Author Archives: Maureen Demers

Pay Down Debt or Save for Retirement?

You can use a variety of strategies to pay off debt, many of which can cut not only the amount of time it will take to pay off the debt but also the total interest paid. But like many people, you may be torn between paying off debt and saving for retirement. If you’re not sure you can afford to tackle both at the same time, here are some of the factors you should consider.

Rate of Investment Return versus Interest Rate on Debt
Probably the most common way to decide whether to pay off debt or to make investments is to consider whether you could earn a higher after-tax rate of return by investing than the after-tax interest rate you pay on the debt. For example, say you have a credit card with a $10,000 balance on which you pay nondeductible interest of 18%. By getting rid of those interest payments, you’re effectively getting an 18% return. That means your money would generally need to earn an after-tax return greater than 18% to make investing the smarter choice. That’s a pretty tough challenge even for professional investors.

Bear in mind that investment returns are anything but guaranteed. In general, the higher the rate of return, the greater the risk. By contrast, the return that comes from eliminating high-interest-rate debt is a sure thing.

An Employer’s Match May Change the Equation
If your employer matches a portion of your workplace retirement account contributions, that can make the debt versus saving decision more difficult. Let’s say your company matches 50% of your contributions up to 6% of your salary. That means that you’re earning a 50% return on that portion of your retirement account contributions.

If surpassing an 18% return from paying off debt is a challenge, getting a 50% return on your money simply through investing is even tougher. Plus, you know in advance what your return from the match will be; very few investments can offer the same degree of certainty. That’s why many financial experts argue that saving at least enough to get any employer match for your contributions may make more sense than focusing on debt.Don’t forget the tax benefits of contributions to a workplace savings plan. By contributing pretax dollars to your plan account, you’re deferring anywhere from 10% to 39.6% in taxes, depending on your federal tax rate.

Your Choice Doesn’t Have to Be All or Nothing
The decision about whether to save for retirement or pay off debt can depend on the type of debt you have. For example, if you itemize deductions, the interest you pay on a mortgage is generally deductible on your federal tax return. Let’s say you’re paying 6% on your mortgage,18% on your credit card debt, and your employer matches 50% of your retirement account contributions. You might consider directing some of your resources to paying off the credit card debt and some toward your retirement account to get the full company match while continuing to pay the tax-deductible mortgage interest.

Time is your best ally when saving for retirement. If you wait to start saving until your debts are completely paid off, you might never start saving. It might also be easier to address both goals if you can cut your interest payments by refinancing that debt. For example, you might be able to consolidate multiple credit card payments by rolling them over to a new credit card or a debt consolidation loan with a lower interest rate.
Bear in mind that even if you decide to focus on retirement savings, you should make sure that you’re able to make at least the monthly minimum payments owed on your debt. Failure to make those minimum payments can result in penalties and increased interest rates.

Other considerations
When deciding whether to pay down debt or to save for retirement, make sure you consider the following factors:

  • Having retirement plan contributions automatically deducted from your paycheck eliminates the temptation to spend that money on things that might make your debt dilemma even worse.
  • Remember that if your workplace savings plan allows loans, contributing to the plan not only means you’re helping to provide for a more secure retirement but you’re also building savings that could potentially be used as a last resort in an emergency.
  • If you focus on retirement savings rather than paying down debt, make sure you’re invested so that your return has a chance of exceeding the interest you owe on that debt. While your investments should be appropriate for your risk tolerance, if you invest too conservatively, the rate of return may not be high enough to offset the interest rate you’ll continue to pay.

Source: Mike Skolnick, CPA FPS, San Diego, CA

The Three Ghosts of Gift Tax

Gifts are not taxable income. However, they can come back to haunt you! Be aware of the three ghosts of gift tax.

The first ghost will come if you are applying for a mortgage and the bank is trying to determine where you’re getting the money for your down payment. They want to make sure you’re not taking out a side loan (and are hence a worse risk to them because of your greater debt burden). If you are going to use gift money to buy a house, they will want a letter from the donor stating it’s a gift and not a loan.

