As with many things in life, knowing what we’re supposed to do and actually doing it are two separate things. This is true for our health, relationships, careers, and, of course, our finances. When it comes to investing, it’s well known that adequately diversifying and staying invested are the best ways to achieve long-term financial goals. However, this is often easier said than done, especially when market and economic outlooks are uncertain, as they have been for many years. Fortunately, there are investment methods for managing the emotions that come from market volatility.   This raises a good question: “What should you know about sticking to an investment plan throughout your life ?”  Dollar-cost averaging and Lump-Sum investing Knowing when and how to invest in the stock market can be challenging, especially if you suddenly come into a large sum of money. This could be through an annual bonus, the sale of a business, or an inheritance, to name a few. In the long run, investing properly can turn savings into wealth. However, market volatility can derail even the most steadfast investors in the short run.   Dollar-Cost Averaging This is where dollar-cost averaging can help. With dollar-cost averaging, investors regularly invest a set amount on a pre-planned schedule. This reduces the temptation to follow and react to every market move or to try to time the market . If you make regular, automatic contributions to your portfolio with each paycheck, such as through a 401(k) plan at work , you are technically already using dollar-cost averaging. Whether these investments occur monthly, quarterly, or annually turns out to matter much less than simply sticking to a plan.   Lump-Sum Investing The opposite, investing all at once, is often known as lump sum investing. How your portfolio performs in the short run is very much determined by how the market performs immediately after the investment. This can be seen in the chart above, which shows the hypothetical returns between these two methods beginning in 2000. Investing $100,000 in the S&P 500 would have lost value almost immediately due to the dot-com crash. This would have recovered over the next several years until the housing crash. Finally, the value of this investment would have recovered in 2013 when the S&P 500 returned to all-time highs and then benefited from the long bull market that followed. This chart also shows the hypothetical returns of a dollar-cost averaging approach in which the investor splits up the $100,000 into monthly investments over this entire period. Given the length of the time period, this is a rather extreme example, but it serves to highlight some key facts.Dollar-cost averaging on a monthly schedule would have avoided the market drawdowns early in the period when the portfolio would have mostly been held in cash, remaining relatively flat through the mid-2010s. There is an inflection after this when the lump sum portfolio catches up and outperforms due to the strong bull market. So, both methods had their benefits and time to shine over the past two-and-a-half decades.   Dollar-cost averaging can make it psychologically easier to invest The takeaway here is less about maximizing returns (in the moment) and more about staying invested through the years and decades to maximize your returns overall. Dollar-cost averaging can help reduce risk in situations where markets fall sharply, especially early on. However, lump sum investing tends to outperform dollar-cost averaging in the long run since, historically, markets have steadily risen over time. This is analogous to comparing a 100% stock portfolio to a properly diversified one with a balanced mix of stocks, bonds, and other asset classes . The 100% stock portfolio might outperform over long periods, especially during strong bull markets like today’s, but it will also experience sharper pullbacks. On the other hand, the diversified portfolio will experience steadier growth and more muted declines, making it easier for investors to stay level-headed. This is especially relevant today, with the market near all-time highs. The truth is that markets are always uncertain. Whether it’s the upcoming presidential election, geopolitical conflict, or the direction of interest rates and the economy, investors may worry that the market could pull back just after they invest. It’s important to keep in mind that just because the market is near a current peak doesn’t necessarily mean it’s “due for a pullback.” By definition, markets achieve many new all-time highs as they rise during bull markets . While significant uncertainty has occurred this year due to interest rates, inflation, and the Fed, the S&P 500 has already experienced 24 new all-time highs. This includes a sharp rally in May after a slump in April.   Ironically, it can be psychologically challenging to invest both when the market is rising and when it is falling, for fear that the market might be at its peak in the first case and that it might fall further in the second. So, whether dollar-cost averaging or lump sum investing makes more sense depends on the individual investor, their ability to handle risk, and their time horizon.   Getting invested sooner is better than waiting for the right timing Whether you choose to dollar-cost average or invest all at once, getting into the market sooner has historically been better than “waiting for a pullback.” As the accompanying chart shows, waiting for a better time to buy or trying to “buy the dip” has tended to backfire. Since the market tends to rise over time and can rebound unexpectedly, even the worst timing is often better than being out of the market. For example, an investor waiting for a 5% pullback before investing would, on average, have waited 291 days. Even though 5% or worse pullbacks do occur periodically, the fact that the market rises over time means that there are often “higher lows” – i.e., the next dip is higher than before. Historically, markets have gained a whopping 13% during these periods, including the pullback itself. Just as a diversified portfolio can help reduce overall risk and volatility, so can dollar-cost averaging when it comes to investing over time. Dollar-cost averaging may not be the mathematically optimal way to invest since lump sum investing has tended to outperform over history. However, it can help investors stay focused in the long run without worrying about every market event or trying to time the market  perfectly. As is always the case, seeking the guidance of a trusted financial advisor  is the best way to determine the approach that works best for your specific goals. If you do not have an advisor, the team at Whitaker-Myers Wealth Managers  is available to help answer questions you have about investing if you are interested in learning more. The bottom line? Dollar-cost averaging and lump sum investing are both ways to invest cash. History shows that investing sooner is the most important way to achieve long-term financial goals.

