Zach Abraham

What does financial freedom mean to you? It could give you the opportunity to pursue personal goals and milestones while shouldering less of a financial burden.

It’s true. Money can’t buy happiness. You can’t simply walk into a store and purchase it over the counter or off the shelf. It can, however, open avenues that allow you to pursue happiness, giving you the flexibility to chase what makes you feel fulfilled, understood and complete. That flexibility is called financial freedom, and it occurs when you’re no longer beholden to restrictions placed upon your goals and your desires by your unique circumstances.

We also truly believe that financial freedom is achievable for everyone, no matter their income level, present outlook or future objectives. But what opportunities does financial freedom typically unlock, and how do those change as you age and progress through both your life and your career? Let’s go over a few phases and milestones as well as the possibilities that may be availed to you through securing your financial independence.

20s

It’s never too early to begin your quest for financial freedom. Similarly, it’s never too early to actually achieve it. In your 20s, it might begin with the ability to start paying off those expensive student loans that can potentially bog you down later in life. You should be in the beginning phases of your career, looking to make your mark, climb a ladder and experience a tremendous amount of growth as you learn who you are in a professional capacity. Use this time to learn and accept the traditional lessons while also voicing what makes you unique, all while collecting paychecks that ideally allow you to pay down high-interest debt, make a down payment on your first home or consider starting your family. While young and spry, financial flexibility can also allow you to travel, plan for a wedding, move cities to chase career opportunities, or start a side hustle or passion project. In your 20s, the possibilities are endless, and detaching yourself from financial limits can help you make the most of your youth. And remember, saving any amount, no matter how small, can have a huge impact on your future financial freedom because of compound interest. As Einstein said, “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”

30s

By your 30s, you might be a bit more settled, either with a family or an idea of when you’ll begin your family. You may also have a better idea of who you are, your goals, your dreams, your passions and your desired lifestyle. Financial freedom in this stage can allow you to indulge in those dreams, potentially with grander vacations, elimination of hand-cuffing debt, continued repayment or payoff of your home loan and car, and the ability to provide for your loved ones. If you’re lucky enough to eliminate debt, it can be a great time to consider saving or investing more for the future while continuing to maintain your current lifestyle expenditures. You can also consider an estate plan or a life insurance policy to protect those who might rely on you, giving both you and your beneficiaries some peace of mind should something happen to you.

40s

Once you reach your 40s, you’re likely quite used to the life you’ve built and the family you’ve raised. You may also be more comfortable financially, as you’re deep into your career and have adapted with the industry you work in. That’s why in this stage, freedom is about satisfaction. With more security in your profession and better backing in your bank account, you could continue to travel, look for a second home and provide for your beneficiaries. Additionally, your children may be reaching the point at which they need to consider how they’ll pay for college. Though parent-owned 529 accounts do figure into how much federal aid a student qualifies for, other methods, such as permanent life insurance policies, may not, making them a potentially valuable tool. At the same time, your parents may be progressing into their next stage of life, and they may need your help whether that’s simply via your time or your funds. Proper preparation may be able to help you accomplish all of these.

50s

If you experienced financial freedom in previous decades and were able to pay off outstanding debt, home loans, car loans, student loans and more, your 50s could be the perfect time to sock money away for retirement. You’re now closer than ever to retirement, making this the most important time to ensure that your accounts are well-funded, you’re prepared to move on to a fixed income, and you’re protected from market volatility in the final years of your career and first few years of your retirement. If you haven’t in a minute, it could also be a good idea to reassess your beneficiaries, your estate plan and your life insurance policy. You may be able to make necessary tweaks and plan to pass your wealth as tax-efficiently as possible. Additionally, if you’ve shored up all aspects of your financial and retirement plans, you may have some flexibility to spend on things like vacations, charities, vow renewals or other recreational expenditures.

60s

In your 60s, you may be on the cusp of retirement or already in retirement. You can file for Social Security at age 62, but it’s important to remember that filing prior to your full retirement age will permanently reduce your benefit. That’s why this could be a good time to do your final pre-retirement planning, which could include the creation of income streams to keep you afloat while you wait until your full retirement age. You may also be in a comfortable enough position to begin looking at vacation homes, pursuing your various hobbies, checking off bucket list items or even just enjoying a little bit of downtime. Grandchildren may also be on the way, or you may already have them. In that case, financial freedom can grant you the power to spoil them, either with memories that will last or with a long-term college fund. Unlike parent-owned 529 plans, grandparent-owned 529 plans do not count when calculating how much aid a student qualifies for, so they may be helpful tools for your grandchildren looking to achieve higher education.

