Financial Freedom – what it means to me

ST. CROIX INSIGHTS

Financial Freedom – what it means to me.

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC

Everyone’s definition of financial freedom varies based on their background, upbringing and life experiences. It seems today on TV, social media and movies, we have all types of expectations set forth for us to live up to. Yet, what is real life these days? From what I see – most of it isn’t real.

Almost every day, I ask someone what financial freedom means to them. Most reply with a dollar amount so they don’t have to worry about money or expenses and they can financially handle whatever life brings their way.

I’m no different. I believe financial freedom is being debt free and having an asset base provide enough monthly cash to support my lifestyle. That’s it. Basic. What that framework, it’s easy to understand and figure out what your number should be.

There are three steps to help achieve this type of financial freedom:

1. Don’t purchase what you can’t afford. Sounds easy but it’s not. For example, do you purchase a new car at 100,000 miles or do you drive it in the ground? Drive it in the ground. At 100,000 miles you’ve barely went through two sets of tires. And that dream home you desire – “right size” it. Don’t over buy.

2. Pay yourself first. Sounds easy but it’s not. For those in your working years, target 15 – 20 percent of your gross Income. Yes it’s a lot, but that is what’s required to achieve financial freedom. Numbers don’t lie.

3. Pay attention to the tax man. Remember that our money belongs to the government and if we don’t understand the rules, they keep more of it. That’s not ideal if they keep more of your hard earned money.

Financial Freedom doesn’t happen overnight. You and I have to work for it. You know that saying, “Freedom isn’t free.”

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I’m rightsizing my home

ST. CROIX INSIGHTS

I’m rightsizing my home

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC

I have to tell you, preparing your home for sale is a pain in the rear, period! I thought hiring a professional would make it easier, but it wasn’t.

Here is what I’ve learned from this process. I know when you look at me you think of style, fashion, hipness and the list goes on. All true of course, but the truth is I wanted someone good with color and design to help prepare my home for sale. So we hired an interior designer to help us. I asked all the right questions and if they would have answered my questions correctly, more importantly honestly, I never would have hired them. I have no problem paying for their services, but this is how they really get paid.

First, is I purchase all the items to stage my house. Furniture, lamps, drapes, bedding and the list goes on. But this is what gets me. When my house sells, the interior designer keeps each and every item I purchased and if I’d like to keep any of them I pay them again for the item. What? Sure, I wouldn’t mind updating my bedroom sheets, comforters, pillows, etc., but I have to pay for them twice? Huh?

Second, is when I asked for the carpets, granite and all those other big items if there do was an additional fee. I was told no. Turns out when the carpet guys came to my house to collect the remaining balance the math didn’t add up to the invoice I agreed to pay the interior designer. They do indeed charge additional fees. I only wish I could charge their markup rate.

Third, I just wanted to pay an hourly rate for these services. Initially, I was told it would cost $1,500 for their services and I was fine with that. Yet, by the time we would have paid her $7,000 to pick some carpet, granite, faucets, etc., for my home. That’s good money and I’m in the wrong business.

If they would have answered my questions honestly, I would have never hired their firm. And they know it. When I questioned what they told me, they couldn’t come clean for almost 15 minutes.

I asked the right questions but was given the wrong information. So here is what I learned for the next time. In my business, I’m required to provide my clients an outline of services, how I’m compensated, etc. I’ll going to require that from other service providers as well. I also want to make sure I’m dealing with a decision maker of the company. No middle men or middle women.

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Leaving your kid(s) a million dollars as your departing gift

ST. CROIX INSIGHTS

Leaving your kid(s) a million dollars as your departing gift

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC

Tears of sorrow or tears of joy. That’s the discussion I have with my family about that day I depart Earth in the physical form. As much as my family “loves” me, there will be tears of joy ☺ as Mrs. Anderson now can hire that pool man I’ve denied her all these years. And not to mention the son who loves cars, but only had a bicycle until he was 25 years old because his old man was too cheap to buy him a car. Now he can buy that Ferrari he’s dream about all these years.

