Author: cindylundberg@verdecm.com

As the back-to-school season approaches, families across the country are getting ready for the flurry of shopping, scheduling, and organizing that comes with it. Whether your children are in elementary school or heading off to college, this time of year can be both exciting and stressful. As Financial Advisors, we want to help you navigate the financial aspects of the back-to-school season with confidence and clarity.

 

1. Create a Budget and Stick to It

One of the most important steps you can take to prepare financially for the back-to-school season is to create a budget. List out all the expected expenses, including school supplies, clothing, extracurricular activities, and any technology needs. Don’t forget to account for additional costs like school lunches, transportation, and field trips.

Once you have a clear picture of what you’ll need, set a budget that aligns with your overall financial plan. This is where prioritizing comes into play—determine what’s essential and what can be scaled back. It’s easy to overspend during back-to-school shopping, so having a budget in place can help keep your finances in check. If you need help with this, reach out to Verde’s Financial Coach, Michelle Kopp!

 

2. Take Advantage of Sales and Discounts

Retailers know that back-to-school season is a prime shopping time, so they often offer significant discounts on school-related items. Keep an eye out for sales, use coupons, and consider shopping during tax-free weekends if your state offers them. Buying in bulk for items like notebooks, pens, and paper can also save money in the long run.

Additionally, consider shopping online, where you can easily compare prices and take advantage of exclusive online deals. Many stores offer student discounts, so be sure to ask about them, especially if you’re purchasing electronics or software.

 

3. Plan for the Unexpected

The back-to-school season often brings unexpected expenses—like a new textbook that wasn’t on the list or fees for extracurricular activities that weren’t anticipated. To avoid financial stress, set aside a small contingency fund within your budget for these surprises. Having a little extra cushion can help you navigate any unexpected costs without derailing your overall financial plan.

 

4. Review and Adjust Your Financial Plan

Back-to-school season is a good time to revisit your family’s overall financial plan. Are you on track with your savings goals? Do you need to adjust your spending or saving habits now that summer is over? Consider meeting with your financial advisor to review your plan and make any necessary adjustments.

For families with college-bound students, this is also an ideal time to review financial aid packages, scholarship opportunities, and student loan options. Make sure you understand the long-term financial implications of any decisions you make regarding college financing.

 

5. Teach Financial Responsibility

The back-to-school season is a great opportunity to teach your children about financial responsibility. Whether it’s through budgeting for school supplies, setting up a savings account, or discussing the costs associated with their education, involving your children in financial discussions can help them develop healthy money habits.

For older children and teenagers, consider giving them a budget for their school shopping and letting them make decisions about how to spend it. This can be a valuable lesson in prioritization and financial planning.

 

6. Consider Long-Term Planning

While the immediate focus is on the upcoming school year, it’s also important to keep long-term financial planning in mind. Whether it’s saving for college, planning for future extracurricular activities, or considering educational expenses down the road, thinking ahead can help you stay financially prepared.

Start or continue contributing to education savings accounts like a 529 plan. Even small contributions can add up over time and provide significant support when your child is ready for college.

 

7. Seek Professional Advice

If you’re feeling overwhelmed by the financial aspects of the back-to-school season, don’t hesitate to reach out to us. A Verde Advisor can help you create a budget, prioritize expenses, and ensure that your financial plan is aligned with your family’s goals.

Back-to-school season doesn’t have to be a financial burden. With careful planning, smart shopping, and a little foresight, you can manage the costs effectively and set your family up for a successful school year.

 

Remember, investing in your child’s education is one of the best investments you can make. By approaching the back-to-school season with a well-thought-out financial plan, you can enjoy this exciting time without unnecessary stress.

 

Here’s to a successful, budget-friendly back-to-school season!

As financial advisors, one of the most common concerns we hear from clients revolves around the impact of presidential elections on their investments. With the 2024 election approaching, it’s crucial to understand the historical market dynamics during such politically charged periods. Buckle up as we dive into some data-driven insights that can help guide your investment decisions today and during future election years.