The second ghost will come wanting evidence of a gift to prove that it is not taxable income. Once I had a self-employed person get audited by the IRS. The first thing the IRS does with a self-employed person’s audit is add up all the deposits into their bank accounts to see if it’s more than the income they claimed. The IRS came back and said his deposits into his bank account were $8,000 more than he showed on Schedule C. In fact, they said, he’d left off all his August income. He claimed he didn’t even work that August! Curious, I asked why he hadn’t worked. He said it was because he’d gotten married. Aha! Those deposits were wedding gifts, not subject to income taxes! Happily, we could prove he’d really been married then, and that a large deposit went to pay for the wedding—it really was from his parents.

The third gift tax ghost comes for the paperwork, which can be a bit complex. The first thing to know is that you don’t have to do anything if the gift was less than some “de minimis” annual exclusion. De minimis literally means “so little we can disregard it.” The annual exclusion was $10,000 for many, many years, and started to climb with inflation a few years back. For 2018 it’s $15,000 per recipient. So, you can give $15,000 to your daughter and $15,000 to your son and $15,000 to your son-in-law and $15,000 to your daughter-in-law… and if you’re married your spouse can do the same thing. That’s $15,000 all-in, including Christmas presents (there are some exceptions surrounding payments made directly to a hospital or college).

If you get a gift of whatever amount, it’s all cool. Make a note in your checkbook, maybe copy the check for your tax files, and send a thank you note (I didn’t have to tell you that, I’m sure). You can stop reading here. Fa la la la, enjoy your day!

The problem is if you give a gift over the annual exclusion rate. Now you have wandered into the territory of estate taxes—the tax you pay when you transfer money from one generation to another.

Here’s how it works.

Imagine you’ve got a net worth of $12,000,000 and you’re feeling a bit peaked. Imagine also that you know that the estate tax exemption happens to be $11,180,000 right now. You gather your two beloved children to your bedside and say “here, each of you, have $1,000,000 each.” You bring your net worth down to $10,000,000 and then die the next day. Did you cheat the tax man? No! Because gifts over the annual exclusion amount get added back to your estate transfer] tax return.

In fact, all the gifts you made in your entire lifetime above the “de minimis” amount get added back to your estate tax return. Depending on the estate tax exclusion level in the year you die, the gifts you gave may or may not cause you to have to pay any actual tax, but all the gifts you ever made eat away at a lifetime exclusion that isn’t actually knowable until the day you die; estate tax exclusions shift around a lot depending on who’s in control of Congress.

How do gifts you made in 1997 get added to your estate transfer return when you die in 2047? Paperwork! Really dreadful paper-work that literally follows you to the grave. When you give a gift over [whatever the annual exclusion is that year], you must file a gift tax return and tuck it into a folder called “Estate of [Your Own Name]”. It’s not a hard return to do, but you’ll probably pay an accountant a couple of hundred dollars to do it, and you’ll be stuck with a folder in your filing cabinet that your heirs/accountants/lawyers should know about when you die.

There you have it: give gifts of above $15,000 a year per per-son per recipient and you’re saddled with serious paperwork requirements. It’s not (usually) a tax, but it’s taxing nonetheless. If the ghosts of gift tax come for you this year, you can be ready for them.

Source: Wendy Marsden, CFP®, CPA, MS, Greenfield, MA

Minimize Taxes to Build Wealth

Because we pay attention to all aspects of your financial life, we know when you can realize tax savings by:

  • Restructuring your investment portfolio,
  • Shifting income to dependents in lower tax brackets,
  • Claiming appropriate office-in-home deductions,
  • Maximizing retirement plan contributions,
  • Identifying all the deductions that apply to your small business,
  • Using charitable gifting strategies more effectively,
  • Amending prior-year tax returns,
  • Or implementing other tax-saving strategies.

