December 2022- Tax-Loss Harvesting and Finances

/in , , ,
Greetings all!The holiday season is upon us, and we at Bona Fide are preparing to stay busy for the rest of the year, helping our clients succeed in all aspects of their lives. This newsletter will provide you with some context surrounding tax-loss harvesting, and what that means when investing. But first, a word from our sponsor…If you haven’t yet, take a listen to our podcast, The FI Entrepreneur. We just finished Season One and are starting to organize and record Season Two where we will spend more time digging into the how-tos of entrepreneurship and financial independence. We also are planning to interview a number of guests, so if you or someone you know is active in entrepreneurial or financial independence pursuits, please reach out and let us know!
Greetings all!
The holiday season is upon us, and we at Bona Fide are preparing to stay busy for the rest of the year, helping our clients succeed in all aspects of their lives. This newsletter will provide you with some context surrounding tax-loss harvesting, and what that means when investing. But first, a word from our sponsor…
If you haven’t yet, take a listen to our podcast, The FI Entrepreneur. We just finished Season One and are starting to organize and record Season Two where we will spend more time digging into the how-tos of entrepreneurship and financial independence. We also are planning to interview a number of guests, so if you or someone you know is active in entrepreneurial or financial independence pursuits, please reach out and let us know!
December 1, 2022
 Read
The ultimate goal when you start investing is never to lose money, but this is part of having a “well-diversified” portfolio and embracing the reality that sometimes stocks will perform well, and sometimes they won’t. Tax-loss harvesting is an investing strategy that helps turn investment losses into tax offsets. You can find more about tax-loss harvesting from Forbes article on tax loss harvesting and improving your investment returns.  More helpful tips and rules about tax-loss harvesting can be found on The White Coat Investor website.
Listen
Taylor Schulte with The Stay Wealthy Retirement Show spotlights what tax-loss harvesting is, how it works, and why it has become a popular strategy. He breaks it down into three steps: sell a security that has lost money, use that realized loss to offset taxes that you owe on another investment that made money or ordinary income, and then potentially investing into something else. This 20 minute listen also gives a few things to know about the wash sale rule. Take a listen! 
Watch
This video breaks down specific examples of what tax-loss harvesting would look like in different scenarios. If you’d like some thorough visual examples, then watch Jake Broe’s video where he details the different ways to strategically use tax-loss harvesting to come out on top with your return. 

Inflation and Student Loan Updates

/in , ,
Greetings all,

Welcome to our monthly newsletter which focuses on current events and is provided only to our ongoing clients. This is meant to be a deeper dive into issues that are front and center in the minds of our clients and we encourage you to reach out if you have any questions or comments on any of the points mentioned. Have something you’d like to learn more about? Let us know and we will be happy to cover it in one of these newsletters.

If you haven’t yet, take a listen to our podcast, The FI Entrepreneur. We just finished Season One and are starting to organize and record Season Two where we will spend more time digging into the how tos of entrepreneurship and financial independence. We also are planning to interview a number of guests, so if you or someone you know is active in the entrepreneurial or financial independence pursuits, please reach out and let us know! General Market and Outlook – As has been our habit in the last few months, we lead off with a general market outlook. As of writing this newsletter in mid-October, the S&P is down 23.32% YTD and this is after a strong 2.65% gain in the previous session. However, we believe the market is getting ready to turn around and we hope the next 12 months will prove far kinder than the last 12. We’d like to share a few informational sources you might find interesting. 

The first is from Ben Carlson’s Animal Spirits podcast. The title of the episode is Long Term Bullish and even if you don’t have time to listen to the episode, we recommend you spend some time looking through the charts that are presented. At the very least, take a look at the first chart presented. There you’ll find historical data that show a great trend toward positive returns in the years following declines in the stock market of 25% or more. Since 1950, there is only one time where the S&P 500 declined by 25% or more and then didn’t post a positive return in the following year. The average decline is -37.6% and the average return the following year is 21.6% in the chart referenced. We can’t be sure when things will turn around, but we can be confident they will. 