70s

At this point, it’s likely that you’re retired. Not only have you reached your full retirement age; you may have also permanently increased your benefit by waiting through that special birthday. Now, with financial freedom, you may have the monetary means to match your ample free time. The world is your oyster, and with sufficient retirement funds, you can plan fun things depending on your hobbies and your passions. If you enjoy travelling, it could be a great time to take that once-in-a-lifetime trip that you no longer have to request time off work for. You might also be able to tack onto a collection you’ve been building for decades. Maybe retirement simply means more time to spend with friends and family, and now that your time and your finances are flexible, you can develop those relationships without any inhibiting factors.

80s and Beyond

Though you may slow down as you get older, financial freedom never becomes less important. In this phase of life, it may be critical to consider the possibility of needing long-term care. Roughly 70% of Americans over the age of 65 will need some type of long-term care ^[1], so while it’s nothing to be ashamed of, it can be a good idea to be prepared. Still, however, you don’t have to stop living your life. You can continue to utilize your free time as you please, but your hobbies may change. You may want to prioritize your health and your personal connections. You may also discover that you have a shift in philosophy, finding joy in activities that require less physical activity such as visiting art shows or attending theatre performances. Furthermore, though you should consistently be revisiting your estate plan throughout the years, this is perhaps the most crucial stage. Reviewing your beneficiaries and ensuring that your tax professional and estate attorney are helping you pass your wealth in the most tax-efficient manner possible can help your loved ones attain financial freedom themselves.

Financial freedom may look different for everyone, but universally, it can be the key to unlocking the comfortability and security to achieve your dreams. Give us a call today to see how we can help you design a plan to become financially liberated and bring those dreams to life! You can reach Bulwark Capital Management in Tacoma, Washington at 253.509.0395. 

This article is not to be construed as financial advice. It is provided for informational purposes only and it should not be relied upon. It is recommended that you check with your financial advisor, tax professional and legal professionals when making any investment or any change to your retirement plan. Your investments, insurance and savings vehicles should match your risk tolerance and be suitable as well as what’s best for your personal financial situation.

Sources:

1. https://www.singlecare.com/blog/news/long-term-care-statistics/

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While so many people dream of their special day, it’s worth asking the question: Is it worth the price?

Love conquers all, right? It’s a nice thought, but as the price of having a fantasy wedding continues to soar, so many couples are left wondering if it’s worth it to have a grand showcase and celebration for their first moments bonded in holy matrimony.  In fact, the numbers appear to back these concerns, as the average cost of a wedding in 2022 was $30,000, a $2,000 increase from the 2021 total ^[1]. When the median household income in the United States is just over $70,000, it’s easy to see how a large wedding can upset the delicate financial balance inside your home ^[2].

Now, we aren’t telling you to elope, arrange for a courthouse marriage or even forgo the ceremony you’ve been looking forward to since you were young. We are, however, suggesting that there might be areas in which costs can be cut, possibly freeing up funds for potentially more important or desirable expenses and luxuries. The Knot, a popular wedding-planning site, assembled a list of just some of the most common expenses you should expect to incur when planning for your wedding, along with their average price in 2022^[1].

-Average cost of reception venue: $11,200
-Average cost of wedding photographer: $2,600
-Average cost of wedding/event planner: $1,900
-Average cost of live band: $3,900
-Average cost of reception DJ: $1,500
-Average cost of florist: $2,400
-Average cost of videographer: $2,100
-Average cost of wedding dress: $1,900
-Average cost of wedding cake: $510
-Average cost of catering: (price per person): $75
-Average cost of transportation: $980
-Average cost of favors: $440
-Average cost of rehearsal dinner: $2,400
-Average cost of engagement ring: $5,800
-Average cost of wedding invitations: $510
-Average cost of hairstylist: $130
-Average cost of makeup artist: $120

While this can add up quickly, it can give you a good idea of where you might spend the majority of your budget as well as where you may be able to make some cuts. First and foremost, the guest list appears to be the best place to start. In 2022, couples hosting weddings with 50 or fewer guests spent an average of nearly $15,000, while couples who invited between 51 and 100 people paid nearly $25,000. The average price for a wedding with more than 100 guests was just over $38,000, so trimming your guest list to only those who absolutely must be there can be helpful if you’re looking to bring down the bill ^[1].

