With so many changes happening around us — school winding down, warmer temps, the ability to travel and see friends — one change that we’re keeping an eye on closely here at Lighthouse Financial Advisors are the changes to the Child Tax Credit (CTC).  For 2021 only, the CTC will be expanded by the IRS under the American Rescue Plan Act (ARPA) of 2021 and will start to process advanced payments to qualified families with dependents.

 

What is the CTC? In simplest terms a child tax credit is meant to financially help families with the high costs of raising a family.

 

Who qualifies for the credit?

  • For tax year 2021, families claiming the CTC will receive up to $3,000 per qualifying child between the ages of 6 and 17 at the end of 2021. They will receive $3,600 per qualifying child under age 6 at the end of 2021. (Previously, the CTC amount was up to $2,000 per qualifying child under the age of 17 at year’s end.)
  • Single filers with an adjusted gross income (AGI) of $75,000 or less are eligible to receive the full credit. Those with an AGI between $75,000 and $147,000 (for children under 6) and $75,000 and $135,000 (for children between 6 and 17) are eligible for a partial
  • The increased amounts are reduced and phased out for incomes over $150,000 for married taxpayers filing a joint return, $112,500 for heads of household, and $75,000 for all other taxpayers.

 

What does this mean?

  • Many taxpayers will receive an increase in the benefit of the Child Tax Credit.
  • The credit for qualifying children is fully refundable, meaning taxpayers can benefit from the credit even if they don’t have earned income or don’t owe any income taxes.
    • I.E. Before this change, certain low-income Individuals could only receive up to $1,400 per child as a refund, instead of the full $2,000 child credit, if their child credit was more than the taxes they otherwise owed. Under the new rules for 2021, people who qualify for a child tax credit can receive the full credit as a refund, even if they have no tax liability.
  • The credit will include children who turn age 17 in 2021.
  • Taxpayers may receive part of their credit in 2021 before filing their 2021 tax return in the form of monthly advances.

 

When Do the Monthly Advances begin?

  • According to the IRS, the first payments will begin being sent to qualified recipients starting July 15th. According to WSJ, an estimated 39 million households will receive the monthly payments. It is expected that 50% of the payment amount will be sent at first, based on information gathered from the recipient’s previous tax returns.
    • E. July through December families will receive 1/12th of their child tax credit they’re due (based off of 2020 AGI) each month via direct deposit or in the form of a check.
    • When you (or LFA) file your 2021 Income Tax Return you will need to report the total amounts received in monthly CTC advancements
    • You will then (if still eligible) receive the final ½ of your CTC when you/we file your return.

 

I think I qualify, what should I do?

  • Eligible taxpayers do not need to take any action now other than to file their 2020 tax return if they have not yet already done so.
  • LFA HIGHLY recommends keeping a log of any and all benefits received throughout the year (July thru December).
  • Eligible taxpayers who do not want to receive advance payment of the 2021 Child Tax Credit do have the chance to opt-out of advance payments, instead choosing to receive it as a lump sum next year. The IRS will be announcing more information and steps on what taxpayers can do to update their information to ensure proper compliance with the rules by July 1st.

 

If you’re interested in calculating the monthly amount you’re eligible to receive starting on July 15th please never hesitate to reach out to anyone here at LFA.

Coming off a whirlwind of a year in 2020, as we faced unprecedented circumstances, there were certainly a number of hard lessons learned as we sailed through unchartered territory. For many individuals, the biggest lesson was perhaps the realization that they simply were not prepared for the changes they now had to face. Although grudgingly learned, these lessons have brought rise to an overwhelming emphasis on having a positive outlook to live a simple and more enjoyable life.

So what if we ignored conventional wisdom and started sweating the small stuff?

In his book, An Astronauts Guide to Life on Earth, Col. Chris Hadfield states, “An astronaut who doesn’t sweat the small stuff is a dead astronaut.” We may not all face the same intense decision making required of an astronaut but the point is a good one. Paying attention to the granular details made a substantial difference in Hadfield’s life and career. If we had focused on the more granular details of our lives, building a good and balanced life, perhaps our finances, jobs, and personal relationships would have been better insulated against the hardships of a turbulent time like we all just experienced.

