Compounding interest is a concept that many people are familiar with, especially in the investing world, and it can most simply be thought of as “interest that you have already earned that is earning interest on itself.” Not only is this a valuable phenomenon when achieved with long-term investing, but can be extremely detrimental when the lender is earning compounded interest on you. (Yes, to no surprise, we are talking about debt!) Albert Einstein and Dave Ramsey do have this loose connection. We not only argue that long-term and disciplined investing is a key to retirement success, but also that avoiding debt to the nth degree is also a key, not only for financial success, but also psychological and emotional success. Albert Einstein called compounding interest “the 8th wonder of the world”, and also once said “he who understands, earns it… he who doesn’t… pays it.” To throw a little bit of high school-related math on the reader that might not be as familiar with the concept of compounding interest, understand that this is an exponential or parabolic concept not a linear one. Also reference this simple, and hypothetical example, that you may have heard of before as well. You have two choices... being handed one million dollars today OR receiving a “magical penny” that doubles in value everyday for 30 days… Which scenario are your taking? To put it briefly, that “magical penny” will be worth over five million dollars on day 30. On day 20, you are looking at only a hair over five thousand dollars. What does this tell you? Good investments, a good plan, and discipline are all secondary keys to achieving compounding interest, whereas TIME is the most valuable asset of all. So, if you are telling yourself that you will put aside money for tomorrow, or when you “get to that priority”, instead of today (disclosure: being debt-free outside of a mortgage is still a key here in our minds), you are putting yourself at a huge disadvantage. Here is a list of ten summarized and simplified reasons why compounding interest is so valuable: 1. It is the great equalizer – it does not discriminate and anyone can achieve this. 2. Momentum is utilized, and this can be psychologically and emotionally beneficial as well. 3. It can and does create Everyday Millionaires (EDMs). 4. Patience is taught – and you know that cliché about it being a virtue overall. 5. It lets you sleep good at night. (Just like a healthy emergency fund.) 6. It is your friend even if your income is statistically average or below-average. 7. It teaches and rewards discipline. 8. It separates those who are savers from those who do not save. 9. Allows for the creation of generational wealth. 10. It is not rocket science! Sources: https://www.clearwealthasset.com/einsteins-8th-wonder-of-the-world/ https://einvestingforbeginners.com/compounding-interest/

Many of Americans woke up to a surprise in their bank accounts last Thursday morning. An extra deposit, they may or may not have been expecting was delivered, courtesy of the $1.9 trillion American Rescue Plan Act of 2021. This money, while extended above normal levels, is an advanced payment of the credit you’d normally claim when filing your taxes. The thought process, at least in my opinion, was to give Americans money now, when they may need it more, while recovering their life from the pandemic, than waiting for the 2021 tax season to roll around, in 2022. With a record 9.3 million job openings in the US right now, you could argue that, a cash flow crisis is now what is hurting Americans at the moment, but rather the supply chain shortages and rising inflation numbers are something to be more concerned about. But alas, here we are, and it begs the question what should one do with these payments? While, currently the American Rescue Plan Act of 2021, is set to expire at the end of this year, it certainly has been discussed, that this could be made permanent, at least for a few more years. Let’s assume, that you as a parent are reading this and understand that compound interest is the eighth wonder of the world. You know that the younger you save, the less you have to save to end up with a very large number. So technically, getting this increased windfall in monthly installments may be extremely beneficial, perhaps not changing your total tax situation, but rather giving it to you in installments you can then immediately put away for little Johnny. Let’s run through the numbers really quick. The child tax credit typically gave qualifying families a $2,000 credit per child. You’ll now be receiving (again for 2021 only currently) $3,600 for child that are younger than age 6 and for child from 6 to 17 you’ll receive $3,000. These are all subject to income limitations. INCOME AND AGE CAPS FOR THE CHILD TAX CREDIT Family Upper-Income Qualification Limit Single filer -- AGI below $240,000 Head of household -- AGI below $240,000 Couple filing jointly -- AGI below $440,000 Dependent Age Qualifications Ages 5 and younger -- up to $3,600 Ages 6 to 17 -- up to $3,000 Age 18 -- $500 Ages 19 to 24, full-time college students -- $500 Young Married Couple – 1 Child, Age 2 Mr. and Mrs. Smith were just married four years ago and welcome their daughter Cecilia, into their family nearly two years ago. They have decided since they are in Baby Steps 4, 5 & 6, that they would like to use this child tax credit for Cecilia’s retirement. They are going to put the entire credit away this year in a UTMA account and will continue to put the $2,000 child tax credit (we are assuming it drops back down in 2022) in the following years until she turns 18. By the time Cecilia is 18, they’ll have saved $31,998 by initially contributing $3,600 for 2021 and $2,000 every year afterwards concluding when she is 18. That account would have been worth around $77,425, assuming an 8% rate, meaning her investment gain was $41,826. Not a bad haul for little Cecilia at 18, but, because she was raised in a smart money home, where she has been taught the principals of Ramsey Solutions & Whitaker-Myers Wealth Managers, through amazing tools such as Financial Peace Jr., she knows that she should allow this money to continue to grow for her future retirement. She keeps the money invested but never contributes again to this specific account and follows her own Baby Steps, which help her and her family to succeed with money. At some point within Cecilia’s adult life her parents pass away and she thinks about the wonderful blessing her parents have left her, through their savings of her child tax credit. She continues to let it grow. By the time she turns 67, this account is now worth $3,851,819, at the assumed 8% rate of return. Remember, we said that Cecilia was a smart 2nd generation FPU kid, so she has saved enough on her own to fund her retirement so she continues to allow this money to compound and grow. By the time she is 80, it is worth a staggering $10,860,085. Cecilia is actively involved in her church and she is able to donate the money for her entire church to build an orphanage in a third world country, she is able to fully fund a pregnancy center that supports the right to life, she is able to change the world! Conclusion If anything, this child tax credit payment has brought attention to your ability to use it to bless your child and leave a legacy for them for generations to come. Proverbs 13:22 says, “a good man leaves an inheritance to his children’s children, but the sinner’s wealth is laid up for the righteous”. While we believe an inheritance, is not always financial, it could be things such as wisdom, memories, love and many other things you can bless your children with, we certainly know that money given to them is the byproduct of your hard work, savings and wisdom, over your lifetime. Use this Child Tax Credit as a catalyst to consider the ways you can help to build financial security for your child. Your Whitaker-Myers Wealth Managers Financial Advisor, is here to help you implement your child savings goal, with the correct account and amount today.