Objective Investment Advice to Grow, Protect, and Manage Your Wealth

Growing, protecting, and managing your wealth requires answers to many questions, including:

  • Do I buy individual stocks, mutual funds, ETFs, Treasuries, commodities, gold, or just leave my money in my savings account?
  • How much am I really paying for my investments?
  • What are the tax implications of the investments I select?
  • Which investments should I hold in my retirement accounts instead of my brokerage accounts?
  • Are my investments properly diversified?
  • Are my investment decisions sometimes driven more by emotion than objective analysis?

Our professional investment advice is fully integrated with your comprehensive financial plan, giving you the security and confidence that you have the best investment strategy for meeting your goals.

Functional Asset Allocation for Growing Your Net Worth

Most financial planners and investment advisors focus on your investment portfolio and its performance against various indexes.  While your investment portfolio is important, it’s only part of the picture.  Your overall net worth is a much better measure of your financial well being and your ability to achieve your goals.

Functional Asset Allocation is a holistic approach to net worth management and growth.  Its most basic premise is that there are three major categories of assets – interest-earning, real estate, and equities – and that each category has a fundamental function or purpose.

The purpose of the interest-earning category, which includes cash and bonds, is capital preservation.  These investments protect against deflation and ensure that you will have a reliable cash flow while keeping this part of your portfolio safe.

The real estate category includes your personal residence, real estate that produces income (rental property, for example), and nonproductive real estate (including vacant land and second homes).  The purpose of real estate is to protect against inflation through the opportunity to leverage your investment by mortgaging the property.  It also fulfills the function of personal use and enjoyment.

Equities produce profits during times of prosperity.  They are the growth engine of your net worth.

Once you understand the function of each asset category you see how questions like “Should I invest in stocks or bonds now?” are fundamentally flawed.  Under Functional Asset Allocation, the three asset categories don’t compete against each other on performance or yield.  The better question is “Do I have the right investments in each asset category, and am I properly balanced across all three categories so that I can achieve my goals and worry less about my finances?”

We can help you answer that question with a resounding “Yes.”

The Importance of Knowing Your Risk Capacity

If you have worked with a financial advisor, you are likely to have a good understanding of risk tolerance, but you may not be as familiar with risk capacity.

Both are important in determining how much risk you should be taking in your portfolio for your unique financial situation.

Defining Risk Tolerance and Risk Capacity

Risk Tolerance is a psychological factor – it is all about your behavior and mental attitude. It is related to how well you can handle downturns in the market. An investor who can sleep well at night, and not sell investments when the market goes down 30% or more, has a high-risk tolerance; an investor who obsesses over a down market, panics, and sells, has a low-risk tolerance.

Investors with a higher risk tolerance would typically have a higher percentage of their portfolio allocated to equities (stocks) and riskier fixed-income investments, such as high-yield bonds. Even though these investors are exposed to greater potential loss, they also have the potential to get higher returns.

Investors with a lower risk tolerance would typically have a lower percentage of their portfolio allocated to equities, and a higher percentage in lower-risk assets such as government treasury bonds and CDs.

Although understanding risk tolerance is important, it should not be the only determining factor in how much risk an investor should take in their portfolio. Risk capacity, as explained below, is also a very important factor to consider.

Risk Capacity has to do with the impact a market downturn would have on your ability to reach your goals. This is different from risk tolerance, which is about how you feel about risk and how much risk you are willing to take. Risk capacity is about whether you can financially afford to take a certain amount of risk.

Factors affecting risk capacity include your time horizon for when you need to tap into your investments, the withdrawal rate needed from the portfolio, the length of time you need to draw from the portfolio, the availability of other assets, and the amount of liquidity needed now and in the future.

Risk Capacity Examples

As an example, consider Jim, who is single and 35 years old, has 30 to 35 years until he plans retirement, has sufficient liquidity, has a stable corporate job in a profession with strong demand, and does not foresee a need to tap into investments prior to retirement. Based on this information, Jim has a high-risk capacity at this time. Given his overall financial situation, he can afford to take on higher risk in his portfolio. A major market downturn would not have any material effect on his financial well-being.