We cannot always control what happens in life. We can control how prepared we are. No matter what life event you are experiencing, be it retirement, career change, or starting a family, planning for success is crucial. Depending on your level of preparation, you will have passed or failed before you began. Hadfield even argues we should visualize failure and not success to better prepare. Break down each situation, look at every angle and then formulate your plan.

And, of course, even after all that preparation, things can go wrong. C’est la vie. Oui? The best thing one can do for themselves, their family or their team, is to hold on to that sense of calm being prepared can bring. By sweating the small stuff (without letting anyone see you sweat of course!), you will be better positioned to navigate gracefully through almost any situation.

As the next generation continues to work hard & graduate college, it is important to know what the next steps may be. Some of us are going into business, engineering, law, maybe even astronauts, etc. The world is competitive and as a result, we all aim to push ourselves to be the best we can be. Sometimes determining the future can be puzzling, but with a strong mindset and doing the simple things first, the future becomes more of a journey rather than a mystery. Being in the work force for 2 ½ years now has been an eye-opening experience, it has helped me evolve as an individual as well as motivate me to build out a strong foundation. Here are a few exercises the next generation can take to take flight off the runway:

1. Create your ideal vision and set your goals! Craft your plan and stick to it!

2. Setting your comfortable cash reserves/ “sleep at night” money. Recommend opening a high yield savings account at a financial institution such as Marcus or American Express which, although lower now in response to the Federal Reserve’s emergency rate cuts, still continue to offer some of the strongest yields available.

3. Create a reasonable budget and remember to save! An easy tip is to automatically set up a weekly/monthly transfer from your checking to a savings/brokerage account. However, make sure you continue to enjoy life and treat yourself when appropriate.

4. Manage to pay bills/loan payments on time such as credit cards, any student loans, & utilities. Important to keep your debt low especially with high interest rates on loans & credit cards.

5. Open & fund a Roth IRA to start building up after tax retirement assets. With an adjusted gross income within $125,000 – you would be eligible to contribute up to $6,000. Having a mix of pre & after-tax dollars gives you options similar to having multiple pots cooking on the stove.

6. Participate in your employer sponsored retirement plan such as 401, 403b, or self-employed plan. For those of us entering into or who are in the earlier side of their career, the current contribution maximum is $19,500. By investing in retirement now, you have the potential for fantastic long-term earnings.

7. If you have a comfortable side cash reserve, invest in a liquid brokerage account. This is a great way to invest for longer term by taking some risk to seek more growth compared to your savings account

8. Invest in your career, you are your most valuable asset. Whether it is going for additional degrees, professional designations or participating in webinars/information sessions.

9. Most importantly – DO WHAT YOU LOVE TO DO! Only you know this answer, too many young individuals are working without a purpose. Life is too short to waste being unhappy. Follow your heart and you are in great hands!

Things usually go right when we follow a recipe. Things quickly turn into a disaster when we improvise or add in things that don’t belong. Let’s add a little more of this and let’s forget this…unless its bacon which makes everything better.  2020 has been a year with lots of distractions with many reasons to add a little more of this and forget about that.

With the New Year coming It’s a good time to review the basics of a sound financial plan and see how we did this year. We call these basics the Five Fundamentals of Fiscal Fitness. They are so basic that most people completely ignore them.

Things usually go right when we follow a recipe. Things quickly turn into a disaster when we improvise or add in things that don’t belong. Let’s add a little more of this and let’s forget this…unless it’s bacon, which makes everything better. 2020 has been a year with lots of distractions with many reasons to add a little more of this and forget about that.
With the New Year coming It’s a good time to review the basics of a sound financial plan and see how we did this year. We call these basics the Five Fundamentals of Fiscal Fitness. They are so basic that most people completely ignore them.