In 1989, Senator Bob Packwood of Oregon, and Senator William Roth of Delaware, proposed the idea of what they termed at the time, the “IRA Plus”. Their idea was to allow individuals to make contributions now, with no immediate tax savings (no benefit today), and then allow for tax free growth and tax-free withdrawals of the entire balance at and during retirement. As things tend to do in politics, it became a bargaining chip and finally, on a glorious day in 1997, President Clinton signed the Taxpayer Relief Act of 1997 with 100% Republican support and 82.2% Democrat support. At Whitaker-Myers Wealth Managers, there are two things we are pretty passionate about: Dave Ramsey & Ramsey Solutions teachings and the Roth IRA. The Roth IRA, not only makes financial sense for most people but considering the out of control government spending we’ve seen recently, do you honestly think that tax rates and structures will be lower in the future, then they are today? As of July 1, 2021, the U.S. Treasury’s official figure for debt of the federal government is $28.5 trillion, which only three short years ago was about $19 trillion. This amounts to approximately $85,680 per person living in the US. Considering many US persons don’t even pay taxes, the debt per actual taxpayer is a staggering $183,000. The point of this article is not to discuss the merits or risk of government borrowing, as some would argue national debt is actually good, but to make the point, that amount of debt, needs to be serviced (interest) and taxes are the way it’s serviced. More interest owed equals more taxes needing to be paid… Hence the point of this article, the Mega Back-Door Roth. Normal Roth Contribution Limits (2021) $6,000 – Annual Roth IRA Contribution $1,000 – Annual Roth IRA Catch-Up Contribution (if you’re 50 or older) $19,500 – Roth 401(k) Contribution (assuming your employer allows it) $6,500 – Roth 401(k) Catch-Up Contribution $25,500 – Annual Roth contributions for those younger than 50 $33,000 – Annual Roth contributions for those older than 50 Of course, to be able to make the Roth 401(k) contributions, you must have access to a 401(k) with a Roth feature and, if you don’t, please have your employer contact Whitaker-Myers Wealth Managers 401(k) Group to discuss how to implement the Roth 401(k) at your place of employment. If you do have access to a 401(k) at your employer, it is possible that they allow after-tax contributions, after you max your 401(k) contributions for the year. The after-tax contributions are what creates the mega back-door Roth. The mega back-door strategy relies on a little-known fact about 401(k) plans. The internal revenue service allows employees & employers to set aside up to $58,000 per year in a 401(k) account, and because of the $6,500 catch up contributions, it’s $64,500 for those 50 or older. To get to the $58,000 annual 401(k) contribution limit the participant would have already made their $19,500 contribution into either the pre-tax, or Roth account, within the 401(k). They would now be able to contribute $38,500 through an after-tax contribution (this assumes no match and a match would decrease the amount eligible for the after-tax side). The strategy would then be to transfer the monies from the after-tax side of the 401(k) to their Roth 401(k) or Roth IRA soon after making them, therefore only requiring income taxes to be paid on the growth of the investment, from the time of the initial contribution to the conversion. Client Example Client A who makes approx. $250,000 in salary and bonus and receives a 5% 401(k) match from his employer, decides he would like to contribute the $58,000 into his Roth IRA through the mega backdoor strategy. Client A makes his normal $19,500 contribution from January 1st – April 30th and now he’s ready to make the after-tax contribution for the remainder of the year, which would be the $58,000 - $12,500 (employer match) - $19,500 (maximum employee contribution) = $26,000. From May 1st – December 31st , he maxes the after-tax side of his 401(k) plan. Then on January 2nd of the following year, he and his financial advisor call his 401(k) provider and have them roll over his after-tax contributions of $26,000, which has earned $1,000 (assumed) in market growth over the last 8 months. The $26,000 would not be taxable, because it was an after tax, hence already taxed, contribution, but the $1,000 in growth has never been taxed, therefore it would need to be taxed at his current income tax rate, perhaps 24% federally, therefore costing him around $240 in taxes, to complete his mega back door Roth IRA. 401(k) Plan Adoption To be able to complete the mega back door Roth, you’ll need to determine if your plan allows for it. Additionally, you’ll want to ask if your 401(k) plan allows participants to roll their after-tax savings over to a Roth IRA or convert this money to a Roth 401(k), while you’re still employed. If you’re over 59 ½, most plans will allow you to roll over your 401(k) savings, both pre-tax and Roth, to an IRA, even if you continue to work for the company and contribute to the 401(k) plan. Today, Vanguard Group says that about 40% of 4.7 million participants in its 401(k) plans have access to after-tax savings, hence would be eligible for the mega back door Roth. Currently, only 10% of those participants have made such a contribution. On the other hand, Fidelity, who is the largest retirement plan provider in the US, says more than 90% of its 19.5 million participants in its 401(k) plans are eligible to make after-tax contributions. Additionally, about three quarters of 401(k) plans that Fidelity administers offer a Roth 401(k) option. Your Whitaker-Myers Wealth Managers Financial Advisor would be more than happy to discuss the mega back door strategy with you to determine, if it makes sense for your unique personal situation and to help investigate whether your companies retirement plan allows such a benefit.