In the world of personal finance, effectively managing debt is essential for achieving long-term financial stability. One often overlooked strategy is making principal-only payments on loans. Understanding this approach is increasingly important as individuals seek to minimize interest costs and accelerate repayment.   This article explores the advantages of principal-only payments, their potential impact on your financial journey, and key considerations for implementation. Whether you're tackling a mortgage, student loan, or other debt, this method could be transformative.   By making principal-only payments, you can save thousands in interest over the life of a loan. If you find yourself with extra cash while budgeting each month, consider directing that surplus toward your loans. This proactive strategy can help you pay off debt faster and pave the way to financial freedom.   Steps to Take Before Making Payments Before proceeding, confirm that your lending institution accepts principal-only payments and check for any early payoff penalties. The last thing you want is to have to owe more on something because you made something off early.   Loan Schedules to Consider If you receive a loan amortization  schedule at signing, you can see how much of each payment goes toward interest and the principal. If you didn't receive one, you can use an Amortization Calculator  to create a tailored schedule.   For example, with a $200,000 mortgage over 15 years ( Ramsey Solutions  recommendation) at a 6% interest rate and no extra payments, you'd pay approximately $103,788.46 in interest. Adding an additional $165 per month to principal payments could shorten the loan term by two years and save $15,534.28 in interest. Imagine the savings with even larger principal payments!   Loans That Benefit from Principal-Only Payments Several types of loans can benefit from principal-only payments: Mortgages: Reducing the principal on your mortgage can significantly decrease interest payments and help you pay it off faster. Saving you literally time and money. Student Loans: Extra principal payments, reducing overall interest, and shortening repayment periods can benefit both federal and private student loans. Auto Loans: Principal-only payments on auto loans can lower the total interest paid, allowing you to own your vehicle outright sooner. Personal Loans: Directing extra funds to the principal can save on interest and improve your credit score by lowering your debt-to-income ratio. Home Equity Loans: Applying extra payments to home equity loans can expedite debt reduction and save on interest. Credit Card Debt: Credit cards typically carry higher interest rates, but principal-only payments can reduce the balance and minimize interest charges. Business Loans: Paying down the principal on business loans can improve cash flow and free up funds for reinvestment. By making principal-only payments on these loans, borrowers can take significant steps toward financial freedom and reduce their overall debt burden.   How to Set Up Principal-Only Payments Setting up principal-only payments can vary by lender, but here are the general steps to follow: Review Loan Terms: Check your loan agreement for policies regarding extra payments, as some lenders may have specific guidelines. Contact Your Lender: Reach out to your lender’s customer service to inquire about the process for making principal-only payments. Specify Payment Allocation: Clearly indicate that you want extra amounts to go toward the principal when making a payment, either through a designated form or online portal. Use the Right Payment Method: Depending on the lender, you can often make principal-only payments through online banking, by phone, or by mailing a check. Confirm Payment Application: After making the payment, verify with your lender that it was applied to the principal as requested. Keep Records: Maintain documentation of all payments and any correspondence regarding principal-only payments to track your progress. Set Up Future Payments: If you plan to make principal-only payments regularly, consider automating transfers or setting reminders. By following these steps, you can effectively set up and manage principal-only payments on your loans.   Incorporating Principal-Only Payments with the Debt Snowball Method Integrating principal-only payments into the debt snowball method  can significantly enhance your debt repayment strategy. Here’s how: L ist Your Debts: Organize your debts from smallest to largest remaining balance, focusing on first paying off the smallest remaining balance. Make Minimum Payments: Continue making minimum payments on all debts except the smallest. Identify Extra Funds: Look for extra cash in your budget to allocate toward debt repayment. This is where principal-only payments come in. Contact Your Lender: For the debt you’re focusing on to pay off early, contact your lender to set up principal-only payments. Make Extra Payments: Direct your extra cash toward the smallest debt, ensuring those payments are designated as principal-only. Celebrate Small Wins: Once a debt is paid off, celebrate your progress to stay motivated. Move to the Next Debt: Apply the amount you were paying on the first debt to the next smallest debt, along with any principal-only payments. Repeat the Process: Continue this strategy, focusing on one debt at a time while incorporating principal-only payments. By tying principal-only payments into the debt snowball method, you can accelerate your journey to financial freedom, save on interest costs, and enjoy the satisfaction of eliminating debts one by one.   Conclusion Incorporating principal-only payments into your debt repayment strategy can be a powerful tool for achieving financial freedom. By focusing on reducing the principal balance of your smallest debts first, you save on interest and gain momentum and motivation as you accomplish each small victory. As you eliminate debts one by one, the impact of your principal-only payments compounds, allowing you to tackle larger debts more effectively.   Working with one of our financial advisors  or our financial coach  here at Whitaker-Myers Wealth Managers  can further enhance this process. They can provide personalized guidance, answer any questions, and help you develop a tailored debt payoff plan that aligns with your financial goals. With their expertise, you can navigate the complexities of your loans, optimize your payment strategies, and stay on track toward a more secure financial future. You can transform your financial landscape with discipline and dedication and pave the way for lasting stability.

Moving our intentionality discussion further, think about this - intentionality without purpose is essentially misdirection. As discussed in the previous post ( read Part 2 of this series ), a farmer can take care of their land to the best of their ability, but without planting a seed, nothing will grow. If the farmer’s end goal is to harvest crops, they should not only plant the seeds, but they need to plant the right kind of seeds. I can’t expect to reap corn when I plant strawberries. It may be a fun surprise, but it wouldn’t align with my end goals and expectations.   Define your why I love this saying, which I’ve heard on the Dave Ramsey  network many times: “If your why doesn’t make you cry, find a different why.” The saying is fairly simple but has much depth that can be explored.   The first line pulls at the passion strings. If your core values and beliefs do not embed the reason you are proceeding with an action or decision, the end result will likely reflect it. The second line realizes this and highlights that there are options to explore.  Find a different WHY. Our core values define what we believe and seed our WHY. Thus, our core values and why are our actions or intentions aligned and need to align with our goals.  I like looking at this from a motivational perspective, specifically intrinsic motivation and extrinsic motivation.   What Motivates You? Our motivation and goals change as we progress in our years, careers, and life journey. Early in my career, I wanted to find the most logical (potentially fastest) way to make six figures, and my focus was 100% on that goal. As I aged, I found that making money was great, but there are more important values I have in my life. So, I split my focus into 50% monetary growth and 50% value/fulfillment. Not to say I’m old, but now, I’m significantly more focused on fulfillment than monetary gain.   In one of my previous roles at a large hospital enterprise, one project I worked on was optimizing operations within a specific department. One task that was assigned by senior leadership was to increase patient visits without increasing our resource/headcount. As we dug through it, one of our solutions was to find various motivation factors for clinical staff. Pizza party, anyone? Maybe a team bonding outing at Top Golf? Sure, but we found that we would hit a roadblock quickly. We hit a roadblock even when we offered additional financial incentives, so more work = more pay. It became apparent that these extrinsic motivators only go so far. They build momentum for a very short period, then fall back to where it was beforehand. So then what?   Our focus shifted. We shifted to intrinsic motivation. What motivated our team? We found clearly that some found those other motivators ‘lame’ or a ‘waste of time’ or, more importantly, non-value add. So, how do we then focus on the intrinsic motivators? Luckily for me, this was healthcare. In healthcare, the majority of clinicians/staff are there because they want to give back and help improve the lives of those who come to their clinic/office/hospital. We focused on improving the interactions with patients, specifically improving time with patients and improving patient outcomes. This resonated most with the providers; our patient satisfaction scores went through the roof. It also accomplished our task not only in the short term but longitudinally as well.   Any why, Any How Friedrich Nietzsche said, “He who has a why to live can bear almost any How.” As discussed in this post, intentionality begins with understanding your core values, motivation, and goals. Intentionality is the strategic or tactical action to get to those goals. Though I would love to have a great infographic that shows this progress, from my research, I’ve found that this pathway is almost never linear.  The weaves and turns that come on our path continue to value or devalue our current goals. Our motivations change, life goals change, and focused intentionality changes. We’ll discuss the emotional components of intentionality in the next post. I hope you’re following along on the journey!   If you are on a financial journey and have questions about end goals, be sure to discuss these with your financial advisor . These goals can range from creating an emergency fund, paying off debt, or saving for retirement. Our team at Whitaker-Myers Wealth Managers  is there to help you through any part of the journey.

