Road to Financial Success

THE ROAD TO

FINANCIAL SUCCESS

2024

A guide to budgeting, planning, investing and reaching your financial goals.

YOUR FUTURE is created by what you do TODAY...

2 • 2024 FINANCIAL PLANNING

FINANCIAL PLANNING 2024 • 3

MAKING COMPOUND INTEREST

Work for You C ompound interest is interest paid on interest already earned on a deposit or loan.

Think of it as “interest on interest.”

For those of you who struggle to pay off credit cards, compound interest is likely the culprit. Interest from the prior month is added to the principal you owe, and you’re being charged interest on interest. Before long, that $200 pair of shoes can end up costing you $600 or more. That is why many financial advisors recommend eliminating credit card debt.

Saving money is a way to turn the tables and have compound interest work for you rather than against you.

To gain an understanding of how powerful compound interest can be, let’s look at an example of four hypothetical individuals: Karl, Joanne, Kylie, and Branson. We’ll assume they’ll experience an average savings interest rate of 5% over their lifetimes, monthly compounding of interest, and they will all stop depositing additional funds at age 70.

Karl is leading a very busy life and feels he has always had too many near-term obligations to start saving money. First, his priority was buying a car, then paying off his own student loans, then getting married and buying a house, and then paying for all the expenses of raising kids. But he has resolved to start saving when his last kid is out of college. So, at age 55, Karl starts saving $1,000 per month regularly.

Joanne spent all her money as a kid, and she had a lot of expenses during and right after college that kept her from saving. But, at age 25, Joanne starts saving $200 per month.

Kylie started saving as soon as she

got her first job at age 15. She and her dad walked down to her local community bank and opened a minor account for her, and she has deposited $150 per month ever since.

Branson had an account opened for him by his grandparents the month he was born. His grandparents took advantage of the bank’s referral program for new accounts and deposited $100 per month until Branson became 15.

Then, Branson took over the tradition and made the monthly $100 deposits.

The lesson from the illustration is obvious: it’s never too late to start saving, but starting early can make a huge difference in achieving financial security. Saving regularly is practicing delayed gratification, and many psychologists view the practice of delayed gratification as a way to help develop emotional maturity. And, unlike the swings of the stock market, your

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bank account never goes down unless the money is withdrawn. Your money slowly and steadily grows with the assurance that it is safe because it is covered by the FDIC (up to $250,000).

No one has ever lost money with an

INVESTMENT GROWTH

account that was FDIC-insured, even if the bank went out of business. No one.

So, why not start saving for your future with a community bank? Big banks and online banks seem convenient, but they typically charge more than your local bank. Local community banks reinvest your money in the community. Start saving with a local community bank. Your future self will thank you!

About the Author: Clinton Gerst is the president of the Bank of Bozeman, an independent community bank in Bozeman, Montana.

This article is provided for educational and informational purposes only, without any express or implied warranty of any kind, and should not be considered legal or financial advice. All expressions of opinion reflect the judgment of the author as of the date of writing and are subject to change. You should consult with an attorney or other professional to determine what may be best for your individual needs.

4 • 2024 FINANCIAL PLANNING

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Budgeting and saving can help consumers avoid debt and ultimately create more financial flexibility down the road.

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LEARN HOW TO BUDGET AND SAVE FOR

BIG-TICKET ITEMS

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hen faced with making a significant purchase, or even financing an unexpected emergency expense, consumers are tempted turn to credit to pay for the goods or services. While credit utilization maintains an important place in building a strong financial reputation, it can quickly put a person underwater financially, and interest fees can increase the price of big-ticket items by a significant amount.

The financial resource The Motley Fool says American households carried a total of $17.1 trillion in debt as of the second quarter of 2023. A report from Equifax Canada indicated Canadian consumer debt rose to $2.32 trillion in 2023. Substantial consumer debt can limit financial flexibility, so individuals who are looking ahead to new vehicles or vacations or even home renovations can first try to save for such expenses in lieu of borrowing. Budgeting and saving may not lead to immediate gratification, but it can help consumers avoid debt and ultimately create more financial flexibility down the road.

• Know exactly what you have. Too often people take a casual approach to their finances. At any given time they may not know whether the money they’re making is actually covering all of the bills, and how much money, if any, is left over.

