Market volatility, debt ceiling default and impending financial doom continue to dominate the headlines of major news outlets as they have for the past year. Most so called “experts” predict at some point in 2023, the United States economy will dip in to a recession. The general definition of a recession is a fall in Gross Domestic Product (“GDP”) in two successive quarters, but there are also other factors that economists look to before officially declaring a recession.

The timing of a recession is difficult to predict so it is best to be prepared for one before it hits. Below are a handful of tips to help you prepare your finances for the next recession, whether that be in 2023 or in the future.

1. Inspect your budget. Personal financial planning does not have to be complex or complicated. One of the easiest methods to ensure long-term financial success is to craft your budget with cash inflows exceeding cash outflows. Realizing positive discretionary cash flow will allow you to increase your savings, pay off debt and invest for the future. If pen and paper or an Excel spreadsheet do not work for you, there are many smart phone apps or online budget tools such as Quicken or Mint that will help you prepare a budget. Analyze your spending for a few months to determine where your money is being spent and if any changes are necessary.
2. Beef up your emergency savings. Your budget is crafted, your spending has been adjusted and you are now cash flow positive. It is time to beef up your emergency savings. The general rule of thumb is to maintain 3 to 6 months’ worth of living expenses in savings. Like most rules of thumb, this really serves as a good starting point. The appropriate balance for your savings account will depend on factors that are unique to you such as your budget, other streams of income and number of dependents. Your budget and financial plan serve as two great resources that will help determine the right amount that you should keep in savings.
3. Pay off high interest debt. By paying off your debt, you will be increasing the amount of positive cash flow for your monthly budget. I am reminded of a young couple who became clients of our firm about 5 years ago. They were both young pharmacists who had just graduated from college and were looking to get rid of the large debt burden they had, mostly in the form of student loan debt. One of our advisors worked with them to prepare a budget and identified that they had strong, positive cash flow. She worked with them to increase their emergency fund and then to aggressively pay down their debt. The end result was a plan for the clients to pay off over $100,000 of student loan debt in just under two years. Talk about huge lifetime savings by not paying decades worth of interest!

This is just one of many stories I could share about the impacts of the three simple tips shared above. These are the same initial steps our firm takes with almost all new clients who hire us for financial planning services. While we do not know when the next recession or economic downturn will hit, it is never too late to work to prepare your finances to weather the next storm.

Published in the Victoria Advocate

Kyle W. Noack CPA/CFP® is Chief Executive Officer of Keller & Associates CPAs, PLLC and KMH Wealth Management, LLC.

The annual NFL draft recently took place. As a Houston Texans fan, it has been a bleak few years of fandom. I closely monitored the draft in hopes the Texans would acquire some much needed support toward building the foundation for a winning team. If you have never watched the NFL draft, it is quite the spectacle. Teams are feverishly negotiating trades of their designated picks, up or down, to better position their chance to win the elusive Super Bowl. Months of analysis go into the decisions of what positions the team should draft based on weaknesses within the team. Just like in football, it takes all the right people to put together a winning team for your financial success. This same due diligence should be used in drafting your team of professionals to win your own financial Super Bowl. The three key professionals you should have on your financial planning team are a Certified Public Accountant (CPA), a CERTIFIED FINANCIAL PLANNER™ and an attorney.

Accountants and tax preparers can be found anywhere you look. Consider locating a professional who has earned their Certified Public Accountant (CPA) designation to be on your team. For many people, this teammate should be providing more than just tax preparation. Make sure this draft pick will provide you with guidance and recommendations on your taxes. They should also be working with the rest of your team to help ensure that your financial plan is successful. Find someone who is annually reviewing items such as retirement contribution options and ensuring your financial plan is carried out most tax efficiently.

Similarly, if you perform an internet search for financial planner, the volume of results are overwhelming. Narrow your searches by finding a CERTIFIED FINANCIAL PLANNER™ to be on your lineup. This professional has a fiduciary responsibility and is required to act in the best interest of their clients. This teammate should not only keep up with your investments, but also prepare a plan for your financial goals and estate planning. They are an integral part of the team.