Everyone views retirement a little differently. Some folks love their career and want to continue pursuing their passion for as long as their health and desires will allow them to; while others are looking for the exit sign, in regards to their career, as soon as they can spot it. For those that long to be out of the workforce earlier than many of their friends and peers they must, of course, save money diligently over an extended period of time. But even the Everyday Millionaire that plans on retiring at 60, still has to deal with how to cover themselves in the event of a cataphoric medical event, which could wipe out years of savings, with one diagnosis. Thankfully for clients of Whitaker-Myers Wealth Managers, which is part of the Whitaker-Myers Group, we have a benefits team led by President Chris Vanderzyden, who help clients navigate their options when they are considering leaving employment before Medicare (government ran health insurance for retirees) kicks in at age 65. Recently, we asked Chris to spell out some of the primary options a client would consider when looking to purchase health insurance, pre 65. COBRA – Are you Eligible? In many circumstances, if you lose your job either involuntarily or through retirement, you can still enjoy the benefit of your companies group health insurance plan for a limited period of time. COBRA stands for the Consolidated Omnibus Budget Reconciliation Act and according to Chris Vanderzyden, President of Whitaker-Myers Benefits Plans, “you can expect to pay 2-3% more than the cost of your companies plan, while you were actively employed, but that is still less expensive than if you were to buy a policy on your own.” Continuation coverage under COBRA is typically available for a shorter period of time, as it’s designed to bridge your gap from one coverage to another coverage. You could expect your COBRA to last you between 18 and 30 months. Keep in mind, that if you were terminated for cause, it is likely you will not be eligible for COBRA coverage. Affordable Care Act Plans for Early Retirement Also known as Obamacare, this type of health insurance plan can be used for those that have no other options. The problem with the Affordable Care Act plans is they have increasingly become more expensive while not providing good coverage, in our opinion. One thing to note is that, the ACA plans, will not exclude you for pre-existing conditions which was a problem that many early retirees, in their 50s and 60s, faced when looking for coverage prior to the ACA. While the future of this program is in flux, it still may be beneficial to take a look to see if this provides you a pathway to health insurance coverage until Medicare. Spousal Health Insurance Coverage Perhaps a couple each carries their own health insurance coverage, during their working years, because their employers require that they only add a spouse to their plan, if the spouse didn’t have access to a plan through their own employer. Well, if one spouse is going to take the early retirement and the other is going to stay gainfully employed for a period of time, this option is going to be something to consider. This is an option that is going to save you a lot of money but will require one spouse to stay in the workforce, which in some situations may not be ideal. Part-Time Employment When asking why most folks want to retire early, the common answer is either, “we want to slow down” or “the stress of this job is getting to me (or my health)”. The desire to work may not be gone but many people understand their current situation may be unmanageable for much longer. If this is the case, a popular option for some is to find employment where they can help ease the burden of their cash flow. This can allow for Social Security Benefits to be delayed and increased, and to provide an answer to their health insurance problem. Below is a list of some of the more popular companies that provide health insurance benefits to part-time employees: Starbucks – 240 hours over a 3 consecutive month period or at least 20 hours per week. Roughly about a 5-month window before benefits will begin to meet qualifications Caribou Coffee – Something about a coffee trend here is brewing. Their website does not indicate a waiting period. Whole Foods – 20 hours per week required and benefits begin after the first 800 hours. UPS – This is a favorite of mine because they mix good pay, a growing industry (think Amazon!), and they provide benefits like you’re a full-time employee. However, you will need to complete 1 year of service. Costco – 20 hours per week and benefits would begin after a 180-day waiting period. Lowe’s – Another favorite of our clients because you become eligible for their health insurance benefits as of the date of hire. U-Haul – Here is one you probably didn’t expect. With a work from home customer service team, the company’s workforce is flexible. U-Haul offers a limited medical plan, so, a supplemental plan may be required. JP Morgan Chase – 20 hours a week and benefits begin after 90 days. JP Morgan, as many of the large banks did, raised their minimum wage to $15 per hour. Health Care Sharing Programs Many of our Dave Ramsey fans remember hearing Christian Healthcare Ministries advertise on the Ramsey Show for many years. Christian Healthcare Ministries is one example of a Health Care Sharing Program. According to their website, "CHM is a membership-based, nonprofit ministry through which hundreds of thousands of Christians voluntarily share to pay each other’s medical bills. Members who incur medical costs eligible according to our Guidelines submit their bills to CHM along with a few simple forms. Bills are then shared or reimbursed – usually by way of a check in the mail." One of the main benefits of an option like this is that the monthly premiums are dramatically lower. According to CHM’s website their plans run anywhere from $78 - $172 per month and a have Brothers Keeper option which allows for sharing of extreme medical costs. They anticipate on average should cost about $45 per quarter, but varies because it’s based on actual medical costs shared. Other popular Christian health care sharing programs: Medi-Share Samaritan Ministries Liberty Healthshare Self-Insure or Hybrid with a Health Savings Account (HSA) A fear of any type of medical insurance that can require the insured (you) to carry more of the day-to-day costs of health insurance is, how would I pay for those costs? A Health Savings Account (HSA) is a perfect opportunity to save money early in your working life to anticipate the inevitable costs that will arise in retirement, as it relates to health. HSA’s provide tripe tax savings in that they allow for pre-tax contributions, the assets inside of the account grow tax-free and when withdrawn, if used for qualified medical expenses, can be taken out totally tax-free. When considering if you should contribute to an HSA, please remember you must meet certain qualifications. Lastly, Have a Good Overall Financial Plan Although we believe in financial planning at our firm, no decision should be made in a vacuum. Your entire financial situation should be understood, and given thought to, when considering health insurance options in retirement. The advisors at Whitaker-Myers Wealth Managers are here to provide you with a customized financial plan, developed with the principals of Dave Ramsey, and the team at Ramsey Solutions, incorporated at every step. Connect with our team today to learn more.