Spend a few months cataloguing all credits and debits to your accounts. Pay attention to times of year when income is higher or when spending increases.

• Know your goal and price. Rayhons Financial, a financial services company, suggests identifying exactly how much you’ll need for a purchase. Estimate on the high side of expenses so as not to go over budget. Treat a big-ticket item just like a utility bill.

• Create a separate expense account.

When all of your funds are together in one bank account, it is easier to spend the money on other purchases rather than the larger one in mind. Open a separate account and move your “extra” earnings into that account to save for your large expense. Automating the savings by setting up an automatic deduction deposited into this account on payday can make savings even easier.

• Review your budget periodically.

Figure out if there are areas where you can cut back and allocate more money to your overall savings or the special savings for the big-ticket item. For example, you may be able to downgrade to a more manageable mobile phone plan or dine out less frequently.

• Time the purchase right. In addition to only buying when you have the money saved, you can look at the calendar to figure out the best time to make that

purchase. Does your state or province offer a sales tax holiday? Some times of year you may get a bonus, tax refund or birthday gifts that can be earmarked for big-ticket items. Avoid purchasing big items during times when you must pay

for other significant expenses, such as tuition, summer camp fees and insurance payments.

Some simple financial planning can help people save and budget for big-ticket items more readily.

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FINANCIAL PLANNING 2024 • 5

HELOCs ARE HANDIER THAN YOU THINK Y ou may have heard of a HELOC, but what is it even used for, exactly? Here are four great ways to take advantage of a Home Equity Line of Credit: Home Improvements Maybe you want to remodel the bathroom or you’ve always dreamed of a playroom for the kids. A HELOC can help you get the money you need to bring your dreams to life. As a bonus, home improvements could increase the value of your home.

also have fewer bills, making it easier to keep track of payments in the future.

Emergencies

In an emergency, it’s common to use a credit card for rapid financial relief. However, high interest rates on increasing debt may only aggravate your situation. A HELOC could be a better option. Like a credit card, a HELOC offers you a line of credit that is available whenever you need it. But, with better rates and generous repayment terms, a HELOC can help you recover faster.

Education

Debt Consolidation HELOCs often have better interest rates than credit cards and other revolving lines of credit. That’s because a HELOC is secured by the equity in your home. Consider using a HELOC to pay off your expensive debts. Depending on the rate, this could save you money. You’ll

Whether for yourself or your kids, education is a good investment. Before getting a student loan, compare rates and terms with a HELOC. You may find that a HELOC saves you money in the long run.

No matter where your journey takes you, Horizon Credit Union is here to

help. Visit our Bozeman branch today to find out if a HELOC is right for you!

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6 • 2024 FINANCIAL PLANNING

FINANCIAL MISTAKES ANYONE CAN AVOID

{ } Overspending when buying a home is a financial mistake that can prove costly over the long haul.

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arnings go a long way toward determining an individual’s financial security. However, high wages do not guarantee long-term financial security any more than lower wages ensure a future marked by a lack of financial flexibility. Individuals are a unique variable in any financial equation, and those who can exercise and maintain some fiscal discipline are more likely to secure long-term security than those who cannot.

One way anyone can improve their chances at a secure and flexible financial future is to identify and avoid some common mistakes. Avoiding the following mistakes can increase the chances individuals at various income levels enjoy a secure financial future.

• Delay saving for retirement: Conventional wisdom says it’s never too early to begin saving for retirement. Despite that, surveys indicate many adults are behind on saving. A 2022 survey from Bankrate found that 55 percent

of respondents indicated they were behind on their retirement savings, while 35 percent reported being “significantly behind.” Though laws governing retirement contributions have made it easier for people to catch up, it’s still better to begin saving once you enter the professional arena, which for most people is some time in their early to mid-twenties.

The longer you delay saving for retirement, the more precarious your financial future becomes.

• Spending beyond your means: The post-pandemic increase in cost-of-living has garnered considerable attention in recent years, when inflation has driven up the cost of just about everything.

There’s little consumers can do about the rising cost of living, but making a concerted effort to curtail spending is one way to combat the spike. However, surveys indicate many people earning significant salaries are living paycheckto-paycheck. For example, a 2021 report from LendingClub Corporation found that nearly 40 percent of individuals with annual incomes greater than $100,000

live paycheck to paycheck, with 12 percent reporting they are struggling to pay their bills. An assortment of variables undoubtedly contribute to that stark reality, and one might be a tendency for consumers to spend beyond their means.