Now consider Laura, who is also 35 years old, but her situation is quite different. She owns her own business, supports a family of four, has an unstable job outlook as her business is still struggling to survive, and does not have sufficient liquidity as she puts almost all earnings back into the business. She has 30 to 35 years until she plans retirement just like Jim; however, she needs to tap into her portfolio in the next few years to help support her family while building her business. Based on this information, Laura has a low-risk capacity at this time. Given her overall financial situation, she cannot afford to take on as much risk as Jim in her portfolio. A major market downturn in the next few years could have a negative impact on her family’s financial well-being.

Notice in these examples there is no mention of each investor’s risk tolerance. We have no idea whether they have high or low-risk tolerances, and we did not need to know this in order to determine their risk capacity.

Combining Risk Tolerance with Risk Capacity

Now that we have an understanding of the risk capacity of our investors, how would risk tolerance be applied to their situations? First, assume Jim has a low-risk tolerance and is not willing to take on the amount of risk his risk capacity indicates he could. That is perfectly okay because he has to be able to sleep at night and not worry about his investments, and it does not affect his financial well-being. Next, assume Jim has a high-risk tolerance and is willing to take the amount of risk indicated by his risk capacity. That is okay too, as explained above in the analysis of his risk capacity.

Consider Laura – assume she has a high-risk tolerance and would be willing to take on more risk than her risk capacity indicates. Just because she feels she could handle the higher risk, it does not mean she should take higher risk than her risk capacity indicates, because she cannot afford to take on more risk at this time.


Risk tolerance is difficult to quantify since it is based on your emotions and ability to handle major market downturns. Because risk capacity is based on your goals, it can be more easily quantified. It takes into consideration factors such as your need for cash and liquidity, your investing time horizon, the length of time you need to draw from the portfolio, and your ability to withstand a major market downturn without affecting your goals or harming you financially.

Here are a few rules of thumb to use as a guide to help determine risk capacity:

  • When the need for liquidity increases, risk capacity decreases.
  • When the time horizon increases, risk capacity increases.
  • When the importance of the investments increases, risk capacity decreases.

Your risk tolerance and your risk capacity may be aligned with one another, or they may not. Both are likely to change over time depending upon where you are in your financial life cycle and depending upon your unique circumstances along the way, which is one reason why a financial plan needs to be monitored and adjusted regularly.

Steven Clark, CFP®, EA

Coconut Creek, FL

Launching the Finances of Your Graduate

With final exams in May and June for colleges, universities and high schools, thousands have marched for their graduation ceremonies. Whatever the age of your graduate, you should introduce them to the power of the Roth IRA. More than anything, it is an incredible gift to the young with their low taxes and time on their side. With Roth IRA accounts you invest money with a mutual fund company or brokerage firm. You don’t get the upfront tax break as you do with a traditional IRA or 401(k), but you get back something more valuable in the form of tax free growth for the rest of their lives.
Grads can deposit up to $5,500 into a Roth every year, as long as they have earned that much income for the year and have an adjusted gross income under $120,000. If you have the extra cash flow, I recommend the “parent match” for the Roth IRA to get them up to their maximum contribution. Convincing your grad to salt away funds for the future may not be the easiest sell. See if you can use the following points to convince them.