Lastly, make sure to have an attorney on the roster. Find an attorney who practices estate planning and administration. These professionals have a specialized focus on the nuances within the world of financial planning. Have the attorney draft and/or regularly review your already existing will and Power of Attorney documents. This teammate should consult with both your CPA and CFP® professionals to make sure current legislation and estate tax considerations are taken into consideration.

Just as the teams do in the NFL draft year over year, review your team to make sure you have strong teammates in all three positions. If any of the positions on your financial planning team are currently vacant, consider drafting the positions as soon as possible to better your chances of financial success. Last, but certainly not least, GO TEXANS!

Published in the Victoria Advocate

Christopher Laughhunn CPA/CFP® is the Tax & Accounting Principal for Keller & Associates CPAs, PLLC and an Associate Advisor for KMH Wealth Management, LLC.

Spring is a time of growth and renewal. I always enjoy seeing our flower beds come back to life in the spring after a cold winter. One springtime tradition that my family has is to take a road trip to enjoy the Texas wildflowers in full bloom (and often some Texas barbeque). One of our favorite flowers is the state flower of Texas – the bluebonnet. One interesting fact about bluebonnet seeds is that they germinate in September through December – in the middle of winter! These seeds go through the winter months growing below ground while our plants above ground are freezing and dying. That process of growth beneath the surface produces the abundant flowers that we enjoy in spring.

Establishing good financial habits can be like planting bluebonnet seeds. It should be done early, can grow “beneath the surface” for a season, but provide stunning results once mature. Here are a few good financial habits to consider this spring that can lead to future financial growth:

1. Start Saving Early
One of the best financial habits that you can develop is to start saving early. Whether it’s for a rainy-day fund or for long-term goals like retirement or a down payment on a house, the earlier you start saving, the better off you’ll be in the future. Even small amounts of savings can add up over time with the power of compound interest. Even the mighty oak started out as just an acorn!

2. Build Good Credit
Credit is essential for many aspects of your financial life, including buying a house, getting a loan, or even renting an apartment. Building good credit takes time, so it’s important to start early by making timely payments on your credit cards, loans, and other bills. Keep your credit utilization low and avoid opening too many credit accounts at once. Good credit is like using good soil – it’s the foundation that the rest of your goals like buying a home or car can be built.

3. Invest in your education
Investing in your education is one of the best ways to improve your earning potential over the long term. Whether it’s going back to school for a trade or degree, or taking courses to enhance your skills, investing in your education can pay off in the future by opening up more career opportunities and increasing your earning potential. A good education is like Miracle Grow – and it’s a miracle how much it can make your income grow!

4. Develop a budget
Developing a budget can help you stay on track with your finances and avoid overspending. Make a plan for your income and expenses, and stick to it! This will help you develop good financial habits and avoid debt. I personally use an app for my budget that I can check daily to see if I’m on track. Like a well-planned garden, a budget can keep your spending on track and within expectations.

5. Practice smart spending habits
It’s easy to get caught up in the latest trends or to spend money on things you don’t need. Practicing smart spending habits, such as shopping for bargains, buying used items, and avoiding impulse purchases, can help you save money and avoid debt. One tactic that companies use extensively today is to sign up for a “free trial” or subscription to use their products. A recent study showed that 51% of Americans have unwanted subscriptions. Get out your pruning shears and cut back those weeds so your financial health doesn’t get choked out by unnecessary subscription fees.

Planting these seeds now can lead to a financial future that is in full bloom. If you want the help of a professional along the way, consider hiring a CFP® professional to help your plant the seeds for tomorrow’s financial success.

Published in the Victoria Advocate

David Faskas is a CFA and CFP® professional with KMH Wealth Management, LLC. He specializes in investments and portfolio management. He is the Chief Investment Officer, Chief Financial Planning Officer, and a managing member of the firm.

The holidays have passed, the calendar has turned to a new year full of resolutions. January is Financial Wellness Month for those of you that resolve to get your finances in order. One way to get a jump start on this initiative is to get your tax documents together to file later this month when the IRS opens electronic filing. At the time of this writing, our team of CPAs is currently working hand in hand with our clients to meet their initial deadline on January 31, 2023, for their information return filings such as 1099s and W-2s.