Financial Advisors with the heart of a teacher. It’s one of the first things you see on our website. It’s one of the sayings you’ll hear Dave Ramsey and the crew at Ramsey Solutions, constantly preach. It’s what we try to instill in the life blood of any financial advisor that puts on the green and white Whitaker-Myers jersey (ok, ok we don’t actually have jerseys….. yet). To that end, clients will see a few new reports uploaded to their Morningstar Client Login Portal each month. These reports are designed to provide clients with a better understanding of their investments. Let’s dive into what you’ll begin seeing each month. Stock Intersection Report The Stock Intersection Report actually X-Ray’s your mutual funds and ETFs to help you understand what you’re investing in. You might ask, “aren’t I investing into mutual funds” and the answer would certainly be yes. However, let’s consider what a mutual fund is for a moment. It’s a basket of stocks, assuming it’s a stock mutual fund, that the fund manager has picked, that spreads your risk amongst many different companies. Therefore, if one company has a bad year, gets bad news about it published, goes bankrupt, I didn’t lose all my eggs because they weren’t in one basket. As a result, when you see a mutual fund on your statement, you can assume that you’re invested in a few hundred different stocks (or bonds if it is a bond mutual fund). Which stocks are you invested in? That is exactly what this report helps you understand. The featured picture helps this client understand their largest holding(s) when combining all their mutual funds together and x-raying them. In this example, Amazon at 2.03%, is the largest holding of this portfolio and that is because five of their mutual funds invest into Amazon. The T. Rowe Price Blue Chip Growth Fund has $6,677.45 of the clients’ money invested into Amazon, which equates to 1.13% of their portfolio. Following that Invesco’s QQQ has $389.50 invested into Amazon and so-on. As a point of comparison, the S&P 500’s top five holdings are: Apple (5.48%), Microsoft (5.21%), Google (3.94%) Amazon (3.84%), Facebook (2.21%) Performance Summary Report This monthly performance summary report will give you a view of your portfolio’s performance since your inception with Whitaker-Myers Wealth Managers to the ending of the previous month. The returns are shown on an annual basis, over the past four rolling years and a since inception return which is an annualized number, meaning if I see 9.66%, it means 9.66% per year, since inception. Please keep in mind, if you view your account on the Charles Schwab website (schwab.com) Schwab will show you a Gain/Loss tab but that is reporting a tax gain or loss, which is used by your advisor and/or accountant to help you calculate the amount of taxes owed when an investment is sold. This report from Morningstar should be used when determining your rate of return. Portfolio Holding Analysis This report provides you with an analysis of each of your mutual fund holdings. Specifically, we added this report because it provides you the Morningstar Rating for each of your mutual funds. While not an end all, be all, Morningstar Ratings can provide a client with an idea of how well a fund as performed, relative to its benchmark (how it should have performed based on peers and the stock market in general). Every fund category has its own benchmark. For example, the benchmark a growth & income fund would use, would be different than the benchmark an international fund would use. How are you to decipher all this information? One way, is the Morningstar Star Rating. Five is the best and one is the worst. People are generally visual – therefore if I see the majority of my funds at a four- and five-star classification, I can be confident to know I’m in solid performing mutual funds and/or ETFs. Conclusion It’s our desire that this information is helpful and creates an even deeper sense of understanding when reviewing your investments. One thing we know, is they can never replace the person-to-person learning and understanding a financial advisor, with the heart of teacher can provide. Should you have any questions or need access to your own personal Morningstar Client Portal, please reach out to your advisor today.

An all to common scenario in our office is, Client A walks in, has done an excellent job of saving money, presumably enough money to retire on, yet it’s all in tax deferred, retirement vehicles that certainly have their many benefits but all too soon, this client, will begin to have to deal with the dreaded Required Minimum Distributions (at current law, age 72) and at some point those RMD’s look to become more than the client wants or needs, therefore forcing taxes on an asset that would be better to be left to a tax favored account. This is where Roth conversions earlier in your retirement lifecycle (either pre or post retirement) can make a lot of sense for the right person. Roth conversions are the process of taking pre-tax money, which could be money in your Traditional IRA, 401(k) or another pre-tax asset and moving (converting) it to your Roth IRA. This requires you paying tax today, but once in the Roth your money will start growing tax free, will be distributed tax free and there will be no Required Minimum Distributions in the future. There are a few common planning ideas around Roth conversions: The 12% Roth Conversion For those that are in the 12% tax bracket considering utilizing the rest of this bracket to complete your Roth conversions. For a married couple, the 12% federal income tax rate goes all the way up to $81,050. With a standard deduction of $25,100 that couple could earn up to $106,150 and remain in the 12% bracket. Once you go above this taxable income level the rate jumps to 22%. For non-married individuals the 12% federal income tax rate goes up to $40,525 with a standard deduction of $12,550. This means a single individual could have taxable income of up to $53,075 and still remain in the 12% bracket. Let’s say a couple’s income was going to be $75,000. With the standard deduction ($25,100) they would only pay taxes on $49,900 therefore leaving them up to $25,100 to convert to their Roth IRA while staying in the 12% bracket. If they choose to convert the entire $25,100 pushing them to the top of the 12% bracket, this would cost them $3,012 in federal income taxes. If the $3,012 tax price tag was too expensive, they could consider converting a smaller amount that would still be in the 12% tax bracket and would fit their budget. Below are examples of client’s scenarios we’ve been able to utilize the 12% tax bracket strategy: When one spouse decides to leave the workforce for a few years to care for young children or an aging parent. This provides an income drop that allows the client to now utilize the remaining 12% bracket for Roth conversions. One spouse may retire before the other because of age differences or job stress level situations. This provides the drop in income for a few years needed to maximize the 12% bracket. When a client retires, they may see a drop in their taxable income. While time is not on your side anymore there may be situations where a Roth conversion at the 12% bracket makes sense to reduce future RMD’s, that may force you into the higher brackets. Fill Out the Bracket Another idea that is common in the financial planning world is the fill out the bracket that your currently in. While this can certainly be a little costlier for high income earners, it may be prudent to explore what tax bracket you are currently in and determine if you should pursue a Roth conversion to the top of that bracket. The federal brackets today are 10%, 12%, 22%, 24%, 32%, 35% and 37%. Your decision to fill out your bracket with a Roth conversion may partly depend on your thoughts around where tax rates will be in the future but if you’re like me, you’ve got to believe they’ll be going higher over time. Stock Market Drop? Convert Last year during the height of the COVID-19 pandemic the stock market dropped over 30% at its worst. Later in the year, the market fully recovered and the S&P 500 ended the year up 18.40%. When the market dropped it provided a unique window for clients to do Roth conversions and have all the recovery happen inside of the Roth IRA. For example, an asset that was worth $10,000 may have dropped to $7,000. If the $7,000 was converted, you would owe tax on the $7,000 conversion. If the money was subsequently reinvested when it was converted the asset would have reaped all the recovery and subsequent growth inside of your Roth IRA. Get a Tax Pro As we constantly mention to our clients, please consult with your local tax professional. It’s well worth the cost to ensure you don’t make mistakes on a Roth conversion. The advisors of Whitaker-Myers Wealth Managers are happy to discuss your personal situation to determine if a Roth conversion may make sense for you.