We are thrilled to announce that Grant Jennings has joined Whitaker-Myers Wealth Managers as a Financial Advisor in our Cincinnati, Ohio, office. Grant brings with him an impressive track record of nearly 17 years at Fidelity Investments, where he served as a Director, Retirement Planner and Retirement Relationship Manager. His extensive experience in helping individuals and families plan for their financial futures makes him a valuable addition to our team. Grant holds the prestigious Certified Financial Planner™ (CFP®) designation, which distinguishes professionals who have met rigorous education, training, and ethical standards. As a CFP®, Grant is well-equipped to provide comprehensive financial planning services, guiding clients through essential areas like retirement, investment strategies, tax planning, estate planning, and more. His holistic approach ensures that clients can build a solid financial foundation to achieve both short-term and long-term goals. President of Whitaker-Myers Wealth Managers, John-Mark Young, said about Grant, "The quality of any firm is reflected in the quality of the people at the firm. Our team is made up of people who continually amaze me with their dedication and selfless service to their clients, communities, and families. In Grant, we continue that trend of high-character thoroughbreds, as my friend Dave Ramsey refers to them. On a personal note, Grant is married to his wonderful wife, Lindsey, a dentist in Southern Ohio. Together, they are raising three beautiful children. Family is at the heart of Grant’s personal life, and this focus on family translates into his professional life as well, where he helps his clients secure financial futures for themselves and their loved ones. In his new role with Whitaker-Myers, Grant will be working closely with Dave Ramsey clients in Cincinnati and Dayton, Ohio along with Lexington, Kentucky. His expertise and alignment with the Ramsey philosophy make him the perfect fit for clients seeking financial peace and guidance. We are excited to see Grant bring his dedication, knowledge, and client-first approach to these communities, where his impact will be significant. We are truly excited to have Grant Jennings join our team at Whitaker-Myers Wealth Managers. We invite you to join us in welcoming him and look forward to the positive impact he will have on both our team and our clients. Grant can be reached at gjennings@whitakerwealth.com .

Saving for Retirement Many people have an opportunity to save for retirement through an employer-sponsored 401(k). This is a great way to save for retirement. Many plans now offer Traditional 401(k) contributions AND Roth 401(k) contributions. But what is the difference between them, and which one is better? This article will explain the similarities and differences between a Roth 401(k)  and a Traditional 401(k) and why I feel most people should save to a Roth 401(k) over a Traditional 401(k).   Similarities of Roth 401(k) and Traditional 401(k) A common misconception is that a Roth 401(k) and a Traditional 401(k) are separate employer plans. Although the contribution types are different, both options fall under the same plan rules found in the summary plan description of the 401(k). Both options allow you to consistently save for retirement and offer the same investment options. Whether you choose Roth or Traditional contributions, a company match will not be affected. Most employers will match using pre-tax dollars.   Additionally, the contribution limits are the same for both a Roth 401(k) and a Traditional 401(k). That contribution limit for 2024 is $23,000 ($30,500 if you are 50 or older). Remember, that is the TOTAL you can contribute to any employer-sponsored plan in any given year. Meaning, you cannot save $23,000 in Roth 401(k) and an additional $23,000 in Traditional 401(k). However, you can also save an extra $7,000 ($8,000 if you are 50 or older) in a Roth IRA, even if you are maxing out your Roth 401(k)!   Differences between Roth 401(k) and Traditional 401(k) While there are many similarities between Roth 401(k) and Traditional 401(k), the differences are where the Roth 401(k) shines.   It all comes down to when the tax is paid on the contributions going into the 401(k). If you make Traditional contributions, these go into your 401(k) as pre-tax dollars. The funds will grow tax-deferred, and distributions after 59 ½  will be taxed at your regular income tax rate. Additionally, your pre-tax contributions will lower your income tax owed for the year you made the contributions.   If you make Roth contributions to your 401(k), you will pay the tax now, but the account will grow tax-free, and you will be able to make tax-free distributions after 59 ½ and having the Roth 401(k) funded for at least five years. Roth contributions will not lower your taxable income in the year they were contributed. BUT THAT IS OKAY! Why? Your contributions grow tax-free over a significant number of years. Would you instead be taxed on $1000 now or $1,000,000 when you take distributions in retirement? If your effective income tax rate is 20% and your Traditional 401(k) is worth $1,000,000, then it is actually worth $800,000 because you will be paying the government $200,000 in taxes.   Let's put it in a Scenario Here is a scenario where Will Smith saved only Traditional dollars to his 401(k), and Chris Rock saved only Roth dollars to his 401(k):   Will Smith had 30 working years left, made $65,000 per year, contributed 15% of his income to his Traditional 401(k), and averaged a 10% rate of return. Saving in the Traditional 401(k) gave Will $2,145 additional take-home pay per year. Multiply that by 30 years; he took home an additional $64,350 during his working career. Will met with his advisor and they ran a scenario where Will has 20 years of retirement, averages a 6% rate of return on his portfolio, and has an estimated income tax rate of 15%. His advisor estimated that Will’s retirement income could be $120,917 annually. Not bad.   But how did Chris do? All things being equal, EXCEPT Chris Rock saved 15% in his Roth 401(k). He missed out on $64,350 of take-home pay because he opted to pay the tax upfront so his investment could grow tax-free and he could receive tax-free distributions in retirement. Chris sits down with his advisor, who Will Smith referred him to, and they review his annual retirement income estimate. Chris also has 20 years of retirement, averages a 6% rate of return on his investments, and has a tax rate of 15%. His advisor estimates that Chris will have an annual retirement income of $142,256. That is $21,338 better than Will PER YEAR!   In just over three years, the additional income from saving in the Roth 401(k) will be more than Will's take-home pay over 30 years. Chris will have $426,760 more income than Will during his retirement, all because he paid the taxes on the contributions during his working years. Source: https://content.schwabplan.com/download/RothCalc/RothCalculator.htm   Conclusion In most cases, contributing to a Roth 401(k) is more beneficial in the long run than a Traditional 401(k). Although they have several similarities, the tax advantage between them is significantly different. You should always speak with a financial professional before making an investment decision, and this article is not intended to provide advice. A financial advisor can also help you with your investment options in your plan and look at other investment options outside of your plan. If you would like to schedule a time to discuss your 401(k) or any other type of investments or planning, feel free to schedule a meeting with any of our advisors at Whitaker-Myers Wealth Managers .