There are a number of estimates on this, but the average Bear market is most often estimated to be around 300 – 400 days long. Our current Bear market has been running for about 285 days. If we had to make a guess, given the current economic conditions, we could easily see this Bear market lasting another 3 to 6 months and increasing loss in the stock market by another 10% to 15%. Check out this article from Investopedia for some more historical perspective on Bear markets. 

The main takeaway here is that we don’t know when this current downtrend will end, but it will and when it does, you want to be invested in the market because that is the only way to be on the ride back up. Most gains in the stock market happen in short spurts and if you have reduced your holdings or paused your automatic investments, you are going to miss out on those gains. 

Series I Bonds – 
On the flip side, for money not needed for the next year (the funds are locked for the first 365 days), like a mid-term emergency fund. Currently, Series I bonds are yielding 9.62%. This rate is good for the first 6 months of purchase and then will reset to prevailing rates. Analysts are expecting a drop in the rate to the mid 6% range. This is a good thing, as it shows that experts are seeing signs that inflation is decreasing. If you have some cash on the sidelines and don’t want to expose it to the volatility of the stock market, then Series I bonds are a good place to park the money. The 9.62% rate will be readjusted at the end of this month, so you only have a few days to lock this in if you are interested. Prior to making the investment, reach out to us so we can discuss your situation and fully go over the details of this investment. 

Inflation and Interest Rates – 
Here also, we believe we are about to see a change happen. We are as certain as we can be that the Fed will increase interest rates again in November, probably by .75% as they have previously done. Once this is done though, we are less certain about future moves. This is for several reasons. First, inflation seems to be slowing down although the Fed is not willing to declare victory just yet. Second, a major driver of inflation, the residential real estate market is showing signs of cooling. As interest rates have risen, so too have mortgage rates, making existing homes more expensive and causing would-be buyers to delay their purchases. Limited supply in the housing market should keep prices relatively stable, with less rapid growth than has been seen previously. Third, the dollar is just too strong internationally and only continues to strengthen as the Fed increases interest rates. This causes problems around the world and the US will face pressure to slow down their rate increases. Check out this podcast for an excellent primer on how a strong dollar affects the rest of the world.  

Student Loans – 
Earlier this week, the official application for student debt cancellation was released. This allows student loan borrowers to receive up to $20k in debt cancellation (if they received Pell Grants, $10k if they did not). There are income limits to be aware of, $125k for individuals and $250k for families. Additionally, four states at this time are expected to tax the forgiveness if you do receive it. The application is simple and is only expected to take five minutes or so. There is no detriment to filing it out, so if you think you are eligible, you may as well give it a shot. Lastly, there are a couple of questions remaining involving legal challenges blocking the program, but we should have more clarity there by the end of the week.

Thank you so much for taking time to read our newsletter. We hope you’ve found some value here and in our services. If you have, please consider passing our information along to friends and family for whom you think our services would be a good fit. A referral is the greatest compliment we can receive! 

Have a great month and we’ll see you next time!

Best wishes,  The Bona Fide Family

Stock Market, Mortgage Rates, and Current Events

/in , ,

Greetings all,

Welcome to our monthly newsletter which focuses on current events and is provided only to our ongoing clients. This is meant to be a deeper dive into issues that are front and center in the minds of our clients and we encourage you to reach out if you have any questions or comments on any of the points mentioned. Have something you’d like to learn more about? Let us know and we will be happy to cover it in one of these newsletters.

If you haven’t yet, take a listen to our podcast, The FI Entrepreneur. We just finished Season One and are starting to organize and record Season Two where we will spend more time digging into the how-tos of entrepreneurship and financial independence. We also are planning to interview a number of guests, so if you or someone you know is active in entrepreneurial or financial independence pursuits, please reach out and let us know!