The word of the day is VOLATILITY, and in the investment world, this word can leave a bad taste in your mouth. Is it avoidable? The answer is certainly not. As an advisor, investor, or both, we all know that volatility is a natural aspect of the stock market or any individual investment. We all wish the stock market appreciated in a perfectly straight line, but then again, it would be too easy and it would not really work the way it has for its 100+ year history if that were the case. With a long-term investing horizon in which natural volatility of the market can be handled, we do make the argument that the stock market is the best place to be for general investing or retirement investing if you are investing intentionally and intelligently. A short-term need for regular income or withdrawal of investable assets tells us that a 100% stock market strategy should almost never be in place due to the natural volatility of the market. However, it does not mean that you cannot aim for great returns while attempting to minimize volatility to the best of your ability, and that is one of the many small aspects of our work that we help clients not only understand but attempt to achieve over a long period of time. In the investment world, we like to have fancy terms, and two additional terms to focus on today are systematic risk and unsystematic risk. Let’s think of these two definitions in a simpler sense: systematic risk is simply the natural risk of the stock market as a whole, and that heavily involves the concept of VOLATILITY. Unsystematic risk involves the risk of investing in only one company, one industry or sector of the economy, one country or geographical area, etc. Long story short, systematic risk is the risk that we essentially cannot do anything about, with understanding that the market does not go up in a perfectly straight line. Unsystematic risk is diversifiable, meaning that with an intelligent or successful strategy, it can be mostly diversified away. As an advising firm that works in the best interest of our clients first, we care about the appropriateness to a particular situation, merit, and long-term track record of a mutual fund or alternative investment. However, that does not mean we chase returns, or necessarily care only about the long-term return of an individual investment. We certainly utilize Dave Ramsey’s general investment strategy of investing in four different types of mutual funds or in more broad terms, four different categories or “sectors” of the stock market as a whole: Growth, Growth & Income, Aggressive Growth, and International. *See the chart... data is from 10+ years ago but overall concept is the furthest thing from being outdated (: As a company, we are huge Dave Ramsey fans, but we don’t just take his word on this strategy. More so, this strategy aims to minimize that unsystematic risk and the volatility of returns as much as possible. Please don’t let anyone tell you that you should either just invest in the Amazons, Googles, and Facebooks of today or in the smaller companies that could be the next Amazon, Google, or Facebook. Notice the discrepancy in returns for those small growth stocks (aggressive growth) between the years 2002 and 2003, or the difference in returns of large growth stocks from 1999 to 2000. This is volatility that you should not want to be subject to by being too concentrated in one specific area of the market, and I am going to make this argument with a mix of statements and calculations: The vast majority of investors fail at timing the market constantly and with chasing short-term returns Not only beating the market when the market does well is important, but losing less than the market when the market is down is just as if not more important Often times but not always, when 2 or 3 of these categories are doing really well, 1 or 2 categories are not doing so well and vice versa Example: Recent tax increases concern many investors that the market will see a pullback at some point. This may or may not be a valid argument in the short-term, however, these companies will do their absolute best to push the cost of tax increase to another party, whether it involves conducting more business overseas to deal with lower foreign taxes, outsourcing cheaper labor or more aggressively, or passing cost off to the customer. Regardless, this is just one small and specific example of why we believe allocating roughly 25% of stock investments internationally. When you simply look at the arithmetic average of returns over a long period of time, volatility has a directly correlated relationship with average annual (or another time period) return. More volatility = more negative affect on the long-term growth of an investment. Let’s look at an initial investment of $100. If you achieve 0% return in year 1 and 0% return in year 2, it should be obvious what you end with: $100. The average return for these two years on an annual basis is 0%. Let’s look at the same initial investment of $100. If you achieve 50% return in year 1 and -50% loss in year 2, you might think you end with $100. When in reality, you would actually end with $75, a 25% loss overall. The average annual return in a purely arithmetic sense in this scenario is still 0%. The same result is seen with -50% loss in year 1 and 50% return in year 2: -25% loss overall… or a $100 investment turning into $75 after 2 years. Another example: A $100 investment into small growth stocks as a whole at the beginning of 2002 leaves you with only $103.59 after 2 years (3.59% overall return) even though your average return between the 2 years was roughly 9% (-30.26% + 48.54%/2). A $100 investment into the overall bond market at the beginning of 2003 leaves you with just under $109 after 2 years (just under 9% overall return for the 2-year period) even though the average annual return between the 2 years was just over 4%. Takeaway: When you are looking simply at average mathematical returns, the only thing that volatility does is hurt you, and it is ultra-important to have a strategy that attempts to minimize volatility. If you are an existing client of ours and have questions regarding this concept, please don’t hesitate to contact your advisor. If you are not, hopefully this was a great initial learning piece as a new reader!