 

1. Pay yourself first (Harvest & plant your crops)
—a. Save at least 10% of your annual income
—b. Review your risks and portfolio
—c. Rebalance taxable & tax-deferred savings toward less risky assets
2. Have sufficient liquidity (Move crops to the pantry)
—a. Should have 50% of annual spending in cash reserve
—b. Layout an annual spending plan / 5-year spending plan
—c. Don’t forget about #1
3. No consumer debt (Empty pantry & no money for new crops)
—a. Learn the difference between good and bad debt
—b. Take advantage of low interest rates
—c. Don’t forget #1 & #2
4. Own the right size home (Barn)
—a. For most, their home is the most significant financial investment
—b. Is it time to trade up or down
—c. Don’t forget #1, #2 & #3
5. Invest in yourself (The farmer)
—a. Human capital is our biggest & most valuable asset
—b. Improve skills, education, personal growth – have a 1-year vision & 5-year vision ——–of your unique future
—c. And don’t forget about your health or #1, #2, #3 & #4 won’t be so important

As we head into the final week of the 2020 Presidential campaign it is important to examine how a Joe Biden victory could potentially impact your taxes in 2021 and beyond. Biden’s proposed strategy is to focus on the highest earners and particularly those that make over $400,000. The country’s finances are in dire straits and whichever party wins will need to implement changes quickly to raise revenue. At this time, President Trump has not released any new plans to adjust the tax code. As expected, neither candidate spoke at length about taxes during the debates since no one wins by discussing tax increases!

It is very important to remember who controls the Senate will have a large bearing on whether Biden or Trump can fully implement their plans. Below is a preliminary look at Biden’s proposals.

Top Marginal Tax Rate – return to the top marginal rate of 39.6% on ordinary income above $400,000. Currently, the top marginal rate is 37% on taxable income above $622,050 for joint filers and $518,400 for single filers.

    1. Capital Gains and Dividends Taxes – any profits above $1 million regardless of total income would pay 39.6%. As it stands now, joint filers with income below $80,000 pay no capital gains tax. Those with income between $80,000 and $496,600 pay 15%. The tax is 20% on income above $496,000.
    2. Social Security Tax on Income above $400,000 – calls for 12.4% tax split 50/50 between employee and employer. Currently, Social Security taxes are only on the first $137,700 of wage income. Self-employed people would pay the full 12.4% over $400,000.
    3. Cap on Itemized Deductions – Biden proposes a cap on amount of deductions (charity, mortgage interest, etc.) for those making over $400,000 to 28%.
    4. Phase-out the Qualified Business Income Tax Deduction – perhaps one of the most complicated aspects of Trump 2018 tax cuts, the QBI deduction allows owners of pass-through entities (self-employed, LLCs, S Corporations) to potentially deduct 20% of qualified income if several factors are met including what type of business. Biden would eliminate the deduction for those making over $400,000.
    5. Estate Tax Exemption Reduction – the current law increased the per person exemption to $11.58 million per person for 2020. Biden’s plan would reduce the per person exemption back to the 2017 level of $5.49 million per person.
    6. Loss of Step-up in Cost Basis – perhaps the most controversial of Biden’s proposal, this would eliminate the step-up in cost basis for inherited assets. Under current laws, appreciation on investments, businesses, real estate, etc. gets a step-up in basis when the owner dies so the heirs inherit the asset at current market value and would owe zero capital gains tax if sold immediately.
    7. Reinstate Home Buyers Credit – similar to law passed in 2008, this would provide a tax credit of up to $15,000 for first-time home buyers.
    8. Expand Child and Dependent Care Credit – minimal details provided so far but this would increase the tax credit for joint filers who both work to cover childcare and school expenses.
    9. Corporate Tax Increase – increase rate from 21% to 28% and enact a 15% minimum “book tax” on corporations with income above $100 million. Both Biden and Trump want to make sure companies are avoiding paying taxes in the United States

It is always interesting (or perhaps scary) to hear proposals.  It is important to note that plans evolve and the pandemic has greatly altered the norm. Tax policy is not entirely up to the president so all components will be negotiated whether one party holds the majority or not. Regardless of the outcome, I highly recommend speaking to your tax advisor if you have concerns!

20 years old. A new adult. The first few years of adulthood, independence and individuality. So many new concepts and so many unknown paths beckoning the young adults to follow. In the age of internet and “infinite knowledge”, there is a large amount of bad advice out there mixed with the good. It is important to ID the good behaviors and advice before any patterns are formed during young adulthood, as these patterns – either good or bad, can embed themselves in financial life for years to come. Whether you are a parent of a 20-something year old (or will be soon) or you are somewhere in your 20’s, this is advice for you.