Obviously for some with larger families, this might not be an option, but the average couple spends roughly $266 per wedding guest, so slicing your guest list by 50 people can save you an average of more than $13,000. It’s also important to know that being more selective with your guest list doesn’t necessarily mean that your wedding will be less significant or impactful. In fact, you might even enjoy the feeling of a more intimate wedding with your closest friends and family whom you expect to be around for the rest of your life.

Another great way to save money is by hiring a wedding planner and using a budgeting tool ^[3]. While the services of a wedding planner average about $2,000^[1], the entire job of the event planner is to remain within budget. They may also know other ways of saving or finding deals that aren’t available to a couple that plans for a wedding just one time. Furthermore, whether you’re keeping tabs or your planner is, a budgeting tool can help you track your spending and ensure that you don’t spend in excess on one particular category. It might also help you get more creative and work within your means and imagination, possibly even making your wedding a more personal experience.

Moreover, if you’re certain you’d like to bring your childhood dreams to life, you can save money by planning early. In addition to increasing your options by aligning your timeline with venues and vendors, you might be able to secure a more buyer-friendly rate while still allowing yourself the flexibility to opt for better or more cost-effective options should they avail themselves in the near future. Remember, pushing out your wedding doesn’t lessen the strength of your bond. Marriage is intended to last forever, and extravagance at the cost of debilitating debt can potentially lead to a more difficult happily ever after.

Additionally, your wedding may be more reflective of your financial circumstances than you even realize. For example, it’s important to communicate and prioritize. Work with your partner to find areas in which you’re willing to compromise and areas in which you aren’t. If you’re a foodie and you want to remember how delicious the various dishes were, it might be a good idea to spring for your top choice in caterers. At the same time, if your family doesn’t drink alcohol, you might be able to save around $2,500 by having a dry wedding ^[4].

So, to answer the original question of whether or not a wedding is worth the money, yes, but it’s probably only worth it if you plan within your means, which can depend on your unique situation, your relationship and your goals. If a grand wedding is within your budget, you aren’t interested in sparing any expense and your pursuit of other goals isn’t hindered, it may be worthwhile to invite extra people or tack on an open bar. However, if you’re looking for a more cost-effective way to show your love, you can explore other avenues or cut costs without sacrificing or devaluing your marriage.

Whether you are planning on paying for your own wedding—or helping your grown children or grandchildren pay for theirs—let’s talk about how a wedding fits into your financial plan. You can reach Bulwark Capital Management at 253.509.0395.

Sources:

1. https://www.theknot.com/content/average-wedding-cost
2. https://www.census.gov/library/publications/2022/demo/p60-276.html
3. https://www.theknot.com/content/ways-to-save-money-on-wedding
4. https://www.theknot.com/content/average-cost-wedding-alcohol

Whether planned or unplanned, many are unsure of how to proceed after inheriting money. Here are a few steps you can take to make the most of it.

So, you’ve inherited money. Depending on the circumstances, it may have been expected or unexpected, and it may or may not have come with a great deal of heartache. Nevertheless, too few people know what to do when they inherit large sums of money, imposing more pressure than they might have imagined. Here are a few things you should consider when you inherit money.

1. Take a Brief Moment to Think

When you first inherit money, it can be overwhelming, but it’s a good idea to take a moment to consider all of your options. Although it’s a myth that all lottery winners end up destitute, there is some truth to the fact that it’s easy to spend too much of a good thing too fast and blow through money that could have cleared debt, funded college costs or paid for your retirement. Know that your hand isn’t forced, and you don’t have to make a decision as to what you’re going to do with it or how you will allocate it on a timeline that you aren’t comfortable with. Additionally, the time at which you inherit money is naturally stressful, and making decisions under duress can cause unforced errors and complications. Take some time to determine a course of action you feel comfortable with and confident in.

2. Familiarize Yourself with Tax and Inheritance Laws ^[1,2]

Once you’ve let the initial pressure of the situation dissolve, it’s a great idea to understand the implications of your inheritance. Whether those implications are determined by the terms of your inheritance or the tax obligations on the funds, it’s crucial that you know how the money may or may not be used. For example, even if your inheritance comes with no tax obligations, it can come with time requirements or required minimum distributions. As of the signing of The SECURE Act of 2019, non-spousal beneficiaries must drain an inherited traditional IRA, 401(k) or similar tax-deferred retirement account within 10 years, and that money is taxed as ordinary income unless it is a Roth IRA, potentially pushing you into a higher tax bracket.