Let’s talk about leaving your kids money. Being in the money business, I see how greedy loved one’s can become when their “loved one” dies, sometimes even before their body arrives at the funeral home. I hope to avoid this in my household. I’m looking to treat everyone the same – fairly, as I define fairly. That generally means equally barring any outside circumstances such as health, disability, mental or other illness that would limit their ability to take care of themselves financially. Hopefully I’ve done my job well enough and taught my children about the value of money which hasn’t been always easy. I have one kid who has his first dollar he earned because he uses mine (which is smart on his part) and another kid that if they have a dollar, it’s a dollar too much. So I know I have more to work on with them.

Yet I want to make we sure have ongoing conversations as a family around what kind of responsibility comes with having this type of money. I believe there are different kinds of money – money you’ve earned and that which is found (which comes in different forms). The kind of money we’re talking about requires a greater level of responsibility because it wasn’t earned for those receiving it. I have no desire that this money becomes easy come, easy go. If I ever suspect that’s the case, I’ll have the necessary precautions in place to prevent that. Because the money they’d receive was either hard-earned through the fruits of my labor, or I literally had to die for it.

Yet I want to make we sure have ongoing conversations as a family around what kind of responsibility comes with having this type of money. I believe there are different kinds of money – money you’ve earned and that which is found (which comes in different forms).

The kind of money we’re talking about requires a greater level of responsibility because it wasn’t earned for those receiving it. I have no desire that this money becomes easy come, easy go. If I ever suspect that’s the case, I’ll have the necessary precautions in place to prevent that. Because the money they’d receive was either hard-earned through the fruits of my labor, or I literally had to die for it.

Leaving each of my kids one million dollars can be accomplished a couple of ways. I can leave my IRA’s, investment accounts, business, home, etc., to them and we’re good. I think that would work but its subject to stock market risks, interest rates, income taxes, estate taxes, lifestyle costs, and healthcare expenses. So when I say “I think,” I can run all kinds of financial scenarios including that really cool Monte Carlo software that spits out the probability of hitting my goals. It’s still a guess at the end of the day.

Another way is I could accomplish my goal is – wait for it – the dreaded two word financial tool called life insurance. Does it make sense to take a small about of money now and purchase a single life insurance policy on me or a joint second life insurance policy on Mrs. Anderson and myself to guarantee that my kids will receive the gift I’d like to leave them? Do I want to eliminate the risks I’ve outlined above or if I fall short of my goal, does it matter? Many feel like the rate of return on life insurance stinks, yet they factor the internal rate of return. Depending upon on circumstances and/or if I want a guarantee to accomplish my goals, could it be the most efficient use of money? Trade-offs – life is full of them.

I’m in the camp of that it if I fall short of my goals, I’d like to leave a legacy behind for my kids to be impactful with their families and community. I know, some individuals have no desire to leave their kids any money and that’s your choice. I’m not judging either way. It’s a personal decision. I want to make sure I can accomplish my goal no matter what the future brings my way and I’d rather have the security of knowing that at my death I’ve completed my bucket list (the best I can with what I’ve been given) and this is just one of those items on my list.

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Unexpected Death or Disability

ST. CROIX INSIGHTS

Unexpected Death or Disability

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC

What to do when the outcome is not what you expected? Now we know that outcomes can be both unexpectedly bad or good. Let’s get the bad news of unexpected death or disability out of the way first.

Unexpected death or disability is certainly bad news. I know, because I’ve been there. (Read more about my story in Bad Things Do Happen). Enough about me, though, I’ve also been there when it wasn’t about me, when it was about my clients and friends. I’ve seen the results of unexpected death and disability firsthand and understand the havoc it wreaks, not just on surviving family members, but on a business.
The most important step to minimize these impacts (and forgive my redundancy, but it’s true) is planning. The more prepared you are in the event something should happen, the better off you are when something does happen.