  • Budget your Cash Flow – No matter your position and income, you cannot start the financial journey until you budget your Cash Flow. The word “budget” has negative connotations – a 20 page spreadsheet with ancient formulas. It does not have to be like that at all. A successful budget needs only a few numbers identified, and your understanding. Once you ID your monthly (or bi-weekly) income, you need to ID your expenses – what you need to spend your money on, and what you want to spend your money on – note which is written first. Whether you are working part-time during college, or have your 1st/2ndadult job after-college, planning out where your money goes every month is a great first step towards controlling it –you cannot harness something you are unaware of.
  • Get Insured – Even if you have really financially savvy parents or friends that assist you with other forms of advice here, this is one that is often skipped. Insurance covers many types products.
    • Health/Life -You are young. For personal health insurance, most young adults are not expensive to insure. Unless you are a smoker, the fact that you are in your 20’s typically places you at the top of the preferred tier for health and life insurance. If you are working at a firm that offers health and life insurance, you should seldom refuse. Even if your employer does not cover 100% of it, you can have (even if basic) coverage for your health care & life insurance for pennies of what your parents would pay.
      • If you are on your parent’s health insurance, you likely will not be offered a better plan, so ride that out until 26 (if you are nice to your parents). But at 25, you should know everything you need to know about your next plan and jump on it right away so as not to have a gap in your coverage.
    • Renter’s / Homeowner’s – Likely earlier in your 20’s you will be renting – especially if near a college campus. Later in your 20’s some of you will opt to stop renting and buy a house – preferably once you have work stability. You need both types of insurance, because well, the younger you are, the less money you have to “self-insure.” All that this means is that if you have any issues within the apartment or house, you are not hit with a significant financial burden. The younger and less financially stable you are, the more these types of insurance make sense.
    • Car – Even if you are on your parent’s insurance for now, it does not mean you can be a reckless driver racking up points on your license from traffic and accident tickets. The more of each of those you get, the more expensive it will be to stay insured.
  • Live within your means – This is one of the most important pieces of advice and my favorite. This cannot be stressed enough, and applies to people in their 20’s universally. No matter how much income you make yourself, or how much your parents assist you, identifying your means and living under that line is crucial. “Live within your means” sounds like an archaic line of advice boomers give to younger folks on TV, but this particular piece actually makes sense. After following the steps from “Budget your Cash Flow” above, and you have a clear picture of what you can spend, you make the choices on what to spend it on. A popular example that was very tempting for me in my younger 20’s, and especially when I started earning my own money, was to not curb unnecessary spending. If you have $750/month to spend on a car/month, or your parents are offering you this amount, there is no need for you to lease a new series BMW. Why not get something more reliable, frugal and financially sound? Use $250/month on the lease or financing payments and the rest for the next point.
  • Save, Save, Save! – Again, you are young. I don’t mean save the money under your mattress – absolutely the opposite actually. First step is to develop an Emergency Savings – most effective account type for this is the “High-Yield-Savings-Account (HYSA)”, but a cushion of ~500-$1,000 in your checking account that you don’t touch is a great start. A sign of great financial health is not having to ask your parents for money for a blown tire or a broken house appliance. That is true adulting. The next step is investing. You always hear “saving for your retirement now will take years off the time you have to work”. But you do not have to hide away all of your money until you are 59 ½. If you do not mind, it is best to take advantage of Roth IRA’s – the less money you make a year, the better. If you do mind locking up your money for a while, start with a Brokerage account. There are more Millennial / Gen. Z alternatives that fill this demands as well – Acorns and Robinhood being the most prominent. Robinhood actually gives you a free stock share just for signing up. Whatever you do choose, most important part is to be aggressive. 100% equities (stocks, mutual funds) should be the norm in your accounts – no cash, as it earns practically nothing.

There are plenty more points to discuss, from building your credit score to avoiding financial money pits. However, this is a compact outline of where to start and what to do as you are getting out there into the unknown and trying to make a name for yourself. The internet is chock full of bad advice – make sure to do your research (fact check everything) and don’t get disheartened when faced with some truths of financial adulthood. It will all click into place eventually. Step by step.