For most companies, the 4th quarter of the year is an essential time for registering for benefits.  According to the Bureau of Labor Statistics June data ,  benefits comprise 30% of a civilian employee’s total compensation.  The remaining 70% were wages.  For state and local government workers, benefits represented 38%.  So, when you enroll in your benefits in the 4th quarter, make sure you’re making thoughtful decisions about what you’re selecting and, if appropriate, consult your financial advisor.    When reviewing your benefits for the upcoming year, consider what benefit options have changed and what have stayed the same.  Contact your company’s benefits team/coordinator if you have questions about the plan.  Just because you chose one benefit option for the current year doesn’t necessarily mean having the same benefit the following year makes sense.  For example, if you have a group legal plan, you may have the option to enroll for one year to have a Will or Trust completed and then unenroll the following year.   Let’s walk through some popular benefits options you will likely have to choose from.   Health Insurance This is likely the most significant deduction in your benefits (unless you have an employer that covers all employees and their family's medical premiums).  You will want to be sure to evaluate the options carefully.  Some popular plans are a Health Maintenance Organization (HMO) and a PPO (Preferred Provider Organization).  Here’s a site comparing the two .    At a high level, H ealth maintenance organizations (HMOs)  have a network of doctors, hospitals, and other healthcare providers who provide their services for a specific payment, which allows the HMO to maintain costs for its members. A referral is required.  Cost and choice are the two features that set HMOS apart from other healthcare plans.    Preferred provider organizations (PPOs)  offer a network of healthcare providers for your medical care at a specific rate. Unlike HMO, a PPO allows you to receive care from any healthcare provider—in or out of your network.   Health Savings Accounts (HSA)  are available with a high-deductible health plan (HDHP). The linked article written by one of our team members does an excellent job of explaining the basics.   Flexible Spending Accounts (FSA)  are a great option if you don’t have an HDHP.  With this type of account, be sure to use the funds: by the end of the “grace period,” typically 2.5 months following the end of the plan year or spend your account below the annual carryover amount, which is $640 for 2024 and likely to Health Equity offers a vast list of Qualified Medical Expenses (QME)  that you can use to ensure you spend any remaining dollars.   Dental Insurance These plans vary quite a bit by employer.  Below is what a   typical plan  covers.    100% of routine preventive and diagnostic care such as cleanings and exams. 80% of basic procedures, such as fillings, root canals, and tooth extractions. 50% of primary services such as crowns, bridges, and implants.   If you need orthodontia/denture work done, asking for a couple of referrals from your dentist is helpful to understand different providers in your area and compare services and prices.  These expenses can be hundreds to thousands of dollars.  For any dental/orthodontia work your plan doesn’t cover, you should discuss with your advisor a plan of how to cover these expenses with your pre-tax Flexible Spending Account (FSA) or Health Savings Account (HSA).   Vision Insurance If you carry vision insurance and your plan offers a glasses/contacts allowance, ensure you maximize them yearly.  If you don’t need new glasses or contacts, you will want to understand what your vision covers to see if it’s necessary to keep every year.   Short- and Long-Term Disability  Your employer can sometimes pay for these.  If your company pays for it, great, let your advisor know.  You should also inform your advisor if they don’t pay for it.  We generally don’t recommend short-term disability unless it’s free/very cheap.  Another team member wrote this article about Long Term Disability Insurance   and the benefits it can provide you and your family. We also have a Disability Insurance Specialist   on our team. If you would like a quote, contact your advisor to discuss how this can fit into your financial plan.   Life Insurance Life insurance purchased through work is generally Group Term Insurance, similar to Term Insurance you would buy individually.  We recommend purchasing it outside of your employer if you get sick and have to leave your employer, and it’s not transferrable.  Here’s an article that gives further insight into Term Life Insurance .   Dependent Care Flexible Spending Account Dependent Care Flexible Spending or DCFSA accounts can be an excellent way for employees paying for care for children under 13, a disabled spouse, or an older parent in Eldercare to save on taxes.  If this is you, visit this site here to learn more .   Legal Plan If your company offers a legal services plan and can have a Will/Trust completed, this could be a great way to set one up for a significant discount. Usually, these would require an estate planning attorney to set them up.  You could enroll for the benefit one year and then not the next.  You should clarify what services the group legal plan covers and if a Will/Trust is part of them.  If you’ve been putting it off like most Americans, talk to   your Financial Advisor  today about establishing one through one of our partners.   Employer-Sponsored Retirement Plan Whether you have a 401(k), 403(b), 457(b), or a small business retirement plan, you should have had this discussion on the features of your plan.  It may require your advisor to review your Summary Plan Description (SPD) or call the plan custodian (the company through which the investments are managed) to obtain the SPD to understand the features.  If you need help managing your employer’s retirement plan, you should talk to your advisor because at Whitaker-Myers Wealth Managers, we are uniquely qualified to help you manage your current 401(k) or other employer plan.   You’re generally always able to change the amount contributed to your plan, whether at a $ or % level.  Most employers allow you to choose a separate contribution amount if you receive any bonus compensation.    You may want to be careful not to max out your 401(k) early because it could cost you the employer match if there’s no true-up provision for the plan .  If you’ve left your employer ,  you should notify your advisor to discuss your 401(k) options.  All these reasons are why you should consult your retirement contribution strategy with your financial advisor.   Tuition Reimbursement & Professional Development Many companies offer a benefit to partially or fully pay for you to get further education, whether a degree through a school, a certification program, or just a professional development course.  This could be a better return on investment than any mutual fund could ever return, so be sure you know what benefits your employer offers. Long Term Care Long Term Care  is not as commonly offered by employers, but the linked article can provide some good considerations for funding options.   Parking/Commuter Benefits If you have to pay for transportation via public transportation or pay for parking, hopefully, your employer offers commuter benefits.  This is a way to save tax-free up to the IRS 2024 limit of $315 (projected to be $325 for 2025) per month to pay for these expenses. Even if you work primarily from home and only go into the office a few days a week, this is another excellent way to save on taxes.  Here’s a site to check out if you have more questions .   The benefit of talking Benefits with an Advisor This is not a complete list of benefits employers offer, but it is some of the major ones typically offered.  As you build out your financial plan, you should discuss how to best leverage your company’s benefits with your advisor, given that it’s around a 1/3 of most employee’s total compensation. If you do not have a financial advisor, one of our trusted team members  would love to set up a complimentary meeting to discuss things with them and help answer any questions you may have.