The Power of Starting Now. If there’s one thing that a college grad has on most of us, it’s time. Let’s say they were able to put $5,500 a year into their Roth IRA for the next 10 years. After that they stop their contributions. If you assume 9% annual growth in the account, by the time they reach retirement 30 years later they will have $1.1 million in their account. All of that growth came out of $55,000 of contributions.
If instead they wait for 10 years to get started on the Roth and then make 30 years of $5,500 contributions, the numbers look good but not as compelling. With that same 9% growth, your grad would end up with $750,000 in their account 40 years from now. And they had to make $165,000 of contributions. Start your grad saving now to get over $1 million in tax-free growth versus less than $600,000 if your grad starts in 10 years.
Tax-Free for Life. Putting funds into a Roth IRA instead of a traditional IRA is a wager that taxes in the future will be higher than the taxes they pay today on income. With your new grad most likely in a low-income tax bracket and the recent tax law changes, this is a good bet to make. Once you put funds in a Roth IRA, you will never have to pay taxes on them again as long as your withdrawals are qualified. For most people that means waiting until age 59½ before they access their Roth earnings. Unlike traditional IRA and 401(k) accounts, with a Roth your grad won’t have to pay income taxes on the proceeds when they need the funds.
You Can Get It Back. Life often happens while you’re making plans. What if your grad ends up needing the funds? They may worry that if they require the Roth money for other purposes, it will be unavailable in some sort of retirement vault. A little-known trick of the Roth IRA allows your grad to withdraw the contributions that were made into the account. We consider Roths to be tax-free gold and don’t generally recommend this step. But if you need the money, you can always get your Roth IRA contributions out free of tax or penalty regardless of your age or circumstance.

Dave Gardner, CFP®, EA
Boulder, CO

A Penny Saved. . .

Benjamin Franklin was born in Boston on January 17, 1706, the 10th son of a soap maker. For the next 84 years he lived one of the most remarkable and productive lives of any American ever. Among his many achievements, he gained prominence as an author, an inventor, a political theorist, a scientist, a statesman, and a diplomat. He was one of America’s first truly wealthy citizens, and he is well described as one of our country’s founding fathers. Some have even referred to him as the “First American.” Few in our history have played such a prominent role in the affairs of their day. His intellect was boundless, and his interests were many and varied. He shares his wit and intelligence with us today through his writings and the sayings and witty aphorisms he published in his “Poor Richard’s Almanac.” I think just about everything we need to know to be financially successful today we can learn from a man who lived over 200 years ago. Consider some of Franklin’s sage advice with me, and I think you will agree.

He was a strong proponent of public education:  1) An investment in knowledge pays the best interest. 2) By failing to prepare, you are preparing to fail.

He understood that risk played a role in investing:  3) Nothing ventured, nothing gained. 4) Vessels large may venture more, but little boats should stay near shore.

He understood the role time plays in investing:  5) Time is money. 6) He who can have patience can have what he will.

He was a strong proponent of thrift and the importance of saving:  7) For age and want save while you may; no morning sun lasts a whole day. 8) Beware of little expenses; a small leak will sink a great ship. 

He understood the importance of personal responsibility and hard work: 9) Motivation is when your dreams put on work clothes. 10) There are two means to increase your wealth. Increase your means or decrease your wants. The best is to do both at the same time. 11) Diligence is the mother of good luck.

He understood the limitations of wealth and the limited role it plays in the life of the truly successful person. 12) Money has never made man happy, nor will it; there is nothing in its nature to produce happiness. The more of it one has, the more one wants. 13) Great beauty, great strength, and great riches are really and truly of no great use; a right heart exceeds all. 14) Don’t judge a man’s wealth or godliness by their Sunday appearance. 15) Wealth is not his that has it, but his that enjoys it. Success has ruined many a man.

Even in that chauvinistic age, Ben recognized the role of a good woman:  16) A good wife and health is a man’s best wealth! 

Ben Franklin made these observations on the potential problems a democracy could face over 200 years ago. His warnings seem eerily loud, clear, and pertinent for us today. 17) When the people find that they can vote themselves money that will herald the end of the republic. 18) The U.S. Constitution only guarantees the American people the right to pursue happiness. You have to catch it yourself.

These are only a tiny sampling of Franklin’s financial wisdom, but with these few pearls you now know about all you need to know to be financially successful. Franklin says that we should educate ourselves, be willing to take some risk, and have the patience to let time work its magic. We should be willing to work hard; be industrious as he would say, and don’t expect others (or the government) to do for us what we can do for ourselves. He cautioned us to keep money in perspective and recognize that it should not be an end unto itself, but simply a tool for doing good. He warned us that money by itself will never make us happy, and we see the evidence of that all around us.

