Financial Planning Tips for Small Business Owners

When you’re a small business owner, you need to pay extra careful attention to both your business and personal finances. Your financial planning strategies should simultaneously encourage the success of your business while also working towards safeguarding your personal finances. To pursue that balance, check out these tips. Separate Your Business and Personal Goals As a small business owner, you eat, sleep, and breathe your business, and in most cases, your personal finances are strongly dependent on the success of your business. However, you need to establish separate business and personal financial goals. Take time to think about what you want your business to achieve and to outline your revenue and profit goals, but also look at your personal goals. Think about how you want to live, investments you want to make, when you want to retire, and other personal financial goals. Then, make sure your small business strategy supports those personal goals. Be Careful About Financing Your Business Personally A lot of entrepreneurs finance their own businesses, and of course, using savings or personal loans and credit cards is often essential as you try to get your business off the ground. But ultimately, you want to avoid carrying personal liability for business debts. Try to explore less risky funding options such as bringing on investors who put money into the business in exchange for a share of the profits. Additionally, consider incorporating or establishing your business as a Limited Liability Company (LLC). Then, you can take out loans in the business’s name without incurring personal liability. Tax Plan Strategically As a small business owner, you have to think about your personal and business tax liability. Work with an accountant

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Three Reasons We Like Small Caps

Markets have come a long way since the March lows, but we believe there may be more room for stocks to run. Given the impressive economic recovery to date and improving underlying technical and fundamental conditions, we think small cap stocks in particular may have attractive growth potential. Despite election and COVID-19-related risks, we see further gains ahead. Not Out of the Woods, But Improving The significant impact of COVID-19 on the US economy has created unprecedented levels of uncertainty for investors, with a heated election as the cherry on top for 2020. Investors have had a lot to digest since markets bottomed in March, and the virus is not yet under control, but the US economy is certainly in a much better place today than it was in the spring. While we previously have favored large cap stocks due to their strong balance sheets and resilient earnings during this recession, we highlight three reasons we have been warming up to small cap stocks. Early-Cycle Environment Favors Small Caps We believe the latest recession is over and the new economic expansion has begun. The Federal Reserve of Atlanta’s GDPNow updated its forecast to 35% gross domestic product (GDP) growth in the third quarter on an annualized basis, potentially confirming our view that the recession has ended. While we acknowledge the immense amount of uncertainty facing the economy, along with the growing risk that there may be no additional fiscal stimulus until after the election, we stop short of calling for a “double dip” recession. Given our view that we’re in the early stages of the business cycle and a new bull market, we point out that small cap stocks historically

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Revisit Your Investment Strategy at Each Age Milestone

As the saying goes, “50 is the new 40″—and with Americans living longer than ever before, it’s not unusual for those in their 50s, 60s, or even 70s to be in their peak earning years.1 But for those who would prefer the option of an early retirement, it can be helpful to revisit your net worth (and investment strategy) at each milestone age to make sure you’re on track. In Your 30s By your 30th birthday, experts recommend that your retirement savings equal your approximate annual income.2 They also recommend you have 2 times your income saved by age 35. But one’s ability to save for retirement (or invest outside their retirement accounts) largely depends on the job market they graduated into. Many members of Generation X and Millennials may not have found a career-focused position until their 30s, giving them a later start on saving than others. When investing in your 30s, it’s important to remember that perfect is the enemy of good. Even if you can’t afford to max your retirement accounts yet, saving a little at an early age can reap major rewards in the future. And with 30 years or more until retirement, you can afford to take a little more risk (which might also yield higher returns) than someone who hopes to retire within the decade. In Your 40s In your 40s, experts recommend you have three times your income saved in retirement accounts like a 401(k), IRA, or Roth IRA. For many, the beginning of their fifth decade can mark greater career stability and earning potential than ever before, making this an ideal time to save. On the other hand, one’s 40s can also

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Avoid Playing Politics with your Portfolio