From conversations I’ve had, most investors have a firm grasp of why stocks move up and down (because of market trends, economy, or supply and demand), but I don’t know if the same can be said for the bond market. Stocks are fairly simple: You buy a share of said company and make money if the company does well and when they pay dividends. Bond performance can be a bit more tricky.   In this week’s article, I hope to simplify the bond market to help readers understand exactly what they are investing in.   I Owe You Bonds are simply “I owe you’s” that entities pay back to investors. Similar to CDs that you would get at a bank. Like a personal credit rating, any institution that borrows money is rated by a rating agency; these ratings range from AAA, the highest rating, to CCC, the lowest rating. Anything below BBB is considered below investment grade. Just like your personal credit rating, if you are lending money to an institution with a lower credit rating, you will be compensated by a higher coupon or interest payment. Pretty simple so far. Generally speaking, the higher the credit quality, the safer the bond, and the lower the interest payment to investors.   Timing and Scenarios The next nuance is bond maturity or duration. Bond maturity and duration are not the same thing, but they are similar. So, for this example, I will just be talking about bond maturity.   Generally, the longer the maturity, the higher the bond's interest rate. This makes sense when considering things in mortgage terms: a 15-year mortgage has a lower interest payment than a 30-year mortgage. The thought behind this is that if I lend money to said company (i.e., Apple) for a year, and the bond matures, I get my principal back. This is a pretty safe bet, as opposed to lending them my money for 30 years. I would still receive annual interest payments and get my principal bank in 30 years, but the thought is that I would want to get paid extra for the risk that I took if Apple goes bankrupt and I never get my principal back. This is a much more likely scenario over a 30-year period than a 1-year period.    So, the longer maturity of a bond the riskier the bonds, and the more sensitive to interest rate moves it is. If your 30-year bond is paying 3% and new bonds are paying 5%, you need to sell it. Let's say you bought it for a face value of $1,000. You will have to discount your bond steeply to account for the lack of interest payments over the next 30 years vs the newer 5% bond. Nobody would want to pay you the total $1,000 when they could go get another bond that pays 5%. This was the phenomenon in 2022 when interest rates moved significantly higher in a short period of time; the market had to rerate existing bonds to account for the lack of interest.   Economic Conditions Influences Credit quality also performs differently in distressed markets. When economic conditions deteriorate, high-quality government bonds generally perform well. This makes sense because investors rotate out of stocks, which are economically sensitive, and into government bonds, which the US government backs. The opposite of “junk” or lower-than-investment grade quality bonds is true. This also makes sense because overleveraged companies with poor credit are typically the first to default as economic conditions deteriorate when volatility spikes and the stock market drops, like in 2008 and 2020 during COVID-19, junk bonds don’t protect investors much as their price action usually acts more like stocks.   The high yield index spread measures the difference in interest between investment and junk bonds, and as the chart below shows, it widens during crises. That said, make sure you understand what type of bonds you invest in, whether in a 401k or any other investment account(s). Be sure that the fund or individual bond achieves the proper diversification or income goal that you hope it will. As always, contact your financial advisor if you have questions about bonds or need help with 401k investments. The team of financial advisors  at Whitaker-Myers Wealth Managers  is ready to help answer questions and create a financial plan to help you achieve your financial goals.

Picking up from where we left off from where we left off with Part 1 of this series , it’s probably important to discuss intentionality in the context of investing, right? The logical thought is that the more intentional and focused I am with my money today, the more that my money will work for me tomorrow. Dave Ramsey  says it nearly every day, “live like no one else today, so you can live and give like no one else tomorrow.” The foundation of intentionality is not only a psychological construct but also an action and reaction component that determines if the intention is positive and yields the desired outcome.   Mud is fun to play with, but it won’t grow anything without seeds How do I reach my end goal if I’m not intentional? Most of you have likely heard the phrase that a farmer who plants cabbage cannot expect to grow corn. Another that states the farmer who waters the soil every day, makes sure to clean the weeds, and always watches for sunlight on his farm only has muddy soil if he doesn’t plant any seeds. Intentionality takes not only the reasonable steps but also the proper steps forward to bring success or the desired outcome. The Social Cognitive Science Research Center at Brown University identified five key components that makeup people’s concept of intentionality, and thus, an action is intentional if:   1.     There is a desire for an outcome 2.     A belief that the action will lead to the outcome 3.     An intention/desire to perform the action 4.     Skill to perform the action 5.     Awareness while performing it   You can read the study here: Intentionality | Malle Lab ( brown.edu )   So, intentionality is not only the longing for a specific outcome or action to achieve it, but intentionality requires the right action at the right time to reach the end goal. There is no way that we all have the proper skill set to accomplish every goal we set. No matter how hard I try, I can never learn everything in the world. So, what do we do? As stated in Proverbs 19:20-21, “Listen to advice and accept instruction, that you may gain wisdom in the future. Many are the plans in the mind of man, but it is the purpose of the Lord that will stand”. We seek advice from our mentors, pastors, teachers, supervisors, family, friends, and others. We learn from each other and base our growth, trajectory, and decisions based off of what we learn. This is an act of intentionality, and incorporating these learnings continues to build our intentionality mindset.   Desire vs Intentionality In the research shared above, the team at Brown University further defines desire vs. intentionality. The desire I have to accomplish a goal versus the intentional steps I’ve taken to achieve that dream should be defined clearly. Their research segmented desires as wants, as any ‘conceivable state’ and is the input function for the goal. On the other hand, the intention that one has is the ‘actionable state’ and the output function for that goal. Remember that neither addresses the capability or capacity to accomplish the objective.   Too academic? Unfortunately (or fortunately), we don’t stop there. This week, I hope you take away that the foundation of an intention, intentionality, or the intentional mindset is a desire for an outcome, belief the action will lead to the result, intention to perform the required action, skillset to perform it, and the awareness (right or wrong) while performing the action.   To help reach our financial goals, we need the support of our trusted financial advisors  to get us to the end goal because we don’t know everything, and we should take it! We’ll dive deeper into creating an intentional mindset in upcoming articles, so stay tuned!

