Archive for financial management

2017 Market Recap

For nearly all of the 2017 calendar year, major news outlets were consistently publishing articles about the remarkable performance of the stock market. It seemed like every week the Dow Jones Industrial average (DJIA) broke a new threshold or the S&P 500 closed at all-time high.

Now that the calendar has flipped, it is a good time to look back at how major stock market indices performed in 2017 and what it all means for the U.S. and its citizens.

What the stock market is - and what it is not

Before defining what the stock market is comprised of, it is important to note that the performance of stock market indices is not necessarily synonymous with the health of the American economy. Most economists and financial professionals measure the health of an economy based on a variety of factors, including gross domestic product, unemployment rates, and the consumer price index. Though a stock market index can certainly point to the general health of an economy, it is ultimately investors and speculators that dictate stock prices.

In the past, tulip bulbs, beanie babies, and dot-com stocks all saw sudden, dramatic increases in value due to a widespread uptick in demand. In the end, however, these meteoric rises often saw equally significant decreases in valuation once excitement wore off and the reality of the long-term sustainability of the investments set in. 

This is not to say that the growth major indices experienced last year was a fluke. It is important, however, to carefully examine the more tangible aspects of the companies whose stocks saw increases in value - such as debt-to-equity ratio, return on equity, return on assets, and operating margins.

What made the markets newsworthy in 2017?

The DJIA experienced an increase of more than 25 percent from the previous year, its second-best year since the beginning of the Great Recession. There have been only seven instances since 1976 where the DJIA has increased by at least 25 percent in a calendar year. When compared to the historical average of about 7.75 percent growth, the DJIA far outpaced what most investors come to expect from a year's worth of growth. Additionally, the DJIA did not experience a net loss in value in any calendar month in 2017, which had previously never happened. For all intents and purposes, stockholders saw truly remarkable growth in their investments, adding trillions of dollars to the aggregate net worth of Americans.

Who does the stock market affect the most?

The individuals most affected by stock market fluctuations are those who directly own stock - which, according to a Gallup poll released in May 2017, is only about half of American households. A closer examination reveals that stock ownership increases in lockstep with earnings. In 2017, only 21 percent of those making less than $30,000 invested in the stock market. Conversely, 89 percent of individuals making $100,000 or more own stock.
A well-performing stock market is undoubtedly beneficial for those who own stocks, and the resulting effects create positive ripples across the economic landscape of the U.S. Keep in mind that a successful stock market, however, does not offer as significant of a direct benefit to those who have below-average earning power.


America is in the midst of one of the longest bull markets of all time, as the DJIA has risen by about 300 percent since hitting its nadir in March 2009. While history has shown that bull markets eventually fizzle out, investors are enjoying an incredibly lucrative period in the history of the stock market.


Success and Failure

by Scott Blakemore

Do we have Success and Failure all wrong?  Our culture loves to champion winners and tell their tale, but what about all the others?  Let’s be honest …  have you ever thought when someone fails, they somehow have a character defect?  I’ve been guilty at times.

It doesn’t help that we can microscopically manage our image through social media to promote our success and hide failures.  I know, we all have the smartest, cutest and most athletic children, an adoring spouse, the perfect home, an awesome job and a lovable, obedient dog … who never has accidents in the house! 

Who are we kidding?  I fear only ourselves.

While it isn’t appropriate to be totally transparent with the world about all our challenges, I do believe it is critical to have close confidants with whom we can bare our struggles.  There is no shame in the struggle – it is normal and even beneficial.

I concur with Rev. Billy Graham’s quote:

“Comfort and prosperity have never enriched the world as much as adversity has.”

We rarely talk about failure, but it is a common experience we all share.  I encourage my children to embrace when they fall short or face a challenge.  These are moments where we learn humility, compassion, and appreciation for those who persevere day after day after day.   

I am often amazed at the stories of bravery and sacrifice from our wounded soldiers and their families.  While we may have troubles in our business or career (or a host of other areas), none of those problems usually affect our mobility.  Lost legs, arms and eyes forever change the game for them.  But what floors me is when they are asked if they would change anything, they often respond with ‘No’.  How could this be? 

My conviction is through adversity, through struggle and hardship, we begin to understand who we are, what we are made of and that we are capable of so much more than we think.  Those who face real struggle and loss know this, and it is why they often say they wouldn’t change a thing.  They are better for it, even if the world around them only sees loss. 