When the markets are shaky, it can be tempting to rely on political headlines or pending legislation to time your entry or exit points. However, letting politics drive your investment decisions can be a costly mistake. Learn more about what helps market trends endure beyond political administrations and why you should ignore the noise and focus on your investment fundamentals. Politics’ Long-Term Impact (or Lack Thereof) on Markets How much do political decisions really impact the stock market in the long term? Not much, as it turns out. Although politically-charged situations like Brexit or the Tax Cuts and Jobs Acts did create momentary market moves, over the long term, the stock market has tended to trend upward regardless of the action (or inaction) taken by any particular administration or President.1 Political news can certainly contribute to short-term market swings, but—absent some independently-corroborated change to a stock or index’s fundamentals—the market’s initial reaction to political news is usually short-lived. As a result, it’s important to tune out the “noise” of daily political news and instead focus on your long-term goals and investment horizons. Simply doing an internet search for “stock market crash in [year]” will yield dozens of projections and predictions of another Great Depression that never came to fruition. Listening to these types of political doomsayers can lead you to avoid a healthy amount of risk in your investment portfolio. Stay the Course with Appropriate Asset Allocation Volatility can be part of investing no matter who is in office. But if the amount of volatility in your portfolio makes you uncomfortable or triggers thoughts of cashing out after a string of poorly-performing days, it may be time to revisit your asset

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Earnings Growth is Approaching

This earnings season, corporate America will get closer to the return of earnings growth—which is likely in the first quarter of 2021. We probably will have another decline in profits for third quarter 2020, though potentially only about half as big as last quarter’s. And we will undoubtedly hear more about uncertainty—both COVID-19 and election-related. We also highlight three things investors can watch this earnings season. Moving in the Right Direction How investors evaluate this earnings season will depend on their perspectives. We are likely to get a much smaller year-over-year decline in S&P 500 Index profits in the third quarter compared to the second quarter, which is good news. Consensus is calling for a roughly 20% year-over-year decline in earnings per share (EPS) according to FactSet’s estimate, but we expect quite a bit better [FIGURE 1].       The consensus estimate for the third quarter has risen by about 4% over the past three months (best such increase in more than two years according to FactSet), a good sign that companies may be able to deliver more than the typical upside. And although fewer companies have offered guidance because of the amount of uncertainty, 67% of the guidance has been positive, significantly higher than the five-year average of 32%. Accordingly, we expect company management teams to instill confidence that the earnings rebound baked into analysts’ forecasts—or at least something close to it—may materialize. The economic growth picture in the United States is also supportive. Mostly better-than-expected economic data during the quarter is a positive indication of earnings surprises. The possibility of a more than 30% annualized spike in US gross domestic product (GDP) during the third quarter is supportive

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Investing in an Election Year

The world’s events always affect the markets, and making smart investment choices requires you to look at what’s happening around the world. But what about during an election year? How should you invest while the country is deciding which direction to take? Regardless of which side of the political spectrum you prefer, you may want to keep the following facts in mind as you invest during an election year. 1. Stocks Trend Upward Regardless of Who’s in Office Although stock values go up and down, the stock market always has an overall upward trend, regardless of who’s in office. On average, returns from the S&P 500 are 8 to 10% per year1. To put these numbers into perspective politically, seven Republicans and seven Democrats have called the White House home since the infamous market crash of the Great Depression. In other words, the person in the Oval Office typically doesn’t affect overall stock market growth. 2. Markets Tend to Bounce Back After a Volatile Primary Season During the primary season, stock values tend to be volatile, which can be scary for investors. But you shouldn’t necessarily yield to the fear and sell. During the year after a primary season, stocks return an average of 10.1%2. Although you can never predict returns, the patterns indicate that if you stay the course during a volatile primary season, values are likely to return. 3. Investors Often Cash Out Assets During Election Years Research indicates that the amount of net assets flowing into money market accounts triples during election years. Essentially, this trend indicates that many investors get nervous, sell stocks, and put the cash into money market accounts. Staying in the markets while

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What to Know About Working With a Financial Professional

If you’ve been wondering how to optimize your finances and ensure your money continues to work for you, a financial professional may be able to help. But the thought of turning over your most sensitive financial information to a near-stranger can be an intimidating one. To make this relationship work, you’ll need to place a great deal of trust in your financial professional, and it’s crucial to find the right fit. What should you know about working with a financial professional, and how can you prepare for your first meeting? What a Financial Professional Can Do For You A financial professional is essentially a personal trainer for your financial life. While you may be able to educate yourself on the financial principles you’ll need to manage your own investments, a financial professional has the knowledge and guidance to take your plan to the next level. Financial professionals use their knowledge to create personalized financial plans for their clients that touch on savings, budgeting, insurance, and tax-saving strategies. Just a few of the benefits you can realize from working with a financial professional include: Accountability and follow-through. It can be easy to talk yourself into (or out of) making certain financial moves. By partnering with a financial professional, you can help ensure that the actions you take will fit in with your overall financial plan. Ongoing tweaking and review. Circumstances can change, and your plans may change with them. A financial professional will help you reevaluate at regular intervals and make any changes that may be necessary. Most financial professionals offer a wide array of services, which means that you can use your professional for as little (or as much) as