With the number of available funds seemingly endless, it can be hard to tell what a fund’s investing strategy is. With so many ways to differentiate funds, it can be very daunting for investors to determine which fund is right for them. This article will discuss one of, if not the most important, ways to differentiate funds. Active management styles and passive management styles are key differentiators of funds and can be the difference between average and superb returns.   Actively Managed Funds Actively managed funds are funds in which the portfolio management team actively trades the held positions within the fund portfolio in an attempt to outperform a specific index, such as the S&P 500, MSCI EIFA, Russell 2000, etc. Specific securities are traded based on expected performance. Different funds have their own ways of determining the best way to select funds, which is what separates actively managed funds from each other.   The most important thing to remember about actively traded funds is that there is not one that will outperform the market 100% of the time. If there were, that would be the only fund because every investor would be in it. This is why choosing the best actively managed fund becomes so essential. Investors want funds that will outperform the market most of the time and don’t get beat by the market by too much if it underperforms the market. This is also why diversification is important  within an investor’s portfolio. If you are only in one fund and it is underperforming the market, then your entire portfolio is underperforming the market. If you were in multiple funds, and only one was underperforming, your whole portfolio could still outperform the market.   Passively Managed Funds Passively managed funds do not seek to outperform the market but rather to mirror the performance of it. Passively managed funds choose an index, invest in funds to mirror that index, and seek to mirror the performance of it. With passively managed funds, it is not likely that the fund will outperform the index, but it is also not likely to underperform it. Passively managed funds are often referred to as “buying the market” because they have such a similar performance to it. There is little human interference with these funds, as the investing within them is typically automated to match a specified index.   What’s The Difference? Although passively managed funds typically won’t underperform the market, it should also be recognized that they also won’t usually outperform the market either. You will get a good return in a passively managed fund when the market is doing well, but countless actively managed funds are getting an even better return during that time period. That said, just as many, if not more, funds are getting a worse return than the market. It is very easy to choose funds that will offer a lower return than the market offers, sometimes even losing while the market gains. This is why proper research and fund selection are essential with actively managed funds. At Whitaker-Myers Wealth Managers , we take pride in being a fiduciary and believe in picking the funds that best fit your financial goals. Talk to your advisor today if you have questions about what kind of funds you are set up with; if you don’t have an advisor, we have a whole team of financial advisors  ready to help answer your questions.

Is Becoming a Millionaire in My Future? Let’s start with real-world facts: most people like the sound and appeal of being a millionaire. The simple definition of a millionaire is having a net worth (assets – liabilities) that is at least $1,000,000. The most recent data from the Federal Reserve revealed that 23.7M households in the United States are millionaires. On a percentage basis, this is 18% of Americans. Including the entire globe, the USA has about 39% of the world’s millionaires based on US dollars. In the last 20 years, millionaires have more than doubled in America and globally.   Inflation has made it easier to hit that seven-figure net worth. However, it is still a desired level that usually signifies security and comfort when entering retirement. With obtaining this status becoming more common and doable, how do we start from scratch or even have a negative net worth and still make it happen? Have the Millionaire Mindset Having a millionaire mindset does not necessarily mean it is your main passion and all you think about. Like many topics or segments of our lives, it is having a “winning” versus a “losing” mentality. A big-picture example is how you define “a lot” of money.   A “winning” mindset emphasizes saving and investing more than spending. Spending $50 feels like a lot to them, but investing $500 is not that much. The reoccurring thought is, “I can do this.”   A person with a “losing” mentality doesn’t want to invest that $500 because they don’t see an immediate return on investment and must wait it out. They feel spending $50 right here isn’t as big a deal because it’s a small amount and can be covered by their bank account.   Phrased differently, a “winning” mindset with money says, “I can get ahead by investing in small increments even if my cash flow is not in a big surplus because it all adds up.” A “losing” mindset says spending in small increments is not a big deal; it's not like investing a few dollars will get me anywhere.   Staying Consistent Now that we have established the general idea of a “winner” versus “loser” mentality with money, the next step is making it an ingrained habit so that you are consistently winning  with money. Having the right mindset will get you started on the right path, but it's vital that you stay on track so that the setbacks are few and far between. Many people are debt-free, open an emergency account, and enroll in a retirement account at some point, but somewhere along the line, they get derailed and lose the positive momentum that they started with.   Much like physical and mental health can ebb and flow, our financial health often does as well. Just like people who never get out of shape or “fall off the wagon,” as the saying goes, will usually have the best overall physical health, so too will the people who rarely deviate from winning financial thinking and avoid binge spending be in the best overall financial health. Delayed Gratification and Living Below Your Means Housing and transportation are two large categories that most people think of and are essential pieces of the puzzle in building your net worth.   With housing, whether you rent or pay a mortgage, Ramsey Solutions  recommends not going over 25% of your take-home pay on that part of your budget . If you own your home, this would include your mortgage, taxes, insurance, and any HOA fee, if applicable, not all of your utilities. Those “ordinary” millionaires who live in our neighborhoods and whom we are surprised when we learn of their financial status have applied this principle well. They save and invest better than those who live above their means; they are also much more likely to endure those surprise emergencies that happen to all of us without derailing their plan.   On to transportation. Ramsey Solutions' research of over 10,000 millionaires revealed that 31% drove a Honda and/or a Toyota car and usually owned them for several years. The first “luxury” car brand on the list was Lexus, at only 8%.   In both the housing and vehicle categories, wise consumers are disciplined enough to avoid overspending on these items, mainly because they acknowledge that they can’t afford them. Once they reach millionaire status and increase in years, they can afford both a bigger house and a fancier car. However, they usually still abstain from taking the plunge in upgrading because they have fully embraced the mindset of living below their means. Those status symbols are less of a desire than they once were at earlier stages in their lives.   Looking at other budget categories, such as eating out or grocery shopping, there will be fewer savings in buying generic brands or ordering water at a restaurant. However, if you lump all of the additional categories together, there are significant improvements that a household can make and significantly contribute to their ability to achieve millionaire status. Meaning don’t just stop at living below your means when it comes to the car and house, but also keep yourself in check by not eating out too often (or extravagantly) or overbuying on clothing or unnecessary household items.   Also, be careful and mindful about mental accounting and thinking that because you saved here and there, you can now splurge on expensive hobbies that eat up your savings. This is why having a separate emergency fund is vital, and you are consistently saving 15% toward retirement, plus saving to pay cash for other high-dollar expenditures. Get educated and apply what you learn Being willing and eager to learn and seek out ways to improve are traits that only some have. A quote from Harry Truman addresses the topic: “Not all readers are leaders, but all leaders are readers.”   