The same is true for you and me.  I am proud of the people and businesses in this issue who have overcome adversity, and I would guess their businesses are stronger and more resilient due to the challenges they have faced.  

Life will happen and it will be challenging.  But I believe the best for us and the companies we work for is made possible through the adversity we face – and it enriches us.  Then we can use what we have learned and help others we know who are in the midst of their own adversity. That is where the real magic happens. 

Financial Education Basics

by Kirk Hoffman

For many children, basic financial education is not part of their school curriculum.  Many adults didn’t have this offered either and generally learned from their parents or on their own.  Here are some financial education basics that you can share with your children to help them be better prepared.

Clarify your financial experience
Share your own perspective on money, including how you got to where you are now, your views on cash management, debt and liquidity, and how your outlook has changed over the years.  Sometimes the discussion of financial matters is uncomfortable or considered taboo.  Being open about financial issues is a great benefit for your children and can help them avoid mistakes that you might have made.  Let them know if you’ve managed things yourself or if you’ve had a financial advisor.  

Establish and maintain a simple budget
Budgeting in its most basic form is just a plan for spending.  Teach your children to think about how their purchases impact one another and how the budget can help them make better spending decisions.  You can use anything from a simple spreadsheet to an online tool like Mint.com.

Encourage savings and investing
Saving and investing are tools for reaching financial goals.  Explain different saving and investing alternatives.  Share the choices you’ve made in your own plan.

Establish a bank account
Help your children learn what a savings and checking account are.  Show them how to view the accounts, how to make deposits, withdrawals, transfers, and how to write a check.  Explain how to balance their checking account.  Teach them how to read a bank statement.  Get them in the habit of reviewing their account regularly.

Learn about credit
Explain how credit cards work and how you feel they should be used.  Explain how mortgages, car loans, and personal loans work.  Discuss how to build a positive credit history.

Stress the importance of insurance
Encourage your children to establish an emergency fund. Help them understand the importance of homeowners and auto insurance, life insurance, disability insurance, health insurance, and long-term care insurance.  Share how you have used insurance in your own plan.

Encourage retirement planning
The earlier you start planning for retirement, the more funds you will accrue.  Explain how Roth and traditional IRAs work.  Talk to your children about company sponsored retirement plans like Roth and traditional 401(k) plans and how to take advantage of company match offers. 

Develop financial relationships
If you have a financial advisor, give your children the opportunity to meet with him or her on their own. This can give them the opportunity to ask questions they may be embarrassed to ask when you are there.  Use your financial advisor as a resource to help explain any of these issues.

Don’t take for granted that your children know the basics.  Discussing these with them is a good way to see how much they already understand and it allows you to share your values in these important areas.

Year-End Financial Checklist

As we near the end of the year, it is time to look back at what has happened and see how it will affect your financial future. Check off these important items so that you can start the new year’s finances with peace of mind.

Review your tax withholdings.
Have you had a major life change (employment change, marriage/divorce, a new child) that affects your income tax? Check to make sure your tax withholdings have been properly adjusted. Having low withholdings can lead to tax penalties, while having too high of withholdings prevents you from accessing your money until your tax return is filed.

Donate to charity as a way to reduce taxes.
You can lower taxable income by 50 or 30 percent with a gift to a public charity or by 30 or 20 percent with a gift to a private foundation. If your gift exceeds these limits, you can roll over the excess deduction for up to five years.

Reduce your estate through gifts. 
You are permitted to give up to $14,000 ($28,000 for married couples) a year per recipient as an untaxed gift. Gifts above this value will consume part of your lifetime gift/estate tax exemption amount ($5,490,000 in 2016). If a gift directly funds education tuition or pays for qualified medical expenses, it will go untaxed no matter what the value.

Check to see when you last rebalanced your portfolio.
Although you don’t need to update your investments every year, many people go far too long without making necessary adjustments as they age. As GuideStream clients, we monitor your account and rebalance your portfolio a minimum of once per year.

If you are retired, make sure you have taken all necessary required minimum distributions (RMDs).
RMDs may be one of the most important items to review when going over your finances at the end of the year. Standard IRAs require these distributions be taken annually after the year you turn 70 ½; standard 401(k)s require them annually after you retire or turn 70 ½ (whichever is earlier). Failure to take an RMD will trigger a 50 percent excise tax on the value of the RMD. At GuideStream, we strive to be proactive in helping our client’s awareness of their RMDs. However, if you ever have questions, please contact us immediately.