Stock Market – 

On Tuesday of this past week, stocks had their worst day since 2020. The S&P 500 dropped 4.3% the Dow 3.9% and the Nasdaq 5.2%. That’s in one day, not a month or greater period of time. You may recall that in our newsletter last month, in this very spot, we were excited about the general direction of the stock market. We also made sure to detail that we didn’t know if that general optimism in the market would continue. The truth is, no one knows what direction the market will move in on a daily basis and you may as well flip a coin to make your prediction. So, why did the markets tank on Tuesday? It really comes down to about .2%. That is the amount by which the reported value of inflation missed its estimate by. Inflation for August was expected to come in at 8.1%, instead, it came in at 8.3%. This fraction of a percent was apparently all that was needed to send the markets into a selling frenzy. The expectation is that the Federal Reserve will continue with its aggressive policy of increasing interest rates which will continue to put pressure on the economy and stock performance. We believe this is also probable as controlling inflation must be the Fed’s number one priority. Still, inflation aside, we believe there are a couple of bright spots to focus on which should bolster the global economy and ease downward pressure.

Ukraine War – 

In reports by CNN and other news outlets this week, it appears that Ukraine is making strides in taking back territories previously held by Russia. As Ukrainian forces have advanced, the true strength of the Russian military and its troops’ willingness to fight has been exposed as severely lacking. If this trend continues, the general hope is that a peace treaty will be signed and the war that has helped foster instability and supply chain shortages all over the world will come to an end sooner than later. This would be good for the soldiers and civilians on both sides of the conflict and the markets as a whole. 

The End of Covid?

On Wednesday, the World Health Organization released information that they are hopeful the Covid pandemic may be nearing a close. Global deaths due to the disease have dropped to their lowest point since March of 2020, a drop we are much happier to experience than the stock market’s recent woes. Other hopeful signs are new cases dropping and a newly available booster shot that protects against the original strain of the virus and the currently active BA4 and BA5 strains. Undoubtedly, we will continue to see peaks and valleys in the fight against Covid, but it seems the worst is behind us. 

Mortgage Rates Continue Rising – 

As the Fed continues to increase interest rates, mortgage rates continue to rise. Bad news for anyone looking to purchase or sell a home. The 30-year rate on mortgages rose to 5.89%, pushing more would-be buyers out of the market. As this trend continues, sales of existing homes will drop (as they have done for the past six months) and inventory should build up in the market, hopefully cooling what has been a historically hot market (which is one of the driving factors of inflation). Mortgage rates tend to track the 10-year Treasury rate, which has progressively been pushing up. While none of this is good news, we do not anticipate a large-scale housing market downturn as there are strong factors at play, such as a deep shortage of housing and a generally robust economy, which will continue to strengthen demand and prices for homes. 

Trains Will Run, For Now – 

In hopeful news for what could have become the newest thorn in the side of the American economy, a tentative deal has been struck to avoid a railway strike. The deal has not been finalized by union members, but they have agreed not to strike while votes are counted in the next few weeks. The White House is highly incentivized to avoid a strike at all costs with the Midterm Elections approaching, so we expect a resolution to this issue sooner than later. The workers and their unions likely know this and will be playing hardball. These talks affect the pay and benefits of approximately 115,000 workers for railroads like Union Pacific and Norfolk Southern. Pay increases and access to benefits are the sticking points in these negotiations. 

Thank you so much for taking the time to read our newsletter. We hope you’ve found some value here. Please reach out if you have any questions or comments. Share this with your friends and family and let us know if you have any topics you’d like us to cover. 

Have a great month and we’ll see you next time!