Market Performance Under Different Presidencies

Historically, stocks have shown strong performance regardless of the party in power, although certain sectors and markets react differently under different administrations. While it’s essential to recognize the overarching growth trend of stocks over the long-term, it’s equally important to understand there is no consistent correlation between who holds the presidency and how any given asset class performs.

Short-Term Reactions to Election Results

The immediate market reaction to election outcomes can provide insights into investor sentiment as shown in the chart below. Sentiment can be significantly swayed by the outcome of presidential elections, leading to immediate but often temporary market movements. On the night of an election and the days following, markets may react strongly as investors speculate on the potential impacts of the new administration’s policies. When a new president announces major policy initiatives, especially those involving fiscal stimulus, taxation, or regulatory changes, markets might react positively or negatively depending on how these policies are perceived in terms of fostering economic growth or adding constraints. While short-term market responses to presidential elections can be dramatic, they are not always predictive of the longer-term economic impact of a president’s policies. 

Long-Term Trends: A Historical Perspective

Presidents often inherit the economic conditions of their predecessors and their policies may take years to manifest in economic outcomes. Thus, the market’s performance during any given presidency can be influenced by a combination of prior economic conditions, global events, and the specific policies enacted during their term. Looking back to the time of President Kennedy, the S&P 500 has only posted negative returns during the presidencies of Richard Nixon and George W. Bush. This underscores the general upward trajectory of the market over time regardless of political leadership.

Investment Strategy Based on Political Party

While it might be tempting to adjust your investments based on the party in office, historical data suggests this might not be the best approach:

• Investing only during Republican presidencies since 1950 would have yielded an annualized return of 2.80%.
• Investing during Democratic presidencies would have returned 5.11% annually.
• Staying invested throughout all presidencies would have resulted in the highest annualized return of 8.05%.

The Myth of Political Impact on Long-term Investment Success

Investors often speculate about the potential impact of presidential elections on the financial markets. However, the long-term data indicates that the person who is Head of State may not be as influential as many think. Significant market trends and economic cycles have spanned multiple administrations, suggesting that other factors—such as global economic conditions, technological advancements, and demographic shifts—play a more substantial role in shaping the investment landscape.

Despite the variability in short-term market reactions to elections, the long-term strategy of staying invested typically yields the best results. Market fluctuations during election periods are normal, but they do not generally disrupt the longstanding trend of growth in stock markets.

The key is to focus on long-term investment goals rather than making drastic changes based on political outcomes, or worse, potential outcomes. Decisions driven by the changing political landscape often lead to missed opportunities and potential misalignment with long-term financial objectives.

Contact a Verde advisor for more insights and information on how you can navigate this politically charged climate.

Source: https://go.ycharts.com/hubfs/How_Do_Presidential_Elections_Impact_the_Market/Election_Guide.pdf

Summer is a season filled with sunshine, outdoor activities, and numerous social events. However, the expenses associated with weddings, summer events, and potential increased childcare costs can strain any budget if not planned for carefully. Here’s a comprehensive guide to help you manage and plan for these seasonal financial demands.

Budget Early for Weddings and Events

Summer is a popular time for weddings and various social gatherings. The key to managing these expenses is to budget for them well in advance.

1. Set a Clear Budget: Determine how much you can afford to spend on summer events. Include costs like travel, gifts, attire, and any other associated expenses.
2. Start Saving Early: Once you have your budget, start setting aside a small amount each month. Consider opening a dedicated savings account for event expenses to avoid dipping into your emergency or regular savings.
3. Gift Wisely: While it’s traditional to give gifts at weddings, remember that your presence is also valuable. Consider creative, less expensive gifts like personalized DIY gifts or offering your skills (like photography or baking) as a gift.

Manage Increased Childcare Costs

With schools out, childcare becomes a significant summer expense for many parents. Planning is crucial to manage this without breaking the bank.