Benjamin Franklin is one of my favorite historical characters. His genius was well-recognized in his time, and he achieved fame, wealth, and the respect of his peers. We are fortunate that he was there to share his wisdom as our country was being born. We would do well to heed his words today as they are as relevant now as when he first spoke them. I often caution my readers that though far from the most important thing, still, money matters. I believe that Franklin had a similar thought in mind when he observed, “There are three faithful friends in our life: an old wife, an old dog, and ready money.”

Michael Ryan, CFP®, MBA

Hendersonville, TN

Tax Alpha

No investment advisor can honestly tell you that they can make you an additional 10% return on your investments. However, I can honestly say that I can, in many instances, save you 10% of your investments through good tax planning. How, you ask? I’ve got a lot of strategies. Taken altogether, they form what we’re calling “Tax Alpha”.

It’s pretty complex, so let’s put some building blocks in place first.

  • Tax-deferred “qualified retirement money” (deductible IRAs, 401ks, etc.) is going to be taxed when you take it out.
  • Social security is untaxed if you live on social security and a small additional income. But if you have more than a minor amount of retirement income, social security becomes taxable. During that time when your social security is phasing in as taxable you’re paying at either a 27.75% tax rate (if you were otherwise in the 15% bracket) or a 46.25% tax rate (for those who thought they were in the 25% bracket.) These high rates are a combination of the tax on your retirement income plus the additional tax on your social security income. Additional retirement income can also cause dividends and long-term capital gains to go from 0% to 15% taxed: it’s a bitter reality that sneaks up on people taking IRA distributions!
  • If you make over $85k single or $170k married filing joint, there’s a surcharge on your Medicare premiums that works as a de facto extra tax. This is called the IRMAA threshold and it sounds like a good idea (“tax the rich”) until you realize that higher Medicare premiums hit people who are merely taking distributions from their retirement plans for large purchases (like buying the RV they were saving up for, or paying for a nursing home).
  • Required Minimum Distributions (RMDs, sometimes called MRDs) are the government’s way of saying “we’ll let you defer taxes so you can save more when you are young, but not forever.” When you turn 70 ½, you must start paying taxes on a required minimum amount each year. Required distributions typically start after you’re on social security and that’s when you discover you’re in the highest tax bracket of your life. (Not what you meant to do when you deferred the taxes, was it?!?)
  • If you are in a low tax bracket, your tax rate on long-term gains and qualified dividends is currently at 0%. That means sometimes we can sell a stock to harvest the accumulated gain at 0% federal income tax!
  • People talk about simplifying taxes as if it were all about changing the tax rates. It really isn’t! Taxes are complex because you have so many ways to earn income, and so many ways to take deductions and credits. The actual tax calculation is easy-peasy. It’s determining what your taxable income (after deductions and credits) is that is subject to much of our strategizing.

So, a tax-focused comprehensive planner (that’s me) accounts for tax ramifications when providing investment advice. We look at several things at the same time:

  • how much cash you need to fund your goals
  • what tax bracket are you likely to be in after age 71
  • how much room for additional income you have left in the same or lower tax brackets before age 71
  • all while paying attention to the IRMAA thresholds that increase Medicare premiums

I have a truly scary Excel spreadsheet to help solve these problems. I also use various tax planning tools. But without getting into numbers, here are some examples.

Fran and Alex are retirees in their 60s. They need $50k/year to fund their retirement goals. They decide to delay taking social security until age 70. They still need money to live on now, though. Let’s say they have $200k in after-tax money (plain old savings or investment accounts) and $900k in qualified retirement money (IRAs).

In this case I’d run some calculations to see what tax rate bracket they’ll be in when they’re 71, and I’d convert as much as possible of their Traditional IRA into Roth IRAs each year to pay lower taxes now rather than later. During the clever Roth conversion years, they live on the $200k after-tax money. The Roth conversions protect the IRA money from ever being taxed again, and reduces the size of their eventual required distributions after age 70 ½. The desired net effect avoids having their required minimum distributions being taxed in a 10% higher tax rate bracket.