Individuals who are struggling to curtail their spending are urged to seek the help of a certified financial planner who can help them devise a budget and alleviate some of the stress and pressure associated with overspending or living paycheck to paycheck.

• Poor use of credit: Credit cards can be a financial safety blanket, but that blanket can soon smother consumers who don’t know how and when to utilize credit. Reserve credit cards for emergency situations and resist the temptation to use them for daily expenses, such as groceries and gas. Credit card interest rates tend to be in the double digits, so unless card holders can pay their balances in full each month, they’re only exacerbating the already high cost of living by using credit for daily expenses.

• Buying too much house: Overspend-

ing on housing is another financial mistake, and arguably the one that’s the most difficult to avoid. It can be hard to walk away from a dream home, but such a decision could secure your financial future. Unfortunately, data indicates far too many individuals are spending more on housing than conventional financial wisdom recommends. The most recent Consumer Expenditure Survey from the U.S. Bureau of Labor Statistics found that spending on housing accounted for 33 percent of the average household’s monthly expenses and that the average household spent 88 percent of its after-tax income each month. That latter figure is especially troubling, as conventional financial wisdom recommends a saving rate of 20 percent. Overspending on housing greatly affects a person’s ability to save and invest, so resisting the temptation to buy that expensive dream home could be the difference between a secure or scary financial future.

Avoiding some common mistakes can help individuals be more financially flexible and secure over the long haul.

FINANCIAL PLANNING 2024 • 7

TIPS TO EDUCATE YOUNG ADULTS

SMART ABOUT CREDIT TO BE

ommends checking a child’s credit score around the age of 16 or 17. This will help families figure out if there are any anomalies that may indicate identity theft or inaccurate credit issues.

Know the formula for good credit Forbes says there are five categories that add up to good credit:

Many adults learn about credit through trial and error. Financial literacy is not taught in many schools, although lots of people feel it merits space alongside literature, math, science, and other subjects. A recent NextGen study found only one in six high school students are required to take a personal finance class in the United States. In addition, a survey conducted in 2018 by Chase bank found only one-third of Americans were taught what a credit score is by their parents.

It is essential that guardians share information about credit with young adults to help them be financially solvent and successful later in life. Here are some ways to help young adults learn about credit.

Speak generally about credit and how it is used. Then explain credit scores, credit bureaus and credit reports. A credit history and credit score is important information for young adults to have early on and check frequently, as having good credit improves the chances they will qualify for loans and earn acceptable terms in the future.

5. Credit mix (10 percent): Having a balance of different types of credit, such as car loans, credit cards and other types of debt, is advantageous.

Share your own experiences

Sometimes the best way to teach about credit is to be honest about what a parent or another adult did wrong with his or her finances, and use that as a “what not Here are to do” scenario. some ways

{ } to help young adults learn about credit.

3. Length of credit history (15 percent): Keeping accounts open

It is important for young adults to learn about credit so they can make smart choices that will positively affect their future. Although talking finances may be uncomfortable, it is vital for families to have these discussions.

Help them build credit Having one or more credit accounts can help a person establish and build credit by making payments on time.

Credit card companies often advertise student and secured credit card accounts that come with small or managed credit limits. Making purchases on the cards and paying them in full every month is the best way to improve a credit score or maintain a good one, says the Consumer Financial Protection Bureau. Another way teens can build credit is through their student loans. Making small payments on the principal while in school can help establish a strong credit history.

Check their credit reports The Federal Trade Commission rec-

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redit is a necessary component of doing business in the modern world. The credit reporting agency Experian defines credit as the ability to borrow money or access goods or services with the understanding that a person will pay later. Various creditors grant credit based on their confidence that a borrower will repay what is owed.

Start with credit basics

4. New credit (10 percent): Do not apply for too much new credit too often.

1. Payment history (35 percent): Always pay bills on time.

2. Amounts owed (30 percent): Borrow a low amount compared to the total lines of credit. This also is known as credit utilization.

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for a long time is a win.