Best wishes, 

The Bona Fide Family

How Interest Rates Affect You

/in
Greetings all,We are deep into the dog days of summer and we hope you have enjoyed the sunshine and higher temps. We at Bona Fide have been able to enjoy a bit of down time and now we are ready to stay busy for the rest of the year helping our clients succeed in all aspects of their lives. This newsletter will provide you with some context surrounding current interest rates. But first, a word from our sponsor…If you haven’t yet, take a listen to our podcast, The FI Entrepreneur. We just finished Season One and are starting to organize and record Season Two where we will spend more time digging into the how-tos of entrepreneurship and financial independence. We also are planning to interview a number of guests, so if you or someone you know is active in entrepreneurial or financial independence pursuits, please reach out and let us know!
Read – 
These days, it is impossible to turn on the TV without being bombarded with news regarding raising interest rates. We want to help cut through the noise with some clear-eyed data to help you understand where interest rates are now, how they relate to historical context, and where they might be headed. This article from Bank Rate provides good context on where interest rates have been. Overall, we are still at a low-interest rate, compared to other points in history. In the 1980s interest rates hit a high of nearly 20%, the highest in history! Then, as now, this was done to combat inflation which was at a high of 14.6%. Compared to those numbers, the current situation doesn’t seem too bad, right? Still, being told things have been and could be worse isn’t much consolation when things are currently feeling bad. Where are we headed? Most analysts are expecting to end the year at around 3.5% which would be an increase of about 1% from where we are now. Beyond that, this article from Reuters shows that the futures funds rate expects interest rates to decline again by Spring of 2023. Of course, all this is contingent upon inflation easing up and beginning to decline back down to the target level of 2%.  Listen – 
If all this interest rate talk sounds a bit Greek to you, then have a listen to the next couple of podcasts offered by the Federal Reserve Bank of St. Louis. The first details the actions of ‘The Fed’ and why they do certain things, like increasing or decreasing interest rates. Collectively, these actions are referred to as the Federal Reserve’s Monetary Policy. If you’d like a bit of a refresher on the intersection of interest rates and inflation, then listen to this episode. It provides a great reminder that if your money is sitting in a low-interest-bearing savings account, then you are actually losing money. This is why we recommend that our clients keep only their necessary emergency funds and other funds for short-term needs in cash. The rest of your money should be out working for you, not wasting away in a savings account. For a deeper dive on all things interest rates, listen to this 45-minute podcast called, “The Scintillating World of Interest Rates” from the Stuff You Should Know podcast.  Watch – 
Our final resources will focus on the intersection of interest rates and mortgage rates. If you are in the market for a new home now or in the near future, you have probably watched with anxiety as first prices soared all over the country and now as mortgage rates have risen. This video with California-based realtor, Jeb Smith, is a nice commentary on whether mortgage rates have peaked or if they will continue to rise. This video, from Yahoo Finance featuring Zillow’s Chief Economist, Skylar Olsen, predicts mortgage rates should stick around the 5.5% range for the near future. If you have plans to purchase a home, this isn’t great news and we may need to do some additional planning to make sure your proposed purchase fits into your budget and other goals. Overall, trying to time the market is something we never recommend so you need to make sure a purchase as large as a home makes sense for you no matter the external factors at play.

Thank you so much for taking the time to read our newsletter. We hope you’ve found some value here. Please reach out if you have any questions or comments. Share this with your friends and family and let us know if you have any topics you’d like us to cover. 

Have a great month and we’ll see you next time!

Best wishes, 


The Bona Fide Family

Estate Planning

/in ,

Greetings all,

We hope you enjoyed a great holiday weekend with your family and friends. The summers are invariably a slower time here at Bona Fide Finance where we take some time away to rest and recharge. Taking this time out in the summer allows us to focus on our ‘why’ for doing the work we do; our families and taking care of the people we love. One of the most important aspects of taking care of loved ones is having a sound estate plan. This is one of the things that is most often put off by clients. It’s simple, no one wants to think about end-of-life planning, much less go through the nitty-gritty details of setting everything up. In this newsletter, we’d like to provide you with some resources and insights to assist you in making sure your loved ones are taken care of in case of the unexpected.

Read – 
Not so much reading as a good resource for getting yourself organized, Mass Mutual provides some useful guides for making sure your ducks are in a row. This PDF guide outlines the different steps you’ll need to take in case of a death of a loved one. Things are organized according to a timeline and key documents that might be needed are listed. There is also a nice Estate Plan Inventory Guide that helps you make sure everything is organized. In our relationship as your financial planner, we can provide assistance in completing these steps and making sure that you’ve shared this information with your loved ones. 

Listen – 
If you are interested in a deeper dive around topics of end-of-life planning, we recommend listening to the Complete Estate Planning podcast. This is a great podcast that is well-produced and currently active, diving into all topics around estate planning and trusts (which can plan a crucial role in estate planning). Episodes are generally 20 to 30 minutes long and straightforward in their presentation so you can get the info you need without suffering through too much fluff. Some interesting episodes include, ‘Student Loans After Your Die’ and ‘When Should I Give My Children Their Money?’.