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Market Responses to Election Uncertainty

Speculation has been increasing that the November election results may be delayed or disputed, or both.  A contested election might affect financial markets in several ways. Also, the news that President Donald Trump has tested positive for COVID-19 may potentially impact markets as well. Note on President Trump’s COVID-19 Diagnosis While this Weekly Market Commentary was in production, we learned that President Trump and First Lady Melania Trump had tested positive for COVID-19. First and foremost, we wish the president and first lady a swift and full recovery. Obviously the news adds a layer of uncertainty to an already contentious election cycle. The immediate market response has been relatively mild so far. US stocks were lower at open the morning of October 2, but some assets that are perceived to be more resilient in the face of a risk-off environment, such as Treasuries, gold, and the Japanese yen, have shown no real sign of added strength early on. The news adds to the election uncertainty, however. Trump will be unable to campaign in person during the quarantine period that he observes—and maybe longer if he exhibits more serious symptoms—which possibly could hurt his reelection chances. On the other hand, the United Kingdom’s Prime Minister Boris Johnson saw his approval rating rise while he was fighting the infection. From a market perspective, we think it’s better not to speculate on the election impact of the diagnosis. We do know two things: 1) The response to COVID-19 is very different from case to case, which means only time will tell how the virus may affect the president, and 2) the president and first lady will be monitored closely and will have access to some

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Security Checks: Tips for Securing Your Online Transactions

As technology continues to evolve, so too have the skills of cyber-criminals, who have honed their abilities to break through firewalls, stealing valuable personal data and funds. What steps might you consider to help secure your valuable personal and financial data when banking online? Consider the following tips as important baseline checks. Connect with caution. Be careful how and where you use any online banking system. Never connect to the Internet through an unsecured public wireless network. Never access your account from a link. Links are easy to tamper with, especially if they are embedded in an email, text message, or online article. Always go directly to the home page of the financial institution first, and navigate from there. If possible, try to use the same computer each time you make an online transaction, and be sure to log off when you are done. Protect your passwords. Choose and use your passwords carefully. Create “c0mplic@T3d” passwords. Use at least eight characters and include a liberal mix of uppercase and lowercase letters, numbers, and special symbols. Avoid using the same password for multiple accounts — doing so leaves you more vulnerable. Never use personally identifying information, such as the last four digits of your Social Security number or a family member’s name, in a password or username. That could easily be the first thing a hacker tries. Be sure to change your passwords regularly (at least three times a year) and avoid reusing the same password and username on different websites. Never share passwords, personal identification numbers (PINs), or other account-related information in response to an unsolicited request. If you did not initiate the communication, you should not provide any information.

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Planning Your Distributions After Retirement

When it comes to retirement planning, much ado is made of how much to save. But often, the real difference lies in shrewd distribution planning. By withdrawing funds from certain account types in a certain order, you might significantly reduce your taxes and lower your annual withdrawal rate. What should you consider now when planning your retirement distributions? Assigning Your Money to “Buckets” Many investors who are getting closer to retirement may worry about the impact of a sudden stock market drop. But while it’s important to protect some funds from major market moves once you’ve left the workforce, remember that your retirement funds will need to sustain you for several decades or longer. By allocating your assets to different risk “buckets,” you can maintain future growth while helping make sure you have enough funds on hand to cover short-term expenses. For example, your short-term savings may be entirely in cash or money market funds that have no risk of loss, while your more aggressive long-term bucket may be invested 100 percent in stocks. The right asset allocation for you will depend on your account balances, your retirement budget, your retirement wishes, and even your projected lifespan. Creating Guaranteed Income The key to a sustainable retirement involves providing yourself with flexibility. If you retire with one or more sources of guaranteed income, like a pension or Social Security, you can use this income to cover your everyday expenses while reserving your lump-sum retirement funds for larger expenses. Having a guaranteed source of income to cover expenses can prevent you from having to cash out funds in a down market. This flexibility can help you preserve your nest egg for the

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