Preece Financial Planning, LLC

Did you know you can get organized and see a diagnostic report of your financial situation without ever even talking to a financial planner?   Try it out by going to the my website and clicking on Start a Plan. Of course, taking the steps to improve might require some conversations, but why not get it started? PreeceFP.com

Do emergency funds need to be in cash? Not really. Here's how much cash my wife and I keep in the bank account: Between $3k and $5k. I've recognized through years of financial planning that I'm unlikely to need my entire emergency fund all at once. And even in an 'emergency,' I'd be able to access funds a number of different ways. So instead, our emergency fund doubles as our "next big purchase" fund. There's more in it than we would need in any emergency. It's accessible in a taxable brokerage account. It's going to earn more than cash will over the long run. Yes, it's possible that we'll need to dip into it at an inopportune time, but that's not incredibly likely for a few reasons: We have one stable income and one income that isn't subject to layoffs. It's invested fairly conservatively (no, it's not all in Nvidia). This isn't the best approach for everyone, but it is one example of how the rule of thumb is never what everyone should do.

"Is the stock market going to be up or down in the next year?" If it matters, you're doing it wrong. A lot of people know that the 'correct' answer to the question is "I don't know." So why do we keep asking and guessing? I guess it can be kind of fun, but please don't make decisions that might impact your life based on what you think or what anyone else thinks the future holds. You don't know, and they don't know. Even if they're on TV, they don't know. They're guessing. Instead, do with your dollars what makes the most sense for the timeframe before you use them. If you have 20+ years, stocks are probably the best spot for those dollars. If you have 20+ years, it doesn't matter what the stock market does in the next year. Asking better questions will yield better results. Here are some better questions about investing: When will I use this money? Is my timeframe flexible (retirement, buying a second house), or will I need the money in that year (college)? How should I invest based on my timeframe and other factors of my life? Should I put everything into Bitcoin? Okay, so the last one is a joke, but the other three are still good! Good financial planners get the answers to these questions to help you make good decisions about your money.

Which is better, Traditional or Roth? What about a Traditional IRA that you can access tax-free? Enter: the Health Savings Account (HSA). I wrote a whole blog post about HSAs a while back, so if you want more detail, you can follow the link in the comments. But for now, I want to highlight one aspect of HSAs that gets overlooked. They're basically traditional IRAs, but BETTER. Here are the similarities: 1. You get a deduction when you put money in (yay! less taxes!) 2. You can invest it however you want without any taxes annually 3. When you're old enough, you can withdraw it penalty-free and pay tax on your withdrawals 4. When you're old enough, you can make additional contributions Here's why HSAs are better: 1. At ANY POINT IN TIME, you can withdraw funds TAX FREE to cover medical expenses 2. If you make contributions from payroll, you get a regular deduction PLUS you don't have to pay FICA taxes on the contributions 3. There is no income limit for deductibility of contributions 4. You don't need earned income to make contributions Here are a couple reasons HSAs might be worse: 1. The early withdrawal penalty is higher - 20% instead of 10% 2. The age that the penalty goes away is 65 instead of 59.5 3. The contribution limit is lower (usually - if you're single with a child, it might be higher) 4. You must have a QUALIFIED High Deductible Health Plan to make contributions 5. If you leave your HSA to anyone other than your spouse, they have to pay taxes on the full balance in the year they inherit it If HSA contributions are an option, I tend to recommend contributing to an HSA before other types of accounts, but here are a couple of reasons not to: 1. Funds may need to be used sooner than retirement for non-health expenses 2. HSA is already quite large, especially if contributor is unmarried and doesn't expect large, uninsured medical expenses Knowing how much to contribute to each different type of account is one thing that your financial planner will help you with.