Sources:

https://www.kiplinger.com/article/saving/t063-c006-s001-10-financial-commandments-for-your-20s.html

https://www.ellevest.com/magazine/personal-finance/money-in-20s

https://jarredbunch.com/10-critical-things-to-do-with-your-money-in-your-20s/

https://www.thebalance.com/money-steps-in-twenties-2385840

https://www.cnbc.com/2019/08/06/4-money-choices-to-make-in-your-20s-if-you-want-to-be-rich-in-your-30s.html

https://www.nerdwallet.com/article/finance/manage-money-20s

Open Enrollment, which varies by company but generally takes place in the Fall, can often be a stressful time as trying to make sense of your company’s benefits can seem like a daunting task. It is an important time however, as it allows you the opportunity to adjust your benefits based on any changes that have taken place or might take place over the coming year. Many employers may make slight changes to their plans and it is important that you review them to ensure you are taking advantage of all your options and getting the coverage you need. On occasion, some employers may even require action on your part in order to stay enrolled. It is important to carefully review the documents provided to you so you can be sure to make the necessary adjustments to options that best fit your needs and keep your coverages current. Open enrollment is also a great time to review the amount of money you are contributing to retirement and seeing if you can increase it as well as review beneficiaries to make sure they are up to date on life insurance or 401k plans.

A few important things to consider:

What Changes Have Taken Place to The Plans Offered?

It is important to look at not just the difference in premiums for the plans, but also the more detailed changes such as coinsurance and copayment amounts. You should also check to see if there is a different deductible amount. These offerings can vary depending on the size of your employer and you may have several different options to choose from. Depending on your situation a plan with a higher deductible may make sense for you however, if you are planning on having a child within the next year, a more traditional plan with a lower deductible may make more sense. You will want to weigh the out-of-pocket expense to you for each plan and consider the likelihood that you will reach those maximums. There may also have been a change in providers which could mean your regular doctor or dentist is no longer in network under the new insurance. You will want to check before going to a doctor to ensure coverages, be aware if pre-approvals are needed, and to avoid out-of-network costs. Lastly, you will want to review life insurance and disability insurance coverages. There may be low cost options available to you for life insurance as well as disability and if you have others depending on you it might be wise to take advantage of these offerings.

Have My Needs Changed This Year or Will They Change Over the Next Year?

It is easier to make changes and sign up during open enrollment. For example, perhaps dental insurance did not make sense when you were single but it may make more sense once you have children. Additionally, you may need to start using that Flexible Spending Account for daycare or health costs or utilize Dependent Care Flex Spending if it’s offered. Contributions to both are tax-free as well as withdrawals made for qualified expenses. You will need to tell your employer how much to take out from your gross pay for the year. You will also need to use this money within the year as it does not roll over like an HSA. With an HSA, which is typically offered with a high deductible health insurance policy, the money is tax deductible, earnings are tax-free, and withdrawals used for qualified medical expenses are also tax-free. The other benefit of an HSA is it’s a portable account, meaning if you change jobs, the money will go with you.

How Will Things Affect My Take-Home Pay?

For existing employees, this is the time to ensure you are taking full advantage of any 401k plan your company offers. Many employers offer a company match (up to a certain percentage) that is free-money you should not leave on the table. You should consider how this will affect your take home pay when deciding how much you can contribute. Insurance premiums, contributions to HSA’s and 401k’s should all be factored into your budget so you are sure your money is going to work for you in the best possible way. It is important to remember that many of the benefits will come out before your taxes as this lowers your taxable income and may make it so that you do not notice the changes as much.

Final Thoughts

There may be other options offered during open enrollment as well. For instance, they may offer a legal plan to assist in your preparation of estate documents. When it comes to additional coverages though, be sure to read the fine print and don’t be fooled by marketing language. Make sure to review the coverages and cost in detail to be sure there is real value to you. Fully understanding the benefits is key to ensure you are making informed decisions and fully taking advantage of the benefits your employer provides. Is your open enrollment period approaching? As always, Lighthouse Financial Advisors, Inc. is here for you and ready to assist you navigate through the process.

 Financial security in retirement doesn’t just happen.

It takes planning, commitment and, yes, money.

FACTS:

  • Only 40 percent of Americans have calculated how much they need to save for retirement.
  • 30 percent of private industry workers with access to a defined contribution plan (such as a 401(k) plan) does not participate.
  • The average American spends roughly 20 years in retirement.

Putting money away for retirement is a habit we can and should all live with.