1. Explore Summer Camp Early Bird Specials: Many camps offer discounts for early registration. Sign up as soon as possible to take advantage of these savings.
2. Utilize Flexible Spending Accounts (FSAs): If your employer offers a Dependent Care FSA, use it to pay for qualifying summer camps and daycare expenses with pre-tax dollars.
3. Combine and Alternate Care: Team up with other parents to share childcare responsibilities. Arranging playdates or alternating care days can significantly reduce the need for paid childcare.

Smart Spending on Summer Activities

The allure of the warm weather can bring about a surge in spending on activities. Keep these in check with a few smart spending habits.

1. Look for Free Activities: Many communities offer free events during the summer such as concerts, outdoor movies, and festivals. Take advantage of these local programs.
2. Pack Meals for Outings: Food can add a considerable amount to your daily outings. Packing homemade meals or snacks can save you a surprising amount of money over the summer.
3. Set a ‘Fun Fund’: Avoid spontaneous overspending by setting aside a specific amount of money dedicated to summer fun. Once it’s spent, resist the temptation to dip into other savings.

By planning ahead and sticking to your financial strategies, you can enjoy all that summer has to offer without financial stress. Remember, the best summer memories are often the ones that cost the least!

 

This year, approximately four million individuals will graduate from college,¹ marking a significant transition into the workforce and a new relationship with financial responsibility. As they start earning and managing their own finances, their families may be concerned about their financial viability. Will they make it on their own? Have we taught them enough about financial responsibility? The advisors at Verde Capital Management are uniquely positioned to guide both graduates and their families, helping to establish a robust financial foundation for a lifetime.

 

POV: Gen Z in the Workplace

Born post-1996, Gen Z is the most racially and ethnically diverse generation in U.S. history, and it’s likely to be the most well-educated.² Known as digital natives, they are recognized for their strong social responsibility,³ collaborative nature, preference for flexible work environments, and resistance to traditional hierarchical structures.⁴

 

Trust Issues

Gen Z’s skepticism towards financial institutions might deter them from investing. A Morning Consult survey in 2020 revealed that only 32% of Gen Z trusts Wall Street, only slightly more than Hollywood at 28%.⁵ With life expectancies increasing (projected to live 20 more healthy years after they turn 60⁶) financial stability could be challenging, especially with potential reductions in Social Security. Because of this, we think financial planning becomes more important than ever.

 

Work and Money frfr

The independent workforce expanded by 34% in 2021, reaching 51.1 million people.⁷ Many of these workers lack retirement plans and may not be saving enough if at all.⁸ As gig economy jobs increase, proactive financial planning is really important.

The uncertainty surrounding Gen Z’s financial future has been exacerbated by the pandemic and ongoing economic volatility. Is this generation prepared for the upcoming financial challenges?

 

Gifts? Say less

A 2022 survey by the National Retail Federation revealed that over half of respondents intend to give cash as a graduation gift.⁹ While cash is always appreciated, it’s a perfect opportunity to introduce gifts that can foster long-term financial well-being.

Consider these thoughtful alternatives:

• Match Savings Contributions: Starting with a savings account could spark a lifelong savings habit. By matching a portion of your grad’s savings, families can encourage regular contributions. In 2024, up to $18,000 can be given without triggering the gift tax, or $36,000 for couples.¹⁰
• Fund an IRA Contribution: For graduates working freelance or those without access to a 401(k), contributing to a tax-advantaged Individual Retirement Account (IRA), like a Roth IRA, can be beneficial. Roth IRAs support tax-free growth and withdrawals, making them suitable for those starting out with modest incomes.
• Gift Stocks with Youth Appeal: Gifting stocks in sectors like entertainment, technology, or sustainable ventures can engage young graduates in investing, making it both an educational and financially beneficial gift.
• Gift Appreciated Stocks: This strategy not only aids in building the graduate’s portfolio but also offers tax advantages for your clients, setting the stage for discussions on generational tax planning.

 

We are here to help and support grads and families navigate through these milestones so that this young generation can be as financially prepared as possible. Reach out to us for great financial tools and for more information!