It’s important to be aware of the implications of retirement accounts subject to income taxes, but depending on the amount you inherit, you may also owe federal or state estate taxes. The federal estate tax exclusion is currently $12.92 million per person, but it is set to drop back down to 2017 levels of around $6.8 million in 2026. Some states’ estate tax threshold amounts are much lower than federal levels; for example, from $1 million in Oregon and Massachusetts to $9.1 million in Connecticut. It’s important to check with a tax professional familiar with both federal and state tax laws.

3. Pay Outstanding Debt ^[3]

After knowing what you’re obligated to do with the money, you can start to explore some of the freedom offered by coming into extra funds. One option that many tend to lead with is paying outstanding debt. Debt can hang over the heads of investors, pre-retirees and retirees, causing stress and potentially getting in the way of greater saving and investing goals. It can be extremely helpful to pay off debt, especially if it comes with higher-than-average interest rates. For instance, while personal loans, credit cards and student loans can be beneficial in the short term, they can be accompanied by unfavorable repayment terms. Paying them off can be a great way to prevent interest from piling up even further. If you are getting close to retirement, paying off your mortgage may also make sense depending on your situation.

4. Establish an Emergency Fund

An emergency fund can offer flexibility when unexpected expenses arise, and while having one can be extremely beneficial, for some it can be difficult to grow the balance of your emergency fund while trying to maintain your current lifestyle. Committing at least a portion of your inheritance to an emergency fund can mean that you can easily tap into a flexible and liquid account to pay the deductible for a new roof after a storm, replace an appliance that goes bad or afford an unexpected auto repair. Most experts advise putting away at least three to six months’ worth of expenses, but you may want to put away more depending on your age and employment situation.

5. Invest in Your Future

This can truly mean anything, whether you’re looking to grow your investment portfolio, you want to pay for classes to grow one of your skills or you’d like to provide yourself with the financing you need to start a new business venture. The opportunities for investing in your own future are virtually endless. A larger sum of money can also give you the opportunity to employ different investing strategies, like further diversifying your portfolio. Furthermore, freeing up cashflow so that you can contribute the maximum amounts to your 401(k) and IRA accounts might be a great idea depending on your circumstances, and other retirement strategies could offer lifetime monthly income that could allow you to retire sooner. There’s no doubt that inherited funds can offer you more flexibility and options.

6. Finance Higher Education ^[4]

Higher education, attending college or pursuing an advanced degree can offer a leg up, both in the job market and with general skills; however, it can be an extremely expensive endeavor. Using inherited money to fund that further education can be a great way to avoid student loans and achieve the skills you’ll use for the rest of your life. Moreover, it doesn’t necessarily have to be for your own education. There are options like 529 plans for grandparents and permanent life insurance with cash value that can help pay for your children’s or grandchildren’s educational expenses, too—without causing them to qualify for less financial aid.

7. Speak to Your Financial Advisor

It’s always best to speak with your financial advisor—as well as attorneys and tax professionals—before making any major financial decisions about inherited money. Your team of advisors should work together and have a good grasp on your goals so that they can offer custom-tailored advice that can best benefit you and your family now and in the future.

If you have any questions about inherited money, please give us a call. You can reach Bulwark Capital Management at 253.509.0395.

Sources:

1. https://www.unionbank.com/private-banking/perspectives/protecting-your-assets/inherited-ira-rules-cutting-through-the-confusion
2. https://www.thinkadvisor.com/2022/12/07/the-estate-and-gift-tax-exclusion-shrinks-in-2026-whats-an-advisor-to-do/
3. https://www.nerdwallet.com/article/finance/good-debt-vs-bad-debt
4. https://www.savingforcollege.com/intro-to-529s/what-is-a-529-plan

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This article is provided for general information only and is not to be construed as financial or tax advice. It is recommended that you work with your financial advisor, tax professional and/or attorneys when you inherit money.

Though the United States may avoid a full-fledged recession, it’s undoubtedly a difficult time to be a consumer. Here are some ways to protect yourself.

The fear of a recession looms large, and though it isn’t certain that we’ll enter recession territory in 2023, there’s no doubt we’re in a period of constraint for consumers. Inflation is still high despite the efforts of the Federal Reserve to cut spending with interest rate increases, and 2022 brought the worst annual performance for all three major indexes since 2008^[1,2,3].