Finding new ways to save and make money can seem overwhelming, but thinking outside the box can open many doors. Those constantly seeking ways to better their family’s financial strength are necessary for those who do not make a large salary, so they must be efficient and innovative with the dollars they have or ways to make more.   For some people, this may mean buying a few rental properties, or others may start a side business. Still, most modest-income millionaires spend efficiently and get creative with finding hidden savings. To have these savings or multiple sources of extra income to add up and make a difference in the march toward millionaire status, they cannot be occasional one-offs you fall into, but a daily proactive mindset. Most people like and want to save money, so a common thought or sentiment when someone shares a money-saving tip, or extra income option is “great, good to know, I’ll check into that,” but then the follow-through is lacking, and getting ahead remains more of a wish than reality.   Remember, extraordinary people are ordinary people who do ordinary things; they just do them more often than most people. Intelligent, friendly, and curious people have a bit of a head start in bettering their financial position. However, they still have to have the discipline and effort to apply the helpful money-winning information they have learned. Keep good company A Bible verse my mother often quoted to me was 1 Corinthians 15:33, which says, “We should not be deceived because bad company corrupts good character.”   This could be interpreted as if most friends and those we interact with have poor money and life habits, our ability to make sound financial choices will be strained and murky. On the opposite end of the spectrum, if the circles you run in are people who are highly disciplined and wealthier than you, then you naturally are more likely to pick up money-winning habits from them. This concept is heavily correlated with the previous attribute of constant learning. The advantage is that rather than seeking out and broadly applying concepts by trial and error, you can constantly be in learning mode and have built-in coaches and teachers who want to help you. Also, this form of education is more fun because it involves simply having friendly and informal conversations. Even if the “tips” or life lessons you are learning are not directly money-related, having highly effective people speaking into your life and motivating you to improve yourself and become more disciplined, the effect will likely carry over into your money habits. Avoid Debt The only debt that makes sense in most cases to incur for virtually every family is a mortgage. So, as long as you are buying a house within your means (payments, 25% or less of your take-home pay), then it makes sense to start building equity so that by retirement, you have paid for an asset that you have enjoyed years of use and necessary function out of.   Other debts that sometimes make sense for some people are starting a business or some real estate transactions. These can carry some risk but generally incur a relatively low borrowing cost for an appreciating asset. That said, do extensive homework and proceed with caution.   Consumer debt is the debt category that NEVER makes financial sense. If there is any value at all, it is a depreciating asset, and it usually has a very high borrowing rate. A millionaire built on a modest salary rarely, if ever, has a credit card balance.   There are two primary keys to avoiding consumer debt. The first is to build and maintain an emergency fund. No matter how much someone plans and prepares, life throws curveballs at everyone, and a financial winner will be ready for the unexpected to occur with their emergency fund. The surprise ER visit, or blown transmission, is more of an annoyance than a catastrophic event that blows up your financial goals. Making and sticking to a budget  is the second primary key to avoiding debt. You need to confirm that your spending in all categories aligns with your income, and you predetermine where every dollar will go. The Ramsey Solutions team calls this the zero-based budget , where every dollar is assigned a category. Summary Proverbs 13:11 says: Wealth from get-rich-quick schemes quickly disappears; wealth from hard work grows over time. So our grandpa, who told us that it is a process and takes a lot of time and sacrifice, was not lying to us; he was just agreeing with our Creator. Even when an intelligent person knows the time it takes to become a millionaire, many will look for a secret shortcut or try to take an easier path. Still, God reminds us in Proverbs 28:20 that a person who wants quick riches will get into trouble.   So yes, an instant millionaire does happen for pro athletes or the musician who catches lightning in a bottle with a hit song, but this is not the reality for over 99% of us. So, approaching your finances with humility, knowing that it is not easy, yet with some confidence that you can do it over time, is good clear-eyed thinking. Few get-rich-quick-schemes pan out, but get-rich-slow plans are often successful if you apply the principles we discussed. The earlier you start using these principles, the sooner and easier it will be to become a millionaire. But it is a mistake to think it is too late to work on the millionaire mindset and benefit from good money habits, even if you don’t quite hit that nice round of $1,000,000 net worth.   If you would like to talk to a financial advisor  but do not have one yet, we have a team of advisors at Whitaker-Myers Wealth Managers  with the heart of a teacher who can answer your questions about investing and put together a plan to help you achieve your financial goals.

Most Valu able Asset Your most valuable asset isn’t your home, car, or retirement account. It’s the ability to make an income. Your ability to provide an income is essential to your family’s day-to-day ability to afford goods and their future. What would you do if you couldn’t work? How far could you go without a paycheck? Only 14% of Americans own some form of disability coverage. Fifty-one million Americans lack sufficient disability insurance coverage . Disability insurance is a proven way to help protect you and your family by replacing a portion of the income you would lose if you suffered an illness or injury that prevents you from working.   What is Disability Insurance? Disability Income (DI) insurance is an insurance policy that provides income to individuals who can no longer work because of a disability. Disabilities can disrupt incomes and prevent people from maintaining their  standard of living , paying their bills, or providing for their families. Enrolling in a disability income insurance policy can help individuals mitigate any losses from an illness or accident leading to a short- or long-term disability.   How it works DI insurance isn't designed to guarantee 100% of your regular income. Instead, it intends to replace about 60% of your  gross income . Premiums  are based on a series of factors, including age and occupation. If you work in a field with a higher risk of injury, your premiums will be higher. The amount of income you receive is also factored into how much you pay for coverage—the more you earn, the higher your premiums. Policies pay benefits if illness, accident, or injury prevents you from performing your occupation's material and substantial duties. Benefits are tax-free because the policyholder uses  after-tax dollars  to pay premiums. Unlike health insurance payments, disability benefits are paid directly to you, so you can use the funds however you like. As long as you qualify, payments will continue until you are able to return to work or until the end of your benefit period.   Types of Disability Insurance There are two types of DI coverage: short-term and long-term.   Short-term disability insurance can provide weekly benefits for a limited time, typically about six weeks up to two years. This coverage is often known as “own occupation,” which means you’ll be paid benefits if you are disabled due to an injury or illness that prevents you from being able to perform the duties of your occupation.   Long-term disability insurance provides weekly benefits for an extended period of time up to a specific age, like 65. Most policies will pay long-term benefits if you cannot perform the duties of your occupation for more than 24 months.   Disability Insurance vs. Government Programs You may be wondering why I would need disability insurance when the government offers programs to help me. Government programs like Social Security Disability are available to most workers who have been in the workforce for a specified period of time. Still, the program's benefits may be insufficient to address all of your financial needs, and they usually do not offer all the features you would be able to purchase with an individual policy.   Consider buying an individual policy if you don’t have any or enough disability coverage at work or are self-employed. Employer-sponsored disability insurance usually pays only a portion of your base salary, up to a cap. It’s a good idea to supplement that coverage if your salary exceeds the cap or you depend on bonuses or commissions.   An insurer will consider other sources of disability insurance to determine how much coverage you can buy.   