You too can create good habits, learn new behaviors, develop effective skills, and make decisions with confidence wherever you might find yourself today. As your coach, we will work together, tailor plans, and I will help you to realize your life and money dreams. I want you to feel comfortable and confident about your life and your money. My wife and I have personally walked these steps during the past 30+ years. We spent ½ of our marriage doing things the wrong way before spending the second ½ doing them the right way. I will help you to go further faster because I have been there and can show you the way. So, where do you find yourself today? See how I can help you to navigate every step of your journey. Let Us Begin to Take These Baby Steps Together Step # 1: Save a Beginner Emergency Fund The first and sometimes the hardest baby step is saving your beginner emergency fund. We are going to create an effective spending plan, give every dollar a purpose, and save an emergency fund. As your coach, you can trust me to help you with a personalized strategy to do so. And, doing so makes all the difference. You will receive judgment-free personalized attention, compassion, love, and support from me as your coach. Step # 2: Eliminate Debt How will it feel when you are completely debt-free of all non-mortgage debt? Leveraging the skills and strategy from step # 1, we are going to attack the debt with high intensity to get it out of your life once and for all. As your coach, I show you the way with milestones and celebration to help to motivate you to keep going and realize success. I walk with you during your journey and help you with the habits, skills, and behaviors to get it done. Step # 3: Save Your Emergency Fund Great job completing steps # 1 and # 2. Now, we are having fun, saving money, and building security for yourself and your family. You now have the skills necessary to realize success and during this baby step, you are going to save either a 3-month or 6-month emergency fund. As your coach, I am going to help you determine how much to save, why, and where to put it. This is an essential part of your overall financial plan. Step # 4: Invest for Retirement We are going to partner with an excellent financial advisor to invest your hard-earned resources to create financial freedom. As your coach, I am going to help you to design a plan, outline questions to ask, and help you to select an advisor who is going to represent you and your interests well. We are also going to outline together the amount that you may want to save to realize the retirement of your dreams and why. Step # 5: Save for College Education Take a moment and think about the joy and blessing of contributing to your child’s college education. We are going to leverage the partnership with the excellent financial advisor from step # 5 to optimally invest your college funds for your child. We are also going to talk about options, experiences, and how my wife and I paid cash for three children to graduate from college debt-free. Step # 6: Pay off Your Mortgage And, for the Coup de Grâce, get debt out of your life once and for all. You too can pay off your home mortgage! As your coach, I am going to show you how to achieve the ultimate in debt freedom by paying off your home too! Step # 7: Live and Give Like No One Else So, why do we want to rid ourselves of debt, build savings, save for a comfortable retirement, help our child with college, and completely payoff our home? To build God’s Kingdom. We have an opportunity to live and give like no one else. As your coach, I am going to offer ideas and help you to build relationships within your household and within your community. The most fun you will ever have with money is to bless others. Let us get started with a no-obligation introductory session. We will meet each other, review possibilities, and you decide if coaching is the right path for you and your family. You can schedule a time and date convenient for you at www.jm-financialcoaching.com.

Those of us that love and respect Dave Ramsey have heard him say that there are two types of investments he makes on a regular basis. The first, being mutual fund investing based on his principals of diversification (Growth, Growth & Income, Aggressive Growth & International) and also paid for, in cash, real estate. This leads many clients to ask the question, should I be purchasing real estate within my global investment strategy and how does it compare to the investing I may be doing into mutual funds? Great question and let’s take a look below. Before you dive into scenarios of what returns could look like in either mutual fund investing and real estate investing let’s discuss some basic foundational principals. First, I am assuming that the person considering buying real estate would be looking at a below $1 million property (commercial or residential) and would be buying the property after they have hit Baby Step 7 and are still actively contributing to Baby Step 4 and perhaps Baby Step 5 (if applicable). The investor would buy the property with all cash so as to not go back into debt therefore allowing the piece of real estate to be a blessing and not a potential curse. If there is a mortgage on the property and the rent stops paying for 3 months (which trust me can and will happen at some point) you don’t want to have to worry about finding the money to pay the mortgage. If you need a refresher on the 7 Baby Steps please visit Dave’s website www.daveramsey.com to catch up. Within real estate investing there are three types of return to be generated. Value increase (or potential decrease) of the property based on real estate values in the general proximity of your piece of real estate. Cash flow from the property which is derived from the rent paid to you from your tenant, whether they be a renter or commercial tenant. Finally, Deprecation of the property provides a tax incentive to own real estate because you’re able to depreciate the value of the real estate offsetting some the income, potentially saving you tax dollars. Stock Market investing most commonly would see only two of these three potential sources of return which are value increase (or decrease) and cash flow, to the extent the stock investment is paying a dividend (the shareholders portion of the profits paid to them). Let’s run through a quick example: Johnny buys a piece of residential real estate for $80,000 and intends to rent the property for $800 / month. After he accounts for maintenance and other potential repairs he plans on clearing for himself $600 / month. The property is in an area that has historically seen a 2% increase in real estate prices annually. The depreciation value is about $560 in tax savings. Johnny’s annual return is 9.70% ($7,200 annual rent + tax savings) +2% appreciation on property = 11.70% return. If Johnny were to increase the rent to $1,000 and clear $800 / month, it would increase his total return to 14.7%. Historically over the last thirty years 1991 – 2020 the stock market (using the S&P 500) has averaged 10.70% per year. There are certainly things we didn’t account for within this example (renter trashes your home or real estate market crashes hence the value of the property plummets) but this gives you a general of idea of how one might consider the return of a piece of real estate against the mutual fund investing you might be doing through your advisor at Whitaker-Myers Wealth Managers. One final factor to consider, is what is commonly called the “hassle factor”. Your mutual fund investments are not going to call and bug you about a broken dish washer or that they don’t like the curtains you put up in the living room. For some people, especially those that are not inclined to fix things themselves, this increased workload from their investments, which in turn could take away from family, relaxation or just general personal non-work time, might create a scenario where an investor may prefer to be in mutual fund options that just provide them a monthly statement and that is the extent to which they are bugged about the investment. Real estate investing for the right person might provide them with an attractive risk / return opportunity, but certainly is not appropriate for everyone. Your advisor at Whitaker-Myers Wealth Managers is happy to discuss the pros and cons of this scenario in addition to modeling the potential real estate purchase in your financial plan.