Max contributions to an IRA and employer retirement plan for the year.
Both IRAs and 401(k)s have annual contribution limits. If you find you have excess savings and have not reached your annual limit, it may be a good idea to make additional contributions. Similarly, you may also consider making greater monthly contributions to your accounts next year, spreading out the cost of contribution. The deadline for IRA contributions is usually April 15 of the following year, though this may vary; 401(k) deadlines may be restricted to the calendar year, depending on your employer. If you would like to make a contribution, we are always available to help.

Check your flexible savings account (FSA).
The government only permits a $500 annual rollover in an FSA; any excess funds disappear if unused by the end of the year. If you have extra money in your FSA, you may want to schedule necessary medical or dental procedures before the end of the year.

Check your health savings account (HSA).
HSA funds don’t disappear at the end of each year like with an FSA; however, many with few medical needs discover money accumulating in their HSAs much faster than they are using it, which is a good thing.  Consider increasing contributions as this is the only savings option where both contributions and distributions for health related purposes are tax free. 

Consider contributions to a 529 plan to fund your children’s/grandchildren’s education.
529 Plans allow for you to make contributions to a tax-free account that may be used to pay for qualifying secondary education expenses. (Investors should consider investment objectives, risks, charges and expenses associated with 529 plans before using them. Information about 

How money affects couples

It is no secret that money is a hot-button issue for most couples. Discussing finances can be uncomfortable, and some couples may avoid these conversations altogether. Financial issues may also cause some to avoid marriage entirely as individuals may be worried about sharing debts and assets or justifying their ingrained spending habits to each other. 

Whether you are recently married, celebrating an anniversary, or simply thinking about taking the next step in your romantic (and financial) life, consider these suggestions to the common financial challenges that most couples face.

If you marry your financial opposite
While most people say they want to find a mate that has similar spending habits to their own, what we want and what we choose may be vastly different. Some research suggests that when it comes to spenders and savers, opposites attract. This could be attributed to the fact that we sometimes seek out those who have opposite characteristics of what we find unappealing about ourselves. Regardless of the reason, if you find yourself a spender married to a saver, it can quickly lead to conflict.

On a positive note, compromising on personal spending habits can lead to healthy, moderate spending habits as a couple. By setting common spending goals together and establishing a system for working toward those goals, you can focus on something beyond the everyday sacrifices or splurges you try to avoid. The important thing is to set a clear budget that keeps both of you accountable to something other than each other.

If one of you makes more money 
It would be rare to meet a couple who made the same amount of money; chances are, either you or your spouse are pulling in the larger income. Whether the discrepancy is small or large, a difference in pay could cause tensions in how money is saved, spent, and earned.

It is important to remember, however, that whether you are the higher earning spouse or not, you both ultimately share responsibility for your family. 
Your importance to your family and the role you play in your loved ones’ lives is not completely tethered to your paycheck.

If you enter marriage with a hefty combined debt 
For Millennials, this is becoming more and more common. According to a Federal Reserve Report, approximately 40 percent of adults under the age of 30 have student loan debt, averaging $32,731 per borrower. That means that Millennials may be starting their marriages with about $65,000 in debt, and with the average cost of a wedding exceeding $35,000 in 2016, getting married may put you even further in the hole. 

Unfortunately, this debt burden may be scaring Millennials off from marriage altogether. According to a 2013 survey by the American Student Assistance, 29 percent of Millennials said they have postponed marriage to deal with their student debt. Conversations about debt may range from whether you will pay off your debt separately or together to how much should be spent on a fancy ceremony or new home. By establishing “debt goals,” you can make sure both you and your future spouse are on the same page and that you start your life together with a plan to reduce your loans in the future. 

If your marriage is the victim of financial infidelity
One in three adults who have combined their finances in a relationship admitted to lying about a financial issue, according to the National Endowment for Financial Education. 
While lying about money may be relatively common, these “little” money lies truly do matter; 76 percent of those who lied about a financial issue said that it affected their relationship. To avoid letting financial infidelity get the best of your relationship, it is important to talk with your spouse about what each of you considers financial infidelity. Something that one of you sees as a minor financial setback may sound like a financial disaster to the other. Establishing financial thresholds from the beginning can keep you both aligned on budgeting goals and foster better transparency when setbacks do occur.