 

Sources:

1. Melanie Hanson, “College Graduation Statistics,” Education Data Initiative, June 12, 2022, https://educationdata.org/number-of-college-graduates/.
2. Kim Parker and Ruth Igielnik, “On the Cusp of Adulthood and Facing an Uncertain Future: What We Know About Gen Z So Far,” Pew Research Center, May 14, 2020, https://www.pewresearch.org/social-trends/2020/05/14/on-the-cusp-of-adulthood-and-facing-an-uncertain-future-what-we-know-about-gen-z-so-far-2/.
3. Annie E. Casey Foundation, “Social Issues That Matter to Generation Z,” February 14, 2021, https://www.aecf.org/blog/generation-z-social-issues.
4. Melissa De Witte, “Gen Z are not ‘coddled.’ They are highly collaborative, self-reliant and pragmatic, according to new Stanford-affiliated research,” January 3, 2022, https://news.stanford.edu/2022/01/03/know-gen-z/.
5. Morning Consult, “How 2020 is Impacting Gen Z’s Worldview,” June 2020, https://morningconsult.com/form/gen-z-worldview-tracker/.
6. Mark Stibich, PhD, “Healthy Life Expectancy and How It’s Calculated”, Verywell Health, October 3, 2020, https://www.verywellhealth.com/understanding-healthy-life-expectancy-2223919.
7. MBO Partners, “The Great Realization: 11th Annual State of Independence,” December 2021, https://info.mbopartners.com/rs/mbo/images/MBO_2021_State_of_Independence_Research_Report.pdf.
8. Allison Shelton, “What We Know—and Don’t Know—About Independent Workers and Retirement Savings,” June 28, 2019, https://www.pewtrusts.org/en/research-and-analysis/articles/2019/06/28/what-we-know-and-dont-know-about-independent-workers-and-retirement-savings.
9. National Retail Federation, “Graduation Season Data Center,” 2022, https://nrf.com/topics/holiday-and-seasonal-trends/graduation/graduation-season-data-center.
10. S. Internal Revenue Service, “What’s New – Estate and Gift Tax,” February 21, 2023, https://www.irs.gov/businesses/small-businesses-self-employed/whats-new-estate-and-gift-tax.

 

April marks the beginning of Financial Literacy Month, a time dedicated to raising awareness about the importance of financial education and empowering you to make informed decisions about your money. At Verde Capital Management, we believe that financial literacy is the cornerstone of financial well-being, and we are committed to equipping our clients and our community with the knowledge and resources you need to achieve your financial goals.

 

Understanding the Importance of Financial Literacy

Financial literacy is more than just understanding how to balance a checkbook or create a budget. It encompasses a broad range of skills and knowledge, including managing debt, investing wisely, planning for retirement, and protecting against financial fraud. Unfortunately, studies have shown that many people lack even basic financial literacy skills, which can have far-reaching consequences for their financial stability and future prosperity. It may even make individuals more vulnerable to financial fraud.

 

Empowering You Through Education

At Verde, part of our mission is to educate. We recognize that proper education is the key to empowering you to take control of your financial future. That’s why we offer a variety of resources and educational opportunities like our blog, regular meetings with our clients, and sharing our expertise through community outreach programs.  We are dedicated to providing the tools and information our clients need to make confident financial decisions.

 

Building a Foundation for Financial Success

Financial literacy is not something that can be achieved overnight; it is a lifelong journey that requires ongoing learning and adaptation. By starting early and instilling good financial habits from a young age, you can build a solid foundation for financial success and security. Any new relationship we have with a client starts with education from budgeting and cash management, to how investments work and our investment philosophy. Our goal is to take you from an average consumer to a well-educated investor to help you avoid irreparable decisions with your money.

 

As we celebrate Financial Literacy Month, we have recommitted ourselves to the cause of financial education. At Verde, we are proud to be a part of this important mission, and we invite you to join us on this journey by sharing us with your friends and family!

Tax time is just around the corner. Is it weird how it comes at the same time every year and for many of us it seemingly comes out of nowhere? And oops, did you have estimated tax payments set up and completely forgot to pay them again this year? Where are we supposed to come up with that kind of money in only a month?