Without the proper foundation, it is impossible to move up the pyramid of building wealth. Certain foundation elements that come in to play when unexpected death or disabilities strike are:

  • Disability insurance
  • Life insurance
  • Long-term care insurance
  • Medical insurance
  • Estate plans
  • Large short-term savings account
  • Protecting your assets

Should you have any questions on the above or are concerned as to whether or not you’ve laid a solid foundation should the unexpected should arise, please do not hesitate to contact me today. I may be reached at brett@stcroixadvisors.com or 651-337-1919.

“Remember, the key to any wealth strategy is laying the proper foundation.”

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Your Will Isn’t Good Enough

ST. CROIX INSIGHTS

Your Will Isn’t Good Enough

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC

The inevitable: death and taxes. Subscribe to our blog and follow along as we journey through these difficult topics, providing tips to ensure you’re as prepared as possible.

In this blog, we’re discussing how just having a will may not be enough. Even the most updated, will may not be enough depending on your intentions and investments.

Many times, without extra steps, some or even a majority of your assets could be distributed against your wishes as outlined in your will. Examples are:

  • 401(k) Plan: If you’re married, regardless of your intentions in your will, generally your 401(k) assets will transfer to your spouse.
  • Regardless of when the account was established (even if it was prior to walking down the aisle AND even if you have a prenuptial), your spouse becomes the sole beneficiary to your 401(k) if you name them as the beneficiary. Time to check to see who is the beneficiary of your retirement accounts.
  • If this is not your intention to leave your money to your spouse, I’d like to be a fly on the wall while you’re having that conversation. If that’s truly your desire, generally spouses have to sign an acknowledgement on your 401k account.
  • If you’re not married or if your marital status changes, make sure that your beneficiary designation remains current. In most cases, this is as easy as filling out and returning a form to your plan administrator(s).
  • IRA: Just as with your 401(k) plan, your IRA beneficiaries needed to be spelled out separately. Claims would go to the individual(s) you set forth on your beneficiary designation form.
  • It’s your choice to name whomever you want as beneficiary on your IRA, so make sure that when you are laying out your will and making an estate plan, your beneficiary designations match your intentions.
  • Once you’re married it’s time to update the beneficiary information.
  • Again, if you’re not married or if your marital status changes, make sure that your beneficiary designation remains current.

You worked hard for your money, so make sure that it passes into the hands you choose, not attorneys.

As always, make sure that you talk to your advisor(s) and attorney(s) as you create your estate plan. If you have any questions or would like additional information, please don’t hesitate to contact us.

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Winning The Retirement Lottery

ST. CROIX INSIGHTS

Winning The Retirement Lottery

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC

Winning-The-Retirement -Lottery

Chances are you’ll hit the retirement lottery one day and it may well be your biggest payday ever. For most it comes in one of two forms – the sale proceeds of your business or that 401(k) you’ve been saving in for the last thirty years. Either way you are going from working for a paycheck to “mailbox money.” And I have to tell you nothing beats mailbox money because it just shows up for your retirement enjoyment.

When you cash in your “retirement lottery ticket” I have a few observations from many years of working with clients. When you go from working day in/day out and earning a paycheck every two weeks for the fruits of your labor, you’ve had one philosophy for your money. But after you retire, and often within three to six weeks and certainly within six months, you’ll develop a different philosophy towards money. And chances are you’ll become more conservative, desiring to spend less to preserve what you have.

During this time, I would recommend you do not to commit to any major purchases that you may regret. That’s probably easier said than done. You may want to travel purchase a larger retirement home or that cabin, or that well-deserved Porsche. What I see happening is clients will start to reevaluate priorities and even question will if they will have enough money to go the distance.

My recommendation – hold off on major purchases, relax into your new lifestyle, get used to mailbox money for six to twelve months before making major purchases. I suspect your values toward money will change during that time. And remember – you can finance college but not retirement.

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