If you are reluctant to combine finances 
If your spouse does not want to combine your finances right after your wedding, it may make you feel like they do not trust you. Try to remember that there is no unilateral approach to finances, and there may be practical reasons for keeping your finances separated. If this is the case, one option is to have both joint and separate accounts until you find out which works better in your marriage. If you are hesitant to merge finances, you may find comfort in the fact that there are certain aspects of your financial life that will not merge when you get married. For example, your credit report is yours and yours alone (although if you apply for a home loan or a joint account, both of your scores will be considered).

The most important thing to realize is that disagreements over money are often manifestations of deeper communication struggles. Money represents complex feelings for a lot of people — feelings about power, trust, or self-esteem that may be masked in a fight over your shopping budget for the month. Just recognizing which of these common issues may be causing friction is a key first step in resolving these common interpersonal challenges. The positives of transparent financial communication can impact far more than just your new joint checking account.

Protecting Your Identity

In September, Equifax, one of the three major credit bureaus in the United States, announced that the company had been the target of a massive data breach. As a result of the breach, an estimated 143 million Americans have had their information exposed. In light of this massive security issue, here are a few ways you can minimize the risk of having your identity compromised.

Regularly monitor your credit
You can get one free annual credit report from each of the three main credit bureaus (Experian, Equifax, and Transunion). It will likely be wise to space out when you receive the reports from each of the three agencies in order to help you catch any fraudulent activity throughout the year.

Regularly check accounts
Be sure to frequently check your bank statements and other personal information. If possible, enable automatic notifications to be alerted whenever suspicious activity occurs in your accounts.

Use complex passwords
Utilize complex passwords to minimize the possibility of your accounts getting hacked. Additionally, put encryption methods on your mobile device to ensure security in the event of loss or theft.

Utilize anti-virus software
By utilizing anti-virus software, you can better protect yourself from invasive software that can steal your information.

Personal Finance Ratios

There are seemingly countless ways to measure financial health for both individuals and corporations. In earnings reports, companies use complicated calculations and ratios to inform investors—and the general public—regarding the health of their business. However, the average American can use these principles to assess their own financial health.

Personal savings
Formally known as “average propensity to save,” the personal savings ratio is the amount of income saved for an individual or household. According to the Federal Reserve Bank of St. Louis, the average saving rate was just under 5 percent for Americans in 2016. Historically, the average savings rate in any given year since 1959 has been about 8.5 percent.

As its name would indicate, a debt-to-income (DTI) ratio is the proportion of an individual’s monthly debt payments in relation to his or her gross monthly income. Many lenders use DTI as a primary indicator of worthiness of loans because it gauges the individual’s ability to cover loan payments. Though there is no consistent, unilateral recommended ratio, it is popular convention that a DTI over 40 percent will make it more difficult to secure a loan.

This ratio is used to determine how an individual is able to make ends meet in the event of an emergency. Liquidity is calculated by taking all liquid assets (such as non-qualified accounts and cash) divided by fixed monthly expenses (like debt payments). It is commonly suggested that an individual should have 3-6 months’ worth of expenses in liquid assets.

The debt-to-asset ratio is calculated by taking an individual’s total debt divided by their total assets. Though this ratio is primarily used in relation to a company’s finances, it is used to help lenders understand an individual’s borrowing habits, specifically how much of their net worth is tied up in hard assets.

Keep Reaching For Your Financial Goals

Few things are able to motivate us like self-improvement. However, despite initial enthusiasm, our personal goals can seem like impossible challenges after just a few days.

Financial goals are particularly difficult to accomplish. Spending money is inherent in modern life, and financial goals can easily get lost in other money issues. What’s worse, the feedback from financial goals is blunt and immediate. As soon as we get started, our finances begin to define our success with clear positives and negatives. Financial goals also remember our mistakes. A one-time slip-up, like a costly purchase, can disrupt progress towards a goal for months or even years.

The success of a goal often comes down to the strategies and tools used to support them. However, valuable techniques are often abandoned as soon as a little bit of progress is made. Use some of these steps to help make your goal a reality:

Be reasonable – It’s always important to be realistic; In regards to financial goals, it is essential. If you make your goals too extreme, you set yourself up for frustration and disappointment. It’s better to have an attainable goal you can more easily reach than an impossible goal that discourages you and could lead to giving up on the goal entirely. Once you have a little success, you can raise your expectations.