  1. Saving Matters – Start saving, keep saving, and stick to your goals

If you are already saving, whether for retirement or another goal, keep going! You know that saving is a rewarding habit. If you’re not saving, it’s time to get started. Start small if you have to and try to increase the amount you save each month. The sooner you start saving, the more time your money has to grow. Make saving for retirement a priority. Devise a plan, stick to it, and set goals. Remember, it’s never too early or too late to start saving.

  1. Know your retirement needs

Retirement is expensive. Experts estimate that you will need 70 to 90 percent of your pre-retirement income to maintain your standard of living when you stop working. Take charge of your financial future. The key to a secure retirement is to plan ahead.

  1. Contribute to your employer’s retirement savings plan

If your employer offers a retirement savings plan, such as a 401(k) plan, sign up and contribute all you can. Your taxes will be lower, your company may kick in, and automatic deductions make it easy. Over time, compound interest and tax deferrals make a big difference in the amount you will accumulate. Find out about your company’s plan. For example, how much would you need to contribute to get a possible employer contribution and how long would you need to stay in the plan to get that money.

  1. Learn about any employer’s pension plans

If your employer has a traditional pension plan, check to see if you are covered by the plan and understand how it works. Ask for an individual benefit statement to see what your benefit is worth. Before you change jobs, find out what will happen to your pension benefit. Learn what benefits you may have from a previous employer. Find out if you will be entitled to benefits from your spouse’s plan.

  1. Consider basic investment principles

How you save can be as important as how much you save. Inflation and the type of investments you make play important roles in how much you’ll have saved at retirement. Know how your savings or pension plan is invested. Learn about your plan’s investment options and ask questions. Put your savings in different types of investments. By diversifying this way, you are more likely to reduce risk and improve return. Your investment mix may change over time depending on a number of factors such as your age, goals, and financial circumstances. Financial security and knowledge go hand in hand.

  1. Don’t touch your retirement savings

If you withdraw your retirement savings now, you’ll lose principal and interest and you may lose tax benefits or have to pay withdrawal penalties. If you change jobs, leave your savings invested in your current retirement plan, or roll them over to an IRA or your new employer’s plan.

  1. Ask your employer to start a plan

If your employer doesn’t offer a retirement plan, suggest that it starts one. There are a number of retirement saving plan options available. Your employer may be able to set up a simplified plan that can help both you and your employer.

  1. Put money into an Individual Retirement Account

You can put up to $6,000 a year into an Individual Retirement Account (IRA); you can contribute even more if you are 50 or older. You can also start with much less. IRAs also provide tax advantages. When you open an IRA, you have two options – a traditional IRA or a Roth IRA. The tax treatment of your contributions and withdrawals will depend on which option you select. Also, the after-tax value of your withdrawal will depend on inflation and the type of IRA you choose. IRAs can provide an easy way to save. You can set it up so that an amount is automatically deducted from your checking or savings account and deposited in the IRA.

  1. Find out about your Social Security benefits

Social Security retirement benefits replace about 40 percent of a median wage earner’s income after retiring. You may be able to estimate your benefit by using the retirement estimator on the Social Security Administration’s Website. For more information, visit their Website, www.ssa.gov

  1. Ask Questions

While these tips are meant to point you in the right direction, you’ll need more information. Talk to your employer, your bank, your union, or your financial advisor. Ask questions and make sure you understand the answers. Get practical advice and act now.

One of the most common sources of conflict in relationships is money. If you are lucky enough to have found someone who you are compatible with, the last thing you want to do is jeopardize the life you are trying to build together because conversations around money are getting in the way.  Discussions about finances between partners often become emotionally charged, especially when it involves different values around money.  Fortunately, whether it’s about spending habits, saving for a desired goal, investing or paying off debt, having healthy discussions about finances is a skill that couples can learn to develop together.

Understanding what drives your partner’s emotions about money is key to turning these discussions into honest and productive conversations.  It can be helpful to discuss together what your experiences were like with money growing up.  In some households, speaking about money can be considered taboo while in others they are open discussions. These early experiences shape the way we view money and inform our decisions as adults on how we choose to spend, or not spend. Understanding that your partner grew up with a financially irresponsible parent due to a gambling problem can go far when trying to understand why your surprise purchase of an expensive custom suit quickly became a serious issue. On the flip side, your partner’s understanding that your purchase of a custom suit was because you felt you could finally afford it and deserve it seems less frivolous when it’s known that you grew up with years of being bullied as a child for your second-hand clothing.