Having read the title of this article, it will inform you that my goal is to explain the main benefits of using a dollar-cost averaging investing strategy. However, first, it is important to understand what a dollar-cost averaging strategy entails, and there is a great chance that you as the reader may already be committing to this strategy without even realizing it! To put it briefly, let’s say you are putting 5% of your income into mutual funds in your 401(k), then you would be using a dollar-cost averaging strategy regardless of the specific frequency of those retirement contributions as long as they are consistent (weekly, biweekly, monthly, etc.) This strategy simply involves investing the same amount of money at these set intervals into stock mutual funds and/or other applicable investments, regardless of price-per-share of those mutual funds. Therefore, by investing with a consistent dollar basis, instead of on a per-share basis, you will buy more shares when the mutual fund(s) is “cheaper”. (Think when the market is “down”.) You will buy less shares when the mutual fund(s) is “more expensive.” (Think when the market is “up”.) Initially, many advisors and investment firms turn their heads to potential clients that don’t have large sums of money to invest. They try to discourage dollar-cost-averaging knowing that it is a beneficial and proven investing strategy for a vast array of people that significantly reduces market timing risk. This can mean less assets up front to take an initial investment management fee or a commission check. (P.S. As a friendly reminder, watch out for commission-based compensation structures.) I say this because we, at Whitaker-Myers, do not operate that way. There are two main things, among many more, that our advisors and company take pride in: working with and providing great advice, service, and strategies to our clients with THEIR best interest in mind and having the heart of a teacher. If you, the reader, are not an existing client and/or don’t know much or anything about our company, I hope the latter point shows through with this information. What Are the Benefits? I would like to dive into the benefits of implementing and using this strategy. I have also included a picture, with credit to Franklin Templeton, that shows a hypothetical illustration or case scenario of using this strategy with results in better investment returns then investing the same amount of dollars, on day one, with a lump-sum. However, the argument for dollar-cost averaging is not completely or even mostly mathematical or return-based in nature. In fact, when you think about the history of the stock market and the fact that it has provided substantial returns with ups and downs along the way, you will generally have a better chance of more substantial returns with an initial lump sum vs. spreading out that same lump into twelve monthly contributions in a one-year period. Although this is not an exact or concrete statistic, we are on par with Dave Ramsey when he says that finances, investing and underlying decisions are about 80% emotional or psychological and about 20% head knowledge. We would also argue that a perfect world or place to be for an investor would be the use of 100% head knowledge, but this is unrealistic with money, and we understand that. While most of us inherently know that buying low and selling high is a general benefit, many end up committing to the opposite. For the majority of people, the immediate thought when they see their investments decline, in the short-term, is to sell because of the uncontrollable fear of “How much more can I lose?”. Also, for the majority of people, the immediate thought when they see their investments appreciate in the short-term is “How much more can I make before selling?”. Dollar-cost-averaging is especially made to be a long-term buying strategy and a behavioral or psychological benefit: Dollar-cost-averaging lets you take on the position of timing the market by purchasing more shares of said investment when cheap and less shares are more expensive. This is in the most modest and least-risk inducing way. The majority of people are not in the position to invest in large lump sums in the first place. It’s beneficial for the overwhelming majority of investors to commit to a simple and disciplined investing habit or plan. Pinpoint market timing is nearly impossible, even for professional investors. • Regret and negative results WILL occur with poorly timed lump-sum investing. If committed to the strategy, you are committing to using bear markets, automatically, as a buying opportunity. Those who try to time the market completely have a historically better chance of failing than succeeding. Overall, this strategy allows those who use it to aim for great returns over a long period of time. This allows them to take on a much lesser risk that essentially equates to a more positive, emotional and psychological result.

If you are going to college to be a teacher, the Teacher Education Assistance for College and Higher Education (TEACH) Grant might be beneficial for you. Let’s look at what it is and who is eligible. What is the TEACH Grant? The TEACH Grant Program provides grants of up to $4,000/year to student who are going to college in order to begin a career in teaching. This grant is a little different from other Federal grants because it requires you to complete four years of qualifying teaching. If you don’t complete that teaching obligation, then the grant turns into a direct unsubsidized loan that must be repaid in full with interest. The interest will be charged from the date the TEACH Grant was given. As you know, we follow Dave Ramsey’s principles around here so we would advise you to only take this grant if you are 100% sure that you will fulfill the teaching obligation so that this remains a grant and does NOT turn into a loan. If you receive the TEACH Grant, you will be required to sign a TEACH Grant Agreement to Serve where you agree to teach in a high need field, at an elementary school, secondary school, or educational service agency that serves low-income families, and complete at least four academic years within eight years after completing the course of study for which you received the TEACH Grant. Schools that participate in the TEACH Grant Program determine which programs that they offer are eligible for the TEACH Grant. For this reason, you should contact your Financial Aid office to discuss this grant. Who is eligible for the TEACH Grant? Here are some of the eligibility requirements for the TEACH Grant: Meet the eligibility criteria for federal student aid Complete the FAFSA Be enrolled at a college that participates in the TEACH Grant Program Be enrolled in a program that is eligible for the TEACH Grant Meet certain academic achievement requirements Receive TEACH Grant counseling Sign a TEACH Grant Agreement to Serve (mentioned above) To ensure that you are eligible for the TEACH Grant, it is recommended that you discuss it with your school’s Financial Aid office. This article was intended to give you an introduction and basic overview of the TEACH Grant, if you are interested in learning more, you can read more at studentaid.gov.