Set solid milestones and celebrate them – Milestones are a great way to track progress and boost your morale, but you need to make them an important part of your life. If you’ve made it halfway to your goal, celebrate in some way and give yourself a taste of what success will feel like. Stay positive; milestones are meant to show you how far you’ve come, not how far you still have to go.

Find some accountability – Telling someone else about your goals and having them check up on your progress can massively boost your discipline. Even if your confidant only asks for occasional updates, being accountable for your actions can provide a lot of encouragement to stick to your plan.

Automate what you can – Constantly trying to make the right choices can wear down your motivation. Automating your target savings or debt payments can help you avoid the potential mistakes and will allow you to save your energy for other challenges.

Break and build habits – It’s often said that it takes 21 days to break a habit or build a new one. While the psychology isn’t exact, it’s clear that our habits are a lot easier to change than we usually imagine. If you can force yourself to stick to a plan for just three weeks, progress should become much easier.

Limit the number of goals – Reaching goals can be difficult, so don’t try to accomplish several of them simultaneously. Only start one or two financial goals at a time and don’t create new ones until your current efforts have become second nature.

Bend so that you don’t break – Interruptions are inevitable. Much like setting a realistic goal, it’s important to have realistic expectations for your progress. If there is an unavoidable problem, adjust your goal accordingly and keep trying. Don’t give up on a goal just because of an unplanned setback.

Reaching goals is a skill that takes practice and experience. In accomplishing one goal, you learn which strategies work best with your personality. Even when you fail, you’ve learned more about what it takes to reach success. The important thing is being willing to try again.

Remember that past performance may not indicate future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, strategy, or product referenced directly or indirectly in this newsletter will be profitable, equal any corresponding historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. You should not assume that any information contained in this newsletter serves as the receipt of personalized investment advice. If a reader has questions regarding the applicability of any specific issue discussed to their individual situation, they are encouraged to consult with a professional adviser.

This article was written by Advicent Solutions, an entity unrelated to Guidestream Financial, Inc.. The information contained in this article is not intended to be tax, investment, or legal advice, and it may not be relied on for the purpose of avoiding any tax penalties. Guidestream Financial, Inc. does not provide tax or legal advice. You are encouraged to consult with your tax advisor or attorney regarding specific tax issues. © 2014-2017 Advicent Solutions. All rights reserved.

The Expert in Anything Was Once A Beginner

-by Caitlin Koppelman-

A few years back, a friend and coworker gave me a print out as a gift to hang in my office. It has this quote on it: “The expert in anything was once a beginner”. When she first gave it to me, I was almost offended by the phrase. I thought to myself, “Oh yeah? Well, maybe that applies to some people, but I’m no beginner. I’m the exception.  I’ve got this!”. I realize now what a lack of maturity that was on my part. You see, my wise friend knew that I’d just taken an important risk in my career. She knew that I’d need the day-by-day encouragement of this little piece of paper to keep me from being afraid to fail. There was only one problem: I hadn’t actually failed at anything …yet. Mostly because I hadn’t really tried.

Those first few weeks, it was easy to slide by – hiding behind other responsibilities in my job, and avoiding those new things I knew would be difficult for me and increase my probability of failure. Eventually it started to bother me: I wasn’t even trying to be the professional I had said I wanted to be. I was hiding. Strangely enough, this fact didn’t seem to bother anyone else. It was clear that I couldn’t wait for others to motivate me beyond the fear of failing. The only solution was to grab some courage, mix it with some integrity, and take a leap!

Risking in private is one thing, but risking with witnesses --- that’s character development. Expertise is gained by repeated practice. Failure is the most common result of practice. It sounds like an unfortunate and bothersome byproduct, but failure builds the character necessary to maintain success. A favorite saying of a colleague of mine is, “it took me 30 years to be an overnight success”.

Risk has rewards. Failure is a sharp tool and though it’s often painful, it’s quite efficient. You can’t avoid it and achieve growth - might as well embrace it and hang on for the ride! Keep others by your side who have also embraced this ability to “fail-forward”. They’ll help you process the failure correctly and remind you to get back up when you feel like giving up. Oh, and it is true, no expert started out that way. 

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Name: GuideStream Financial, Inc.
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Address: 8050 Spring Arbor Rd., PO Box 580, Spring Arbor, Michigan 49283