Watch – 
An important concept to understand when thinking about the estate planning process is ‘probate’. This is a legal term referring to the presenting of the last will and testament to a court for its administration and disbursal. Depending on the size and complexity of the estate, you may need legal help in this step and it can take anywhere from a couple of months to years. If going through probate after the loss of a loved one is something you’d like to spare your family from, you may want to look into steps to avoid probate. There are a number of strategies that you can take, some as simple as titling assets in the name of a loved one and others that are more complete like setting up a trust, to pass items outside of probate. Most people agree that taking the time and energy to avoid probate is well worth the upfront trouble. If you’d like to learn more about the probate process and why you may want to avoid it, check out this video from Rabalais Estate Planning.
We hope you’ve found the above information helpful. Estate planning is an incredibly important aspect of any holistic financial plan. Please reach out to us if you have any questions or concerns about your own estate plan.

Sincerely,

The Bona Fide Family

Inflation Basics and Outlook

/in ,

Greetings, 

Last month, we spent some time discussing and sharing some resources centered around retirement. More specifically, what makes for a good, ie. happy, retirement. This month, we are going to focus on something a little more tangible, something that many of our clients have been feeling in their pockets: inflation. 

As sure as the summer temperatures are heating things up near you, inflation has been a hot topic since the beginning of the year. We thought it was a good idea to spend this month discussing inflation to help our clients better understand and cope with its effects. We believe in looking at all things from a position of knowledge. Inflation is scary. It touches all parts of our lives and puts into jeopardy the goals we have planned for and worked so hard to achieve. We hope that in learning about inflation, we can take some of the fear and emotion out of the equation and help our clients make better decisions. 

Read – 
First, we want to understand the basics of inflation. What are the main causes of inflation? Cut down to its most basic definition, inflation is the rising cost of goods and services over time. The rate of inflation ebbs and flows and a rate of 2% or 3% are considered pretty normal and manageable. Currently, inflation is over 8%. Inflation is measured monthly using something called the Consumer Price Index which measures the costs of goods and services ranging from housing to energy to food (in and out of home). Different aspects of the CPI experience inflation at different rates and have varying effects on the total inflation rate. 

So, what is driving inflation to these heights? It is generally understood at this time that there are three sectors whose price increases have had an outsized impact on inflation in general. These three sectors are housing prices, energy prices, and used car prices. That may sound pretty dire, right? It depends. If you are one of our typical clients, you already own a home, you have a decent vehicle, and you can hopefully adjust your energy consumption. In the ‘Watch’ and ‘Listen’ sections, we will dig deeper into the housing and car pieces of this trio. If you want to geek out a little more and see how different sectors have been affected by inflation, check out this chart that shows the 12-month percentage change in the CPI by different categories. 

Watch – 
Is the American dream dead? If you have been house hunting in the past year or so, you may have a pretty strong answer to that question. All across the country, real estate markets have been hitting all-time highs for both housing prices and monthly rental figures. The dream of owning your own piece of America is becoming more and more difficult for people to achieve. One of the pernicious theories for the cause of this is that hedge funds have been purchasing large numbers of homes to rent out. In other words, Wall Street is using its deep pockets to bid up the prices of homes out of the reach of everyday consumers. This clip from The Daily Show with Trevor Noah dives deep into the controversy using this original NBC piece as its basis. Fair warning: the humor from The Daily Show clip might not be for everyone, so we’d recommend sticking to the NBC link if you like to keep things a bit more PG. 

So, is it true? In a single word, yes. Institutional investment firms, hedge funds, and even retirement funds from abroad are all pumping money into the US housing market. Most of the homes they are buying and converting into rentals are homes targeted by first home buyers in attractive markets such as those in the Sun Belt. A silver lining to increasing inflation is that as the Fed has increased interest rates, it has made access to credit more expensive for these firms which should result in fewer purchases on their part. Time will tell how this plays out. 