In the absence of hope, despair and status-quo become acceptable. This is the feeling I get when talking to many families about the chances they feel their children will be able to get through college debt free. No hope so status quo (student loans) become acceptable. Perhaps a family hasn’t had the means to save because of poor financial habits in the past and now, after getting connected to Dave Ramsey and Ramsey Solutions, they’ve finally found their way out of debt, built an emergency fund, yet one problem – their child is 16 and they’re staring down the barrel of almost nothing saved for college. What’s an advisor like us to say to this client? Perhaps we could tell them that over the next two years they could save $1,890.58 / month and at a 10% rate of return they’d have approx. $50,000. Yet, as you’re probably thinking, who has $1,890 / month laying around, especially considering you should not put your retirement on hold (Baby Step 4 is before Baby Step 5, right!) to fund your kids’ college. Good news, as an eternal optimist, because I believe in the power of positive thinking and positive attitudes, we’ve got some excellent recommendations to guide your student through college debt free. Of course, you can always find reasons, why YOUR child won’t be able to do some of the things we recommend in this article and if that’s you, I don’t think there is much we can do to help you, however if you’re open to ideas and suggestions let’s walk down this road together. First things, first Just like in real estate, where the common phrase “Money is made at the buy” is so important to your ability to be successful as a real estate investor, college success is dictated, many times by school choice. For example, according to collegecalc.org, colleges in Ohio can be as cheap as $2,802 / year (Belmont Technical College) to $54,346 / year (Oberlin College). Let’s say that little Johnny, tells us he wants to go to The Ohio State University. We know that tuition costs at main campus are going to run us $9,852 however we’ll also have to fork out the cost of dorm, food, car, etc. because Johnny will have to move down to Columbus. Instead we know that we could send him to the Mansfield Regional Campus (assuming we live in or around Mansfield) for $7,416. Or we could send them to the Wooster Regional Campus for $7,416. Thus, saving an additional, $2,400 / year plus the costs of room, board & other misc. expenses. Now this may not be what Johnny wants to do but remember, you are still the adult and it gives you a great opportunity to teach Johnny about economics such as, what economic benefit are you getting for the additional $2,400 / year plus expenses? Nothing at all! Tuition Reimbursement Programs One of my favorite pieces of advice is tuition reimbursement programs at some of the best employers for young people. This is exactly what I did when going through college and it was extremely helpful in two ways. First, it allowed me to keep my out of pocket costs for college to a minimum but additionally because I was juggling 20 – 25 hours (sometimes more) of work along with my school schedule, I learned the importance of time management and built a resume while in school. So here are some great examples of employers that will provide tuition reimbursement and the amount they reimburse in parentheses. AT&T ($5,250 after 6 months at company) Bank of America or probably any bank for that matter. I worked for PNC Bank, they paid for most of my MBA ($5,250 after 6 months at company) Chipotle ($5,250 or 100% of tuition yearly if you enroll in one of the specific degrees offered through their partner programs) Home Depot ($1,500 per year for part time hourly workers) Starbucks (full tuition to Arizona State University online degree program after working 240 hours and continuing to work 20 hours per week) UPS ($5,250 for part time and full-time employees from day 1) Walmart ($1 per day cost for part- & full-time employees to earn college degrees in demand fields at one of their online partner colleges). Target ($3,000 per year) Verizon – another favorite of mine because I worked with them one year during undergrad and they paid all my tuition that year ($8,000 / year if the degree is applicable to Verizon operation or $5,250 if not). Lowe’s ($2,500 / year for full time employees with one year of service) Chick-fil-A (Tuition discounts and grants for more than 100 colleges and universities that partner with them). Best Buy ($3,500 per year if you work 32 hours / week) Fidelity (90% of education costs with a maximum payment of $10,000 per year, after 6 months of service). Scholarship Search & Apply As Dave Ramsey says, during your child’s senior year, their full-time job should be searching for and applying for college scholarships. A simple Google search will yield a couple websites to visit to narrow down scholarships your child might be well suited for. A favorite of mine is https://bigfuture.collegeboard.org/scholarship-search They have scholarships and internships for more than 2,200 programs, totaling nearly $6 billion. A board of directors I once sat on, had a $1,000 scholarship they gave each year. Sadly, for the three years I sat on their board, we only had about two kids apply for the scholarship each year (50% chance!). Imagine, with great school choice, such as The Ohio State University Mansfield Campus, example above, how even $1,000 could have a huge impact (15% of your costs would be covered). How did Johnny do? In our hypothetical example above, Johnny has decided to attend The Ohio State University Mansfield Campus which means he’ll need to come up with $7,416 per year. Mom & Dad (you) have decided you’ll help cover $1,200 of the cost ($100 / month). Johnny applied for and received a $500 scholarship from his local community bank. He also got a job at UPS working from 7am – 10am each morning, meaning he’ll need to take afternoon classes – no big deal! He gets paid $14 / hour (my guess) which is $252 / week on a six-day workweek. Guess what – that’s his spending money because between his scholarship, $1,200 from you, $500 from his scholarship and the $5,250 that UPS will reimburse him for he is out almost nothing. Some of you may be instantly thinking my child can’t work while in school. They need to focus on school! Well, you’re wrong! According to a study done by the National Center for Educational Statistics (https://nces.ed.gov/pubs94/94311.pdf) among full time, full year undergraduates those working only 1-15 hours per week while enrolled were more likely to have GPA’s around 3.5 or higher. Acknowledging the fact that you have little saved is the first step. The second step shouldn’t be to instantly pursue student loan options. Create a plan for your child, that helps them to create life long skills instead of burdening them with life long debt. As always, your Whitaker-Myers Wealth Managers Financial Advisor is here to help you take those steps towards financial freedom.