 

You know, this problem can actually happen with a lot of expenses that we don’t have on our radar. How about the semi-annual auto insurance or those huge property tax bills? You’d think that by now we would have remembered them every year, but no, every year we seem to forget every single one. Then we scramble to come up with the money or end up putting something on a credit card.

 

So here’s what I think is the problem. It’s not about our brains. Even if we took a class on how to have a better memory, that won’t fix it. Because even remembering that it’s coming up, will not take care of the need to have the money when that expense comes up. Don’t rely on your brain to remember everything and then on top of that come up with a solution. That’s a lot to do at one time! Instead, have a system in place that will handle it for you. What is this magical system you may be asking?? 

 

Well, let me introduce sinking funds. 

 

What Are Sinking Funds?

Sinking funds are like your financial safety net. They’re funds set aside in savings specifically designated for future expenses. These expenses can range from predictable annual bills like estimated tax payments and property taxes to more unexpected costs like car repairs or home renovations. They can also include expenses like travel, clothing, random kids activities, personal care, annual subscriptions, etc. 

 

How can Sinking Funds Help?

1. Managing your checking account: Sinking funds help remove the stress of fluctuating checking account balances. By setting aside money for known expenses, you can keep your checking account stable and avoid feeling like you’re constantly playing catch-up.  A lot of us may determine how well we’re doing by the amount of money in our checking account. But this amount can be deceiving. One month we feel great, but the next month, there goes two of those bigger random expenses and now we feel like we’re in the hole. However, if we’re accounting for these big bills throughout the year and saving for them, we just move the money from our sinking funds back into our checking account when they are ready to hit and in and out the money goes – not affecting us or our budget one bit. What a great feeling.
2. Budgeting with Confidence: Ever feel guilty about indulging in a shopping spree or unexpected purchase? Sinking funds alleviate that guilt by allowing you to budget for these expenses in advance. Whether it’s clothing, travel, or entertainment, having a designated fund means you can spend without remorse. Now when we find those deals and spend a few hundred dollars, those moments aren’t painful anymore – they were actually planned.
3. Emergency Preparedness: Sinking funds serve as your financial cushion in case of emergencies. Instead of reaching for your credit card when the unexpected happens, you’ll have a dedicated fund to cover expenses like car repairs or medical bills. This proactive approach to financial planning ensures you’re prepared for whatever life throws your way. Being prepared for emergencies helps take that extra piece of emotional stress out of the equation so you can focus on what’s important. For example, the unexpected car repair. Instead of having to pay the full $2,000 car repair bill, wouldn’t it be nice to just have to worry about $500 since you’ve been saving every month and have $1,500 sitting in your car repair sinking fund? Be your own emergency fund and don’t rely on a credit card. 

 

How do I start implementing sinking funds?

Creating sinking funds is simple. Start by identifying these non-recurring and random expenses and estimating their costs for the year. Divide that number by 12 to come up with a monthly amount. Then, add this amount to your monthly budget. Set up a separate savings account, you can open multiple Verde Flourish savings accounts to account for different categories, or use a spreadsheet to track your sinking funds. Over time, you’ll build up a reserve for each expense, giving you peace of mind and financial stability.

 

So there you have it! Sinking funds are a powerful tool for managing your finances and preparing for the unexpected. This piece of my program has honestly been a game changer for a lot of my clients. By proactively saving for future expenses, you can eliminate the stress of surprise bills and budget with confidence. If you’d like setting up your own sinking funds and learning the rest of my full money management system, reach out to schedule a free consultation today. Your future self will thank you!

 

Verde Capital Management, Inc. is a federally registered investment adviser. The information, statements and opinions expressed in this material are provided for general information only, are based on data we believe to be accurate at the time of writing, and are subject to change without notice. Financial Coaching services are only provided to those with a financial coaching service agreement in place.  Investment advisory services are only offered to clients or prospective clients where Verde Capital Management, Inc.  and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Verde Capital Management, Inc. unless a client service agreement is in place.