Listen – 
One of the conversations we have frequently had with clients is to discuss the question of whether it is better to fix an old car or buy a new one. This question has gotten even more important these days as used car inventory has shrunk and prices have gone up. In plenty of cases, the cost of a used car is 80% or more than what a person would pay for a new car, so the question of repair or replacement is even more critical. To consider this topic, we like this podcast episode from The White Coat Investor. Cars are extremely personal items for people, but they are also one of the most expensive parts of a household’s financial picture, so their expenditure should not be one ruled by emotion. Overall, we recommend buying cars in cash and only buying what you can immediately afford. If you find yourself in this situation, this Fix or Trade Calculator is pretty fun to play with and hopefully, prices for used cars will come back down to earth sooner rather than later. 

Thank you so much for taking the time to read our newsletter. We hope you’ve found some value here. Please reach out if you have any questions or comments. Share this with your friends and family and let us know if you have any topics you’d like us to cover. 

If you haven’t yet, take a listen to our podcast, The FI Entrepreneur. We’ve been doing it for a few months now and have gotten some good feedback. Ben and Andrew are set to record an episode about how to keep the ‘Freedom’ in ‘FI’ and how to avoid burnout as an entrepreneur, something both of them have plenty of experience with. 

Lastly, we’d like to extend a word of congratulations to our team member Andrew Bencivenga, who was recently awarded the Certified Financial Planner™ designation, an accomplishment long in coming! Andrew also recently celebrated being on the Bona Fide Finance team for 2 years. We are happy to have two CFPs® to lead the charge in serving our client base!

Have a great month and we’ll see you next time!

Best wishes, 

The Bona Fide Family

What Makes for a Happy Retirement?

/in , ,

Greetings all,

As financial planners, we at Bona Fide Finance spend a lot of time working with people to get them to retirement. We analyze current cash flows, we project future income, we optimize tax strategies, and do a myriad of other things chiefly centered around making sure you arrive at retirement with enough resources (aka, money) to get you through your retirement years without worrying about outliving your bank accounts. Something that can get lost in this focus on the arithmetic of retirement is the question of what makes a ‘good’ retirement. We believe it is equally important to focus not only on getting you to retirement with an appropriate nest egg, but also to help you realize what is going to make you happy in the retirement you’ve worked so hard to create.

Watch – 
If you haven’t noticed, we are big fans of a good TED talk and that’s where we lead off here. Watch Robert Waldinger, director of the Harvard Study of Adult Development, one of the world’s longest studies of adult life, address the topic, “What makes a good life?”. Perhaps unsurprisingly, creating a happy and well-lived life isn’t just about the amount of money you have (although it certainly doesn’t hurt), but more so about the amount and quality of relationships you have and how fulfilled you feel in your personal life. In his talk, Robert shares, “shares three important lessons learned from the study as well as some practical, old-as-the-hills wisdom on how to build a fulfilling, long life.” We hope you’ll enjoy this as much as we did. 

Read – 
If you enjoyed the above TED talk, you’ll surely want to read more in this article from the Harvard Gazette, “Good Genes Are Nice, But Joy is Better”. The article is full of wisdom such as, “The people who were the most satisfied in their relationships at age 50 were the healthiest at age 80”, so if you feel like you’ve neglected some of your personal relationships in pursuit of your professional success, it might be time to reevaluate your priorities. Let’s say you are blessed with financial stability, great relationships, and long life, what then? There is a growing movement in financial planning toward taking care of the people who are spending more and more time in their retirement years. This increase in longevity requires special skills. This is an area we are acutely attuned to and Ben recently attained his RICP® (Retirement Income Certified Professional) which focuses on longevity planning among other topics. If you’ve got questions about how to prepare for your later years, we can help you.

Listen – 
In what appears to be one of our best finds in recent history, check out the Lifespan Podcast with David Sinclair, professor at Harvard Medical School. This podcast started just in December of 2021 and from what we’ve watched is of exceptional quality. With high production values, tons of good information, and a host that is extremely easy to listen to, this is one of the most engaging sources of information on the science of aging that we’ve found. If you are interested in living a healthier, happier, and longer life, then this is a great resource. 