The benefit to understanding your partner’s emotional connection to money is that it can open the door for truly honest conversations.  If you both come from a place of understanding you create a safe space to share information, even if it means sharing things you may not be proud of.  Hiding debt or overspending is a deception that can have serious adverse effects on a relationship.  Like lying, it can wear away at the trust that exists between you and could be your downfall.  It’s imperative to have an honest conversation about any debt or unhealthy spending habits.  If you can agree to a plan to pay off the debt or plan a budget that includes a set amount of savings these issues can easily be figured out before they become your undoing.

Starting and regularly having these money discussions can be difficult but money is a part of life – and maintaining openness around it with your partner is key to prevent it from becoming an issue.  Like most aspects of a relationship, communication is everything.  Sharing priorities and agreeing on common goals together will allow you to more easily create a path forward. Focus on each other’s strengths, always keep each other in the loop and your money conversations can become a part of your relationship that serve to reinforce your shared visions and dreams and further strengthen your partnership.

For the past 20 years Lighthouse Financial Advisors has been committed to reducing stress and keeping couples happy by coaching them through financial matters.

2020 has been a year like no other with Covid-19 having derailed all of our plans and expectations. Unfortunately, the United States is officially in a recession, ending the longest economic expansion in history. More than 40 million Americans have filed for unemployment since the pandemic began and uncertainty seems higher than ever. The word recession often triggers negative thoughts, feelings, and fear of the unknown. The question is, when do we get back to how life used to be? Below are several ways to help navigate through a recession and these uncertain times.

  1. Building your emergency reserve.
    1. What is your “sleep at night money”, what is your comfortable minimum cash balance to have at all times for large expenses, emergencies, etc.? If possible, adding additional funds to your reserves will help ensure that you will continue to pay all of your necessities. Recommend using an online high yield saving such as “Marcus by Goldman Sachs” or “American Express” to earn the highest interest possible.
  2. Paying down debts if possible
    1. Priority is to eliminate existing debt such as credit cards which may involve high rates of interest. Auto loans and mortgages can be refinanced at lower interest rates due to the Federal Reserve cutting rates. Federal student loans offer deferred payments interest free to help for several months.
  3. Think with the end in mind
    1. This expression by Franklin Covey means to think with a clear vision and destination, then proactively incorporate a plan to achieve success. The path forward may be uncertain, but your long-term vision should never change. Making drastic short-term changes will severely impact long term financial security.
  4. Identify your risk tolerance and stay the course
    1. Understanding your risk tolerance is a major factor when building a financial plan. At Lighthouse, we believe that allocation should focus around a spending plan. Someone who may depend on their portfolio with a short-term mindset would often focus on CD’s, money markets, and bonds. An investor focused on needing income from their portfolio several years down the road would rely on equities to maximize their potential return. Although thinks can be shaky in the current markets, stick to your plan and identify your objective.
  5. Identify your budget and cash flow
    1. What makes you happy, what is essential? Only you know that answer. It is helpful to take a look at current income and expenses to see where you stand. Identify possible ways to cut back to make sure you are living within your means.
  6. Focus on your health
    1. This is the most important of this list. Having strong mental & physical health during tough times is what will help you achieve success. Whether it’s going for a walk, going for a drive, playing a video game, etc., do what makes you feel good. Options may be limited, but take advantage of what makes you thrive. Take advantage of spending time with your family and friends. They are your most invaluable assets.

There is no specific timetable as to when a recession will end, but we can at least navigate these unprecedented waters a little easier together. Think of all you have, especially your family and friends. We often look back in life wondering how we ever got through various life challenges. Covid 19 may be disruptive, but in the end this too shall pass. In the future we will look back and learn from this experience together and be better for it.

Contact

Lighthouse Financial Advisors

3 Harding Rd Suite B
Red Bank, NJ 07701

P: 732.747.6697
F: 800.886.0302
info@lfadvisors.com

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Disclosures

Client Relationship Summary – Form CRS
Firm Brochure – Form ADV 2A

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