8 • 2024 FINANCIAL PLANNING

TIPS TO BUILD A NEST EGG IN A TIME MARKED BY A

{ HIGH COST OF LIVING

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rise in the cost of living has presented challenges to millions of households across the globe.

As the cost of everything from food to natural gas to fuel for vehicles has risen, many people have struggled to find ways to save money, especially for their longterm goals like retirement.

The term “nest egg” has long been associated with long-term financial goals like retirement savings or college tuition. But what are individuals to do if short-term costs get in the way of their long-term goals? There’s no magic formula for building a nest egg, but these tips can help anyone grow their savings despite the high cost of living.

• Identify a specific, achievable goal.

Simply resolving to save “more” without attaching a figure that defines what

“more” is can make it hard to build a substantial nest egg. Examine your finances, including what’s coming in each month (i.e., take-home wages) and what has to go out each month (i.e, housing and automotive costs, etc.). Document these expenses and then identify an achievable goal to build your nest egg.

If necessary, trim some fat related to monthly expenses that are not necessities so you can redirect funds to your nest egg. Cancel streaming services or cut back on dining out so those funds can be redirected to building a nest egg.

• Take advantage of pre-tax opportunities to save. Pre-tax opportunities to build a nest include retirement vehicles like a 401(k). With these plans, money is deducted from a paycheck before taxes, thus lowering workers’ immediate tax burdens (taxes are paid when funds are withdrawn) and enabling them to save

These tips can help anyone grow their savings despite the high cost of living.

more now. Some employers even match contributions up to a predetermined percentage, so enrolling in plans that offer employer match contributions can be an especially effective way to build a nest egg.

• Begin living on a budget, and stick to it. The idea of living on a budget may seem simple, but it’s less common than some may recognize. A 2023 survey from the online financial resource NerdWallet found that 83 percent of the more than 2,000 adults 18 and over who participated acknowledged they overspend.

Perhaps more telling is that 84 percent of respondents indicate they have a monthly budget but exceed it anyway.

Individuals who want to build a sizable nest egg are urged to work with a financial advisor to devise a monthly budget and then stick to it.

}

• Save for emergencies. A lack of emergency funds can quickly jeopardize a nest egg. Without a somewhat sizable savings account, individuals could be forced to borrow from their retirement accounts in emergency situations. That strategy hurts in more ways than one, as it both reduces the amount in the nest egg and also affects how much the nest egg can grow, as gains are greater when balances are higher. The NerdWallet survey found that 48 percent of respondents want to prioritize emergency savings, and that strategy can be vital to building a nest egg.

A sizable nest egg can help anyone live comfortably in retirement, and various strategies can help people grow their nest egg even as the cost of living remains high.

FINANCIAL PLANNING 2024 • 9

TIME: A KEY ELEMENT OF INVESTING W ho knows where the time goes? We’ve reached the beginning of another year, so it’s appropriate to reflect on the nature of time and how it affects us. And time certainly is a key element in the pursuit of your financial goals.

As an investor, time can be your greatest ally. If you hold some investments for the long term, you could achieve an impressive cumulative growth in value.

Furthermore, if you keep adding shares to these investments, possibly through a dividend reinvestment plan, you could attain “growth on growth” through the power of compounding. Of course, when you own equity investments, you will experience market fluctuations, but in general, the longer you hold these investments, the more you can reduce the effects of market volatility.

But you also need to consider aspects of time in these contexts:

• Checking progress on achieving goals – When you establish a goal, such as saving for a child’s education or your own retirement, you know the end date of when you’ll need the money, but it’s also important to mark your progress along the way. So, each year, see how far along you are in meeting your goal.

If you’re falling behind, you may need to adjust your investment mix.

• Choosing an appropriate strategy – The time needed to achieve a goal should drive your investment strategy for that goal. For example, when you are saving for a retirement that won’t happen for three or four decades, you will need to invest for growth by placing a reasonable percentage of equities and equity-based investments in your portfolio, based on your comfort with the various types of risk, including interest rate risk, credit risk and market risk. You will experience some bumps along the way — keep in

mind that the value of investments will fluctuate and the loss of some or all principal is possible — but you likely have time to overcome the “down” periods.

On the other hand, when you are saving for a short-term goal, such as a vacation or a new car or a wedding, you’ll want a set amount of money available precisely when you need it. In this case, you may need to sacrifice some growth potential for investments whose principal value won’t fluctuate, such as certificates of deposit (CDs) and bonds.

