for help with your finances. It’s always better to be certain that you understand than to have a mistake snowball into a larger problem. If you have financial questions we’d love to hear them. Send your questions to questions@yieldfa.com and we will write up a post to answer them!

“It’s not what you buy. It’s how much you pay for it.”

-Carl Icahn pg.36 The Maxims of Wall Street by Mark Skousen

As we become adults we take on the expected responsibilities like getting a job, paying our bills, and providing for ourselves. Many people go on to start families and provide for them. But what if that provider died? This has been a concern since the beginning of time.

Life insurance has been around for a long time, longer than some people realize. Dating back to ancient Rome, there were societies dedicated to cover burial expenses for their fellow comrades. Flash forward a few centuries and life insurance starts to look a little more familiar. In the mid 1700’s life insurance was developed in America, and by the 1830’s some of the insurance companies we are familiar with took shape. From here it was refined and became what is known today.

Life insurance, in essence, is pretty simple. You pay a premium every month, and in return the insurance company agrees to pay out your coverage in the event of your death. It can feel a bit macabre or depressing, but it is an important issue to address; as the old adage goes “the only two certainties in life are death and taxes.”

Life insurance is not really for the person receiving the coverage. It’s for the individual’s loved ones-their family. When a provider passes away it leaves not only a hole in the hearts and lives of a family, it can also leave a deficit in their finances. Funeral costs can range anywhere from $5,000 to $10,000. Then there are debts and bills to be paid as well as the everyday living expenses. Having proper life insurance can provide coverage for those costs and bring peace of mind, not only to you now, but to your loved ones as well.

Back in the mid 1970’s 72% of adults in the United States carried some form of life insurance. However, today only 57% of Americans have life insurance. And more than half of those insured don’t have enough coverage to meet their financial needs.

What changed? Why are fewer people getting life insurance?

Most insurance companies will have you do a physical and answer medical and family history questions in order gauge your health. This is one of the reasons getting life insurance when you're younger is a good idea. Typically when we are young we are at our physical peak, which allows for a lower premium- the better your health, the lower your premiums. All that being said, reports show that 4 out of 10 Americans don’t qualify for life insurance. There are a few different reasons why someone might not qualify, but the top reasons usually have to do with poor health that is associated with obesity, high blood pressure, or some form of metabolic disease. The good news is these are factors that are within your control and can be overcome with lifestyle changes and healthy habits.

Acquiring life insurance earlier in life is better than waiting. It's important to consider that the time to get life insurance is before you need it. If you wait until you have been diagnosed with an illness you will likely not qualify for a new policy.

Most people are familiar with the concept of life insurance. The two most recognized are “term” and “whole.” Both policies are designed to pay your beneficiaries in the event of your death. However, there are significant differences between them.

Initially, term life insurance can have lower premiums to start with, which makes it a popular choice. But those premiums go up over time because as you get older your chances of dying increase. The name “term” indicates that the insurance coverage lasts only for a set amount of time. Once the set term of your policy has expired, all the money you paid into it is gone.

Whole life insurance typically has higher premiums, but they don’t go up as you age or if you become ill. The earlier you start a whole life policy the better deal you can get. Whole life also differs from term in that it offers additional perks in the form of “cash value.” When you pay your premium a portion goes into a tax-deferred savings account where it can build up and grow interest, which can help provide more stability in your retirement years.

The goal of whole life insurance is to provide coverage for your whole life.

If you have a financial question we would love to hear it. You can email your questions to questions@yieldfa.com

“Buy on mystery, sell on history.”

-Old Wall Street Saw;

The Maxims of Wall Street, by Mark Skousen p.41