Thank you so much for spending your time reading our newsletter. We hope you’ve found some value here. Please reach out if you have any questions or comments. Share this with your friends and family and let us know if you have any topics you’d like us to cover. If you haven’t yet, take a listen to our podcast, The FI Entrepreneur. We’ve been doing it for a few months now and have gotten some good feedback. Ben and Andrew are set to record an episode about how to keep the ‘Freedom’ in ‘FI’ and how to avoid burnout as an entrepreneur, something both of them have plenty of experience with. Have a great month and we’ll see you next time!

Best wishes, 

The Bona Fide Family

Personal, Small Business, and Real Estate Taxes

/in , , ,

Greetings all, 

April is here and taxes are at the top of most people’s minds. For this newsletter, we are going to keep things on the light side with some info and tips for optimizing your tax situation for 2022. Before we get into that, we would like to give you a heads up on a new development on the student loan front. Recently announced by the Biden administration, the pause on federal student loan repayments will be extended through August 31. This means the soonest a person would have to make a payment would be late September/early October. This can change the calculus on a number of planning opportunities, so be sure to reach out if you have any questions. If you are a client and this affects you, we will be in touch with you to advise on what to do.  

Read –
Have you heard of Tax Freedom Day? It was conceived in the 1940s to help people understand how long they have to work each year until their tax burden is met and their money becomes their own, AKA Tax Freedom. This year, on average, Tax Freedom Day is on Monday, April 18th which coincides with the regular tax filing deadline. That means, most taxpayers need to work for about four and a half months just to cover their taxes for the year. Now, with this out of the way, what are some ways to optimize your taxes for the year?

Watch – 
One of the best ways to reduce your tax burden is to claim expenses as a self-employed individual. This video by Lyfe Accounting details some of the most common and effective tax reduction write-offs available to small business owners. These include the home office deduction, using your personal vehicle for business driving and writing off the mileage, and writing off $5,000 in startup costs in the year you start a business. All of these can really add up to reduce your taxable income if you are self-employed. If you are a business owner or aspire to be one, make sure to reach out if you have any questions about your situation. If you are a W2 worker, check out this video which goes into some of the ways to lower your taxes by taking advantage of all the employer-sponsored tax benefits available to you. The biggest switches you can hit are using your retirement plans, HSA, and FSA plans available to you. 

Listen – 
These days, it seems like everyone is interested in or already owns a rental property. The problem is, most people have no idea have to deal with this in a tax-compliant and efficient way! We are in the thick of tax season and the number one most common mistake is rental owners not taking depreciation on their property from day one. This can be an extremely expensive mistake down the road, so make sure to reach out if you are unsure if you are in this group. For a really great listen, check out this episode of The Rental Income Podcast with CPA Sean McNamara who goes over some higher-level tax planning tips for rental owners. There is a lot of good advice here to get you started on how to handle your rental property. 

Taxes can be daunting whether you are a small business owner, a wage employee, or an aspiring rental property tycoon. The most important thing is to have good information at your disposal and advisors you can rely on to have your best interests at heart. We pride ourselves on being able to advise across all of these situations. Through careful planning, we make sure our clients don’t leave any of their hard-earned money in Uncle Sam’s pockets and are able to celebrate their Tax Freedom Day as early as possible each year. 