Keep in mind, though, that when you’re investing for long- and short-term goals, it doesn’t have to be just one strategy or the other. You can save for retirement with primarily growth vehicles but still have room in your portfolio for shorterterm instruments. And even when you’re specifically investing for some shortterm goal, you can’t forget about your need to save and invest for retirement.

And here’s one final point about the relationship between time and investing: Your risk tolerance can, and probably will, change over the years. As you near retirement, you may feel the need to adjust your portfolio toward a more conservative approach. That’s because you may want to consolidate any gains you might have achieved while also recognizing that you simply have less time to bounce back from down markets. Still, even in retirement, you’ll need some growth potential in your portfolio to help you stay ahead of inflation.

When you invest, one of your biggest considerations is time — so use it wisely.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

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10 • 2024 FINANCIAL PLANNING

YOUNG WORKERS AND

RETIREMENT SAVINGS

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oung adults newly introduced to the professional arena may not immediately be thinking of the future when their careers will come to a close. Retirement may seem like a distant goal when it’s 50 years or more away. However, pushing off retirement savings because it is not viewed as a necessity could turn out to be a significant mistake.

According to Mass Mutual, the economic disruption caused by the global pandemic pushed retirement to the bottom of many workers’ lists of financial priorities. That was especially so among young professionals. A 2019 survey found roughly half of millennial and Generation Z professionals believe they are not saving enough for retirement. Student loan burdens are another reason why certain people may delay saving for retirement until they are older.

Young workers need to get the facts about retirement. For example, The U.S. Social Security Administration says that Social Security taxes that people now pay into the Social Security Trust funds that used to pay benefits to current beneficiaries, not future ones. The Board of Trustees estimates that, in 2041, and based on current law, the Trust Funds will be depleted since people are living longer and the birth rate is low. The taxes being paid now will not be enough to pay the full benefit amounts scheduled for future retirees.

Young people can no longer rely on Social Security benefits to finance their retirements in the United States. Rather, young workers need to be proactive and take control of their own retirement savings.

• Experts advise following the general rule of saving 10 percent to 12 percent of your salary when you are in your 20s, including factoring in any employer match.

• Working for companies that offer defined-contribution plans like a 401(k) or 403(b) can make it easier for young professionals to begin saving for retirement.

• Setting aside a portion of your income early on in retirement savings ensures more years of savings and investments will benefit from decades of compounding.

• Those who contribute to a retirement plan may receive an immediate tax break because the contributions come out of paychecks before taxes are withheld. Many of these plans also offer the advantage of tax-deferred growth. This translates to not being required to pay taxes each year on capital gains, dividends or other yield distributions if the money is not withdrawn before age 591⁄2 . Speak with a financial advisor to learn more about tax-advantaged accounts.

• T. Rowe Price says there are certain

benchmarks that can help people save enough money for retirement. By age 30, you should have .5 times the amount of your salary. At age 35, that amount should increase to 1.5 times your salary. These numbers are based on an assumed retirement age of 65 and with a household income growth of 5 percent until age 45 and 3 percent thereafter.

• According to research from Qualtrics, young workers don’t plan on working until they can receive full benefits from Social Security. Twenty-four percent plan to retire early, and 41 percent want to do so by the time they turn 50. That could spark more ambition among younger generations to save for retirement and to save more aggressively.

Even if retirement is many years in the future, young workers need to start saving for retirement early on to be able to retire comfortably.

FINANCIAL PLANNING 2024 • 11

STEPS TO SECURE YOUR METRO CREATIVE CONNECTION

S

afeguarding personal financial data has never been more important, as an increasingly digital world has made online banking that much more prevalent. Cyber crimes are a significant concern. According to the Federal Bureau of Investigation, no less than 422 million individuals were impacted by cyber crime in 2022, and nearly 33 billion accounts are anticipated to be breached by the end of 2023.

Cyber crimes are happening every day, even if the public only hears about the largest data breaches.

Financial institutions as well as retailers and other businesses that require the use of personal financial information are obligated to safeguard customer data. According to the Federal Trade Commission, financial institutions protect the privacy of consumers’ finances under a federal law called the

Financial Modernization Act of 1999, also known as the Gramm-Leach-Bliley Act. That law governs banks, securities firms, insurance companies, and companies providing many other types of products and services. The law dictates how financial institutions can collect and disclose customer’s personal financial information.