Here’s another case: Sage is still working, still accumulating, still growing assets. All of Sage’s money is in workplace plans. When Sage retires, quite possibly not until age 70, there’s going to be a massive required distribution (RMD) hitting at the same time as social security payments start. The trick here is to consider some other strategies; QLACs, donor advised funds, and the Roth side of a 401k.

Dale is early-career but has an inheritance. In Dale’s case we’d pay attention to tax-loss harvesting of inherited taxable investments; have Dale contribute as much tax-deferred income as he can at high brackets; but use Roth contributions if Dale is in low tax brackets.

Everyone loves to save taxes. An investment advisor who is tax-focused and considers comprehensive financial planning goals will do a better job for you than the typical investment advisor. I am a member of the Alliance of Comprehensive Planners and that’s how we work.

Wendy Marsden, CFP®, CPA, MS

Greenfield, MA

Today I Might Be Crazy

Today I might be crazy. I signed up for the 2017 CrossFit Games. I have only been participating in CrossFit since last July; I am not a top athlete; I am not highly competitive; I have no hope of making it to the regional games for my age group; and I will not even rank highly in my gym. So, why sign up and participate? Because, without hurdles to overcome or goals to achieve, it’s easy to lose track of where you are heading or even where you wanted to go in the first place.

This morning’s MET-CON at “the box” was a cardio killer. Our trainer said it was the hardest of the week because the first Games workout is on Friday. Yikes, that’s coming up fast. For the next five weeks, everyone participating in the games will compete at their home “box” with the same workout and log results. The top scores will move on until the elite from across the country gather this summer to compete in the finals.

If there isn’t hope of any substantial outcome, why compete? I decided to compete because I made a commitment last July to give CrossFit a one-year opportunity to see what it could do for me. I made the commitment, so I will give it 100% until the end of the year. If that means pushing myself to do more than I thought I could, then that is what I will do. I’m already stronger than I’ve ever been. But, I can do more.

I could work out at the local gym or at home. Would I push myself as hard? No, absolutely not. Unless you have crazy determination and focus, it’s important to seek outside guidance to move beyond where you are today. The best will always tell you that without the guidance of their coach or a mentor, they wouldn’t have gotten where they are today.

In my financial planning practice, I push clients to set goals, break them into small bites and develop timelines for completion. Unfortunately, I don’t receive much feedback that clients are taking advantage of the power of goal setting. Dr. Gail Matthews, a psychology professor at Dominican University in California, did a study on goal-setting with 267 participants. She found that you are 42% more likely to achieve your goals just by writing them down.

So why not write them down? My uneducated guess is a fear of failure. But, if you wrote down a goal, be it financial, lifestyle, personal growth, career, health, etc., and do only one thing toward achieving the goal, won’t you be farther along than if you didn’t take any action? How is that failure? It’s not; you should praise yourself for any progress you’ve made. Then, reassess the goal, redefine the interim steps, and recalculate the goal date.

Forbes reports a remarkable study about goal-setting. Harvard’s MBA graduate students were asked if they had set clear, written goals for their futures, as well as specific plans to transform their fantasies into realities. The result of the study was that only 3% of the students had written goals and plans to accomplish them, 13% had goals in their minds but hadn’t written them anywhere, and 84% had no future goals at all. Think for a moment which group you would belong to. After 10 years, the same group of students were interviewed again and the results were astonishing. The 13% of the class who had goals, but did not write them down, earned twice the amount of the 84% who had no goals. The 3% who had written goals and plans for them were earning, on average, 10 times as much as the other 97% of the class.

So, what does my competing in the CrossFit Games have to do with financial planning? Absolutely nothing for someone at my level. But it has everything to do with living my best life. What commitments will you make to live your best life? Will you write them down? Will you share them with your financial planner, life-coach, mentor, trainer so you have your own personal cheerleader in your corner?

Kelly Adams, CFP®, EA

Novi, MI