Best wishes, 

The Bona Fide Family 

Peace for Ukraine

/in
Greetings all,

We’ve decided to take a break from our normal format this month to touch upon something that is of importance to many of our clients, the conflict in Ukraine. We’ve received emails and calls from some of our clients and would like to take this opportunity to provide you with some perspective on what may happen in the markets. Before we do that though, we would like to express our deepest sympathies for all of the people in Ukraine and elsewhere who are suffering right now. The focus of the rest of this newsletter will be on the markets, but not without remembering the human cost of what’s happening right now. 
 Overall, it is important to remember that markets are resilient and you and your portfolio are designed for the long term. We’ve seen crises before. You’ve seen crises before. When designing your portfolio we considered the risk of decline, regardless of where it may come from, so we believe that no change is necessary, but we’re still monitoring your portfolio, as we always do. We’ll rebalance when we believe it’s time to do so.
 Our words may bring you some comfort, but what does history say? What has happened in the past when dramatic events have shaken up the world stage? Vanguard published research on February 25th of this year showing that geopolitical sell-offs are usually short-lived with the average total return six months after the event being up 5% and a year later, up 9%. In situations where there are other factors at play, such as deeper economic strife, the numbers may not play out quite as well, but the fact remains that the market eventually returns to its upward trajectory. For reference, 6 and 12 months after the Ukrainian conflict of 2014 the market (as measured by the S&P 500 Index) was up 8% and 12% respectively. In a recent blog post at the appropriately named, A Wealth of Common Sense, Ben Carlson reminds us that The Stock Market is Heartless. And it’s true, as Ben details, time and time again, the market has shaken off the worst news headlines of the day to continue its climb upwards bringing with it those disciplined enough to stay the course. The market doesn’t go up, but it goes up more often than down and that’s all we need to accomplish our goals.  This is a reminder of the importance of calm, even when there’s a lot of noise around us. This is a reminder that we’re here for you. This is a reminder that I’m here for you if you want to have a quick (or long) call or meeting, to talk about the markets or whatever’s in your mind. If you’d like to consider supporting the people in Ukraine, take a look at the list of charities at this site.  We hope this has been helpful and possibly eased any anxiety you may be feeling. Most of all, we hope the current conflict ends as quickly as possible with as little destruction and suffering as possible.  All the best,  The Bona Fide Family

Can Money Buy Happiness?

/in , ,
Greetings all, 

Thank you for joining us for another issue of the Bona Fide Monthly Newsletter. For this month, we’d like to wade into an age-old question, ‘Can Money Buy Happiness?’. At Bona Fide, we enjoy digging into the numbers and ensuring our clients use their financial resources as best they can to achieve their goals, but we also believe it is important to know why we are working to earn all this money. Will working more and earning more make us happier? Is it better to earn more or to work less while being more efficient with our resources? How much is ‘enough’? These are important questions and we hope the links below will help you think a little more about what makes you happy in your own lives. 

Read – 
Most people are familiar with the figure of $75,000 being the number often quoted as providing happiness. Turns out, it’s a little more nuanced than that. According to a Purdue study from 2018, $60,000 to $75,000 provides emotional happiness, and levels around $95,000 provide the opportunity for life evaluation. From Purdue “Emotional well-being, or feelings, is about one’s day-to-day emotions, such as feeling happy, excited, or sad and angry. Life evaluation, really life satisfaction, is an overall assessment of how one is doing and is likely more influenced by higher goals and comparisons to others.” Keep in mind that these are figures for an individual and the numbers would necessarily increase for families. Also creating a disparity in the numbers is the location in the country or world you live in. Spoiler alert…. “The study also found once the threshold was reached, further increases in income tended to be associated with reduced life satisfaction and a lower level of well-being.”

Listen – 
In doing research for this newsletter, we came across a great podcast called, Your Life, Simplified. Conveniently enough, they had an episode called, Can Money Buy Happiness? This is a good listen if you’re interested in another perspective, this time from Dr. Elizabeth Dunn, a professor of psychology at the University of British Columbia. We like this episode because it focuses on how to achieve “happier spending” and get the biggest happiness quotient out of each dollar that you spend. It’s a good thing to keep in mind when you are considering a purchase. Will this thing make me happier? If so, for how long and why? If you wind up deciding you have enough and it’s time to give back a little, you can also check out the following episode about community involvement and giving back. 

Watch – 
Still not convinced? Well, here is the video that started us down this rabbit hole. Titled, The Price of Happiness, author Benjamin Wallace sampled the world’s most expensive products, including a bottle of 1947 Chateau Cheval Blanc, 8 ounces of Kobe beef, and the fabled (notorious) Kopi Luwak coffee. If you’d like to read about those and other experiences Ben had, you can check out this GQ article. Both the article and the video are quite entertaining, so we highly recommend them. If money were no object, what is one thing or experience you would like to spend a large sum of money on?

That’s it for this month. We hope the above links gave you something to think about and reach out if you have any questions or comments. Also, if you haven’t, take a listen to our podcast, The FI Entrepreneur. We are closing in on a dozen episodes and think we are getting better with every show. What do you think?

Wishing you happiness, regardless of how much money you make, 


The Bona Fide Family