Social Security's Demise! “You can’t plan on Social Security being around when you retire.” Is this true? Almost certainly not. I see/hear this type of thing fairly often, so I wanted to address the concerns. The Social Security trust fund is currently projected to become insolvent in the mid-2030s. But what does that mean? It DOES NOT mean that benefits will cease to exist, but if we get to that point, they’d likely decrease to about 80% of current benefits. Why 80%? Well, here’s how social security works: Workers and employers pay into the trust fund with payroll taxes The trust fund gets invested in government backed securities Benefits get paid out to claimants (who are generally either retired or disabled) The problem? Right now, more benefits are getting paid out of the trust fund than payroll taxes/treasury interest coming in So when that trust fund gets to zero, does it make any sense that benefits would cease to exist? Not really. More likely, the trust fund would pay out every dollar that comes in, meaning reduced benefits for claimants, but not benefit elimination. And the estimate is that about 80% of projected benefits will be covered by payroll tax paid into the fund. What bugs me more about these assertions that social security won’t be there is that this isn’t even the first time this has happened. If you want to read more about historical adjustments to the social security system in take a look at my latest blog post. You can do that by going to the link in the comments.

After my time in Ireland (one week), I learned that it never rains there. In fact, I came home with a little bit of a tan. Obviously, the first part isn't true. Where we stayed in Western Ireland, it rains 225 days out of the year. But our experience was much different from that. We literally didn't see a single drop. Pretty remarkable. What's the lesson here? I think there are a couple: 1. You shouldn't use your past experiences to set your expectations. When we go back to Ireland (maybe several years from now), we'll expect it to be rainy for much of our trip. I often hear stories about big wins or big losses in investing, and all too often, people continue making decisions based on those experiences. All it does is hold them back. 2. You have to plan for the unexpected. I didn't pack shorts or sunscreen. I ended up hot and sunburnt. Thankfully, I'm better at this when it comes to personal finance. It takes work and/or money to be prepared for unexpected risks, but you'll be glad you prepared if they materialize. This means buying insurance, maintaining an emergency fund, applying for a HELOC, drafting estate documents, etc. - ALL when you think you don't need it. This is where much of the value of working with a financial planner comes from. 1. Making decisions based on data instead of personal experience 2. Preparing for the risks you haven't even thought of yet. And don't worry, I did enjoy the trip - just can't pass up an opportunity to tie things to personal finance!

What's the most exciting part about what I do? Destroying cages. We create cages for ourselves. The bars say things like this: "How things are is how things have to be." "If I could just ___________ then I wouldn't worry about money." "I can't afford to _______________, but I'd really like to." Sometimes I feel like I have to grab people by the shoulders and shake them a bit. Which is difficult, because most of my meetings are virtual. But when it happens - when we break that sh!t mindset - I hear things like this: "You know, I've always kind of had ______________ in the back of my mind as something I'd really enjoy doing." "I feel funny even saying this, but I kind of have this dream of ____________. Do you think that's possible?" That's when I get really excited. Can I help you save money on taxes? Probably. Can I help you build a more efficient portfolio? Probably. Can I help you put your kids through college? Probably. Can I help you better protect yourself and your loved ones with insurance and estate planning? Probably. But those are the basics. That's where we start. The dreaming - that's the advanced stuff. That's where the real value is. For me, the dream was starting my firm (checked that one off the list). Still working on the next one. What are the dreams you're afraid to admit to yourself?

What's your biggest complaint about your current advisor? Here's the one I hear most often from people coming to me: Poor communication. It's not about cost. It's not about portfolios and returns. It's not about planning strategy. It's that they feel neglected. They feel misunderstood. They feel like they don't have a solid understanding of what their advisor is doing for them. We can talk all day about paying less in taxes, lowering costs, and getting better returns. But at the end of the day, the people I work with know they're being served by someone who deeply cares. My promises to the people I work with: I'll never make you feel silly for asking a question, and I'll always listen to your concerns. You'll always know exactly how much you're paying me. I'll help you understand your situation and the strategies we implement as deeply as YOU feel is necessary. On top of that, I'll do a darn good job with all the technical stuff.

Want some of the investing basics? Listen to my latest podcast episode! Some of you who know me might know that I volunteer at a local high school through Junior Achievement to teach students about investments. Well, I was thinking that everyone else could probably use a refresher as well! Check out my latest podcast episode for a 30-minute look into investments. Still looking for more? Ask questions in the comments, or reach out! Podcast link in comments.

Here's a question to ask when you're looking for an advisor: "How many clients do you serve personally?" If it's over about 100, you're probably talking to a salesperson, not an advisor. I remember a senior advisor bragging about working with over 1,000 clients. He also bragged about getting to spend much of the fall in his deer stand. There were 1,000 people paying him, sure. But he wasn't serving 1,000 people. He had sold 1,000 people. Know the difference.