Understandably, this can cause panic among American consumers and pre-retirees, whether they have assets invested in the market or they’re simply looking to continue with their current lifestyle. With the times, however, our behavior and spending habits must change to give us the best chance to protect ourselves during periods of financial downturn. Here are some things you can do to counter volatile markets and economic declines.

1. Cut Unnecessary Spending

One of the best ways to avoid a financial crisis is to cut unnecessary spending. That could mean more trips to the grocery store instead of your favorite restaurant, fewer luxury purchases or delaying your upcoming vacation. A properly structured and maintained budget typically accounts for all of your incoming and outgoing funds, so it can likely be a great place to start when looking for places to cut back. You may be forced to make some hard decisions, but the idea is for those decisions to pay dividends in the long run.

2. Build an Emergency Fund

While an emergency fund might be seen as the most obvious form of protection against difficult financial times, nearly one-in-four consumers don’t have one ^[4]. Furthermore, 39% have less than a month’s worth of income saved in an emergency fund, and less than half would be able to cover a surprise $1,000 expense. A general recommendation is to have three to six months’ worth of expenses saved in your emergency bucket, giving you some flexibility if you’re forced to access that money. Additionally, you don’t need to make one lump sum contribution to your emergency fund. You can build it gradually, adding little by little until you have a balance you’re comfortable with.

3. Pick Up an Extra Job

One way to supplement the difference in difficult times is to pick up an extra job to increase your total income. Though your finances often seem cut-and-dried, this is one area where you have the freedom to be a bit flexible and creative. Some ideas for an extra job include freelance or contract work, consulting, starting your own business, or even finding a part-time role at a local establishment where you already enjoy spending time, like a golf course. The possibilities are nearly endless, allowing you to have some fun with this secondary source of income. And who knows? It could lead you down a different career path that leaves you even more satisfied than your primary source of income does.

4. Prioritize Financial Obligations

Market volatility, inflation, high interest rates, supply chain issues and other economic factors can be scary, but they’re even scarier when compounded with outstanding debt. It can always be a good idea to tackle debt to avoid falling into a situation where you’re beholden to that debt, seemingly allowing you little-to-no flexibility with your income. The sooner you enact a plan and clear that debt, the sooner you can begin building your emergency fund, making larger contributions to your retirement accounts or enjoying the perks of increased financial freedom.

5. Look for Advantageous Investment Opportunities

While there are certainly no guarantees when it comes to investing in the market and no current iron-clad ways to dictate market performance or protect yourself from declines, opportunistic investors with a long time-horizon to retirement can take advantage of dips. Investors may be able to utilize these periods to their benefit by entering the market at a low point, or they could use a strategy called dollar cost averaging to continue investing or putting away money in their 401(k) at consistent intervals, thereby lowering their average cost per share. Though the big three indexes were down in 2022, they have a sustained history of long-term growth, potentially making declines a favorable time to enter the market.

6. Use Protection-Based Strategies

Though growth can be enticing, sometimes protection for what you already have can be even more important. Diversifying your portfolio with a protection-based asset class, such as an annuity or a permanent life insurance policy, could be helpful through guaranteeing principal protection and index-linked growth. Despite allowing you to participate in market upside, these policies are not investments. Rather, they’re contracts with issuing insurance companies, and the guarantees are made by the claims-paying ability of those companies. These products and strategies can help you create a tax-free stream of income in retirement while protecting you from market volatility on the way there. If you think a protection-based approach may be the right strategy for you, we can help you decide based on your unique circumstances.

If you have any questions about protecting yourself from financial downturn, please give us a call. You can reach Bulwark Capital Management at 253.509.0395.

1. https://www.macrotrends.net/2526/sp-500-historical-annual-returns
2. https://www.macrotrends.net/1319/dow-jones-100-year-historical-chart
3. https://www.macrotrends.net/1320/nasdaq-historical-chart
4. https://www.marketwatch.com/picks/this-is-the-surprising-generation-least-likely-to-have-even-1-000-in-savings-and-heres-what-they-need-to-do-about-it-01650321688

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This article is for informational purposes only and is accurate to the best of our knowledge. It is not to be taken as investment or tax advice. in all cases we recommend that you work with financial, tax and legal professionals to find the strategies best suited to your individual situation.