Benefits of buying your own policy By buying your own policy, it lets you: Customize the coverage with extra features, such as annual cost-of-living adjustments Choose the insurance company with the best offerings Keep the coverage when you change jobs Employer-paid coverage ends when you leave the company You might be able to take the coverage if you pay the full premium for disability insurance offered through the workplace Control the disability insurance The coverage stays intact as long as you pay for it Employer-sponsored coverage will end if the employer decides to stop providing disability benefits Collect benefits tax-free if you become disabled If the employer pays for the coverage, you must pay taxes on the benefits   Cost of Disability Insurance The annual price for a disability insurance policy generally ranges from 1% to 3% of your yearly income, according to the Council for Disability Awareness.   A variety of factors affect the cost: Your age and health You’ll pay more the older you are and the more health problems you have Your gender Women usually pay more because they tend to file more claims Whether you smoke You pay less if you don’t smoke Your occupation You’ll pay more if you work in a job with a high risk of injuries The definition of disability The broader the definition of disability, the higher the premium A policy that covers you if you can’t work in your own occupation but could earn income in a lower-paying job will cost more than a policy that covers you only if you can’t work at all Length of waiting period This is known as the elimination period You can reduce the premium by increasing the waiting period before benefits kick in Your income The more income you have to protect, the more you’ll pay for coverage Length of benefits The longer the period that the policy promises to pay out if you become disabled, the more you’ll pay in premiums Extra features Additional features, such as cost-of-living adjustments to protect against inflation, will increase the premium   When to get Disability Insurance Everyone needs to review their coverage options, but most importantly, if you are a small business owner, self-employed certified professional, the primary income generator, or a high earner. Small business owners do not have the option of purchasing coverage through a large employer.   Individual disability insurance can help replace more than just your salary, such as bonuses and commissions, that sales professionals, stockbrokers, and others who receive income above straight salaries rely on.   All of this information is great, but the best way to express how important disability insurance is is to share its impact on someone who has been able to utilize its benefits.   A Real-life Example When my friend Tim decided to open his own business, thankfully, he worked very closely with his insurance agent to put comprehensive personal and business insurance in place. At the time, he didn’t know that his careful planning would save both his business and his family from financial ruin. Tim suffered a life-threatening aneurysm that left him unable to work. Thanks to disability insurance, he received financial support during this challenging time. The policy helped cover essential expenses like his mortgage payments, utility bills, and medical costs, allowing his business to continue operating even when he couldn’t be actively involved. The coverage provided a very crucial safety net that protected his income and safeguarded his operations. It was and is a valuable asset that offers peace of mind to Tim and his family.   If you are interested in learning more about Disability Insurance or feel like this could benefit you and your family, reach out to your financial advisor . They can speak with you more about this topic and get you in contact with the right resource.

It seems that the topics of inflation and interest rates have been all over the news this year, as buying groceries and owning a home have both become expensive ventures in their own right. The Federal Reserve’s September meeting is expected to reveal the first interest rate cut since March 2020. With that impending news, it might be helpful to look at two of the main influences on the U.S. Economy, which may seem cloaked in mystery to the Average American: Monetary Policy and Fiscal Policy.  This article will explore each of them and their impact on our lives.   Monetary Policy This refers to the actions taken by central banks, including the Federal Reserve (AKA, The Fed), to affect change in the economy on a macro level. The government created the Fed to manage the money supply and prevent economic collapse. Their policies are intended to impact employment (in a good way), economic growth, and, most notably, prices of goods. Monetary Policy deals directly with interest rates and the economy's money supply.   Interest Rates This is the buzzword for many. An interest rate is the price an individual or entity pays to borrow money from the lender. The home mortgage is perhaps the most talked about type of loan impacted by interest rates, but car loans, credit card interest and even bond yields are other notable arenas where interest rates reign. You might wonder what goes into changing interest rates. How do they go up, and how do they go down? This can be a complicated question, but we’ll put it simply. The Federal Reserve raises interest rates when the economy heats up. This can help them achieve their goals of stabilizing prices and maximizing employment. The Fed will cut rates when the economy has cooled, in an attempt to reignite economic activity (get people to spend their money). The adjustments of interest rates are reactionary, and the overall success of the macro-economy is (supposed to be) in their best interests when doing so.   Money Supply This is a bit more complicated. Money is far more intangible than many of us think it to be. It all goes back to the advent of paper money, which served as a depositor’s receipt, representing the value of a stash of metal somewhere else, without requiring the owner to lug it around with them. The paper (or plastic) we carry now is merely a representation of a tangible thing that is somewhere else.   Is your head spinning yet? I recommend the book “Money – the true story of a made-up thing”  which delves deeper into this topic and the history of money for further learning. I’ve digressed, so let’s move back to how the Fed impacts the money supply.   By adjusting the monetary base, or amount of money in circulation, and the amount of money required to be on deposit with the reserve, they can help cool or heat up the economy, whichever is needed. There’s far more that could be said about monetary policy, but simply put, it is less political than fiscal policy and more about keeping the economy functioning than anything else.   Fiscal Policy This is far more entangled in politics as it pertains to the government’s revenue. Fiscal policy boils down to two main things: Taxes and Government Spending. It’s all about the government’s balance sheet and deals directly with the government's ability to fund its operations, which can also impact economic growth.   Taxes As you may have noticed, taxes are constantly changing. You may have also noticed that with each newly elected regime, the tax code takes on a particular flavor that jives with the policy of that regime. How does that actually happen, though? In short, it looks like this: In order for a new tax to be implemented, it has to pass through Congress and work its way up the chain of command, and then it gets written into law as part of our lovely tax code.   Government Spending As I write this, the national debt sits at around $35,000,000,000,000. Actually, it isn’t sitting at all but climbing by the hundreds of thousands each second. Take a look for yourself here .  The bottom line is that to operate this country, the government has to spend money. How they get that money is simple: They bring in tax revenue and sell debt. However, the things on which they spend that money is a hot debate topic that I don’t intend to ignite here. Government spending is the second of two critical footers upon which the fiscal policy is built.   Selling Debt This refers to Government Bonds. Simply put, when the Government needs money to fund their spending (always), they issue bonds to the public. When you buy a bond, you’re loaning money to the government. In return, they promise to return that money to you and pay you interest, making you the lender in the relationship. This provides the government with the cash it needs to operate while it provides the investor/lender a safe investment with clear expectations, backed by the full faith and credit of the U.S. of A.   You might notice a beautiful dovetail of the Monetary and Fiscal policies in the above example, as interest rates play an essential role in the transaction. Though the country’s monetary and fiscal policies are separate and set by separate entities, they’ll forever be intertwined.   If you have questions about these topics or about investing, please reach out to our team of financial advisors .