Individuals also have key roles to play in protecting themselves. Though even the best precautions cannot completely secure your financial privacy, every little effort is worth it to reduce your risk of being victimized by data theft. These tips from the Financial Industry Regulatory Authority can help individuals safeguard their privacy.

• You have the right to opt out of the sharing of some of your personal information with affiliates and non-affiliates of a financial institution. For example, you can opt out of receiving pre-

FINANCIAL PRIVACY screened credit offers by way of credit bureaus selling information about you to lenders or insurance.

• Increase awareness of phishing scams. These often are emails that appear to come from legitimate firms or financial regulators asking for personal information. These entities would never ask for account numbers, passwords, credit card information, or Social Security numbers through email. Verify all communication with the financial institution by contacting that institution directly at the number listed on your account statement or bill.

• Be aware of where you click online. Never click on a questionable link or download a suspicious email attachment.

• Strong passwords can keep accounts more secure. Resist the urge to use the same password across many accounts. Once that password is com-

promised, the cyber criminal may be able to try it on your other accounts.

Consider using a password manager to suggest and save strong and unique passwords for each account.

• Utilize multifactor authentication whenever it is available. MFA adds an extra layer of protection by using a password as well as a unique code or biometric to unlock the account.

• Conduct all financial business on a personal device on a secure network.

Delete the cache and history frequently to avoid leaving a digital trace.

These steps can help protect financial security. Individuals need to be diligent in safeguarding their information from cyber criminals.

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12 • 2024 FINANCIAL PLANNING

TWO SERVICES,

By Danielle M. Shyne,

Attorney/Owner, Shyne Law Group, PLLC

E

state planning and financial planning help you to protect your assets and plan for the future. Each process has a different purpose. Estate planning attorneys and financial planners have distinct roles and expertise; however, the best design is when your estate plan and financial plan work together to achieve important long-term goals.

A financial planner evaluates and collaborates with you to establish long-term financial goals, based on your needs and desires. A financial plan includes a strategy for managing and growing your wealth, as well as an analysis of your risk tolerance based on your circumstances.

Estate planning focuses on putting the proper legal documents in place to ensure implementation of your goals and wishes for the future, both for yourself and your

family. The documents address concerns that are different from your financial goals. When you create a thorough, careful estate plan, you accomplish these important goals: • Minimize taxes and maintain personal and financial privacy of your estate after death • Ensure that your assets and legacy benefit individuals of your choosing upon your death • Determine whether your beneficiaries receive all your assets outright, or whether a person you select manages and distributes those assets to your beneficiaries according to your directions • Designate the people who will care for your children and manage their finances in the event that you are not able to fulfill those responsibilities Designate individuals to provide per-

ONE PLAN

sonal care, decision making, and financial management, in the event that you become unable to do so yourself • Communicate your final wishes If you do not have an estate plan, state law determines who gets your property and makes your decisions should you become incapacitated. Your loved ones may need to ask a court to decide who makes the decisions and who receives your assets (those people may not be the individuals you would choose).

Estate planning is a process that requires assistance from a licensed attorney. Your lawyer first talks in depth with you about your concerns, goals, and wishes for your future and that of your loved ones. Then, your attorney explains how specific legal documents address all those matters. If you decide to establish an estate plan, your lawyer creates documents tailored to your unique circumstances.

The only way to make certain your estate plan is properly established — and does what you want it to do, both during your life and after — is to talk with an experienced estate planning attorney.

Although estate planning and financial planning are separate and distinct, both processes involve your financial assets.

The two processes work together to accomplish your goals. For that reason, a great estate planning lawyer will work directly with your financial planner and vice versa.

While not everyone needs or wants a financial plan, everyone should have an estate plan to avoid allowing state law to make personal decisions. So, logically, starting with your estate plan makes sense. But the truth is that it does not matter whether you start with estate planning or financial planning; it is just a matter of getting started.

EStAtE & Long tErM cArE pLAnning Personalized service and one-on-one attention.

Estate planning | Wills | trusts | probate incapacity planning | Medicaid planning Danielle M. Shyne Attorney at Law

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