While these information return filings may not apply to you, I want to share some frequently asked questions we receive and provide guidance to answer them.

Why should I file my tax return as early as possible?
Filing early has many advantages. For starters, filing as early as possible helps to mitigate some of the exposure to possible identify theft. Cyber criminals are notorious for attempting to front run filing incomplete, fraudulent returns in their victims’ names in order to re-route the victim’s tax refund into the criminal’s bank account. Further, those who file their return early will likely get their refund sooner, or if they owe tax, will have more time to ensure funds are in place to pay by the April 18, 2023, deadline. April 15th is on a weekend and April 17th is Emancipation Day in Washington, DC.

What is the easiest way to determine what documents I need?
A good general rule of thumb to start is to examine your tax return from the previous year. For clients of our firm, we send them a document known as an organizer which illustrates the names and amounts of the documents they previously had to guide them through organizing current year documents. For those who may prepare their own return, find your 2021 tax return and walk through it to compile a list of documents you may need.

When can I file my return?
As of this writing, an official filing date has not been announced. If history is any guide, the week of January 23, 2023, will likely be the opening of the IRS beginning to accept tax returns.

Should I file my own return or hire an accountant?
Generally, you should seek the assistance of an accountant if you had a major life event or milestone such as marriage, divorce, child birth, new homeownership or an inheritance. Also, those with small businesses are likely to benefit from the services of a Certified Public Accountant to help navigate the business filings related to businesses. This is true even for those who may work in the gig economy or have a side business in addition to their day job.

I often tell clients and prospective clients the more organized you can become, the easier your tax return filings will be. This is especially true for our clients who we recommend at least one mid-year tax projection as well to ensure we are on track and no surprises await in April. Hopefully, these tips will get you started to a smooth and uneventful tax season.

Published in the Victoria Advocate

Kyle W. Noack CPA/CFP® is Chief Executive Officer of Keller & Associates CPAs, PLLC and KMH Wealth Management, LLC.

Christmas, to me, has always lent an opportunity to be merry, spread joy and spend time with both family and friends that I do not see on a regular basis. For my wife and I, this year will be extra special as is it will be our first Christmas as parents. We have been blessed by our son who has just surpassed 11-months-old and who has become extremely mobile. His true and unadulterated fascination by everything is contagious. Watching life through his eyes has given me a reminder of appreciation for the little things in life.

With this Christmas holiday being our first as parents, it brings some added self-pressure to make sure that our son has an enjoyable first Christmas. As we prepare, we have used our budget to navigate this pressure and ensure we are still on course for reaching our financial goals. The Christmas holiday can pressure every budget. Falling off your budget in December (or any month for that matter) will lead to starting the next month behind. This can be even more important for December as the start of the year tends to have many required, annual payments due, such as property and income taxes.

Using credit cards may be enticing to help cover some of the budget deficits. I would strongly reconsider swiping your credit card. The typical credit card interest rate in America ranges between 15% to over 30%. Interest owed will be accrued monthly on any unpaid balance which will continue to exasperate the deficit issues.

As my wife and I have pushed to stay within our budget, it has given me additional opportunities to reflect on what values that I want to teach my son. For most children, it is hard not to relate how good of a Christmas you may have based on how many gifts you receive. I want to make sure to raise my son with the idea that Christmas is not about gifts but about being merry, how much joy you can spread and spending time with family and friends. Combine this philosophy with living the last year of seeing happiness through my son’s eyes and it has really shown me the importance of spreading joy by giving. This can be done not only by financial or material giving but by time volunteering with a local charity. To this reflection, we have increased our personal December charity budget amount.

Many local charities give directly back to the community that you live in. Find a charity that has a mission statement that resonates to you. Your generosity can give a local child or a family an opportunity to have a Christmas that they may not have otherwise. Keep receipts of these charitable donations in your current year tax folder. Contributions given to 501(c)(3) charitable organizations may receive a tax benefit if you plan to itemize deductions when filing your tax return. Unlike the 2020 and 2021 tax years, there are not any charitable deductions allowed on your 2022 tax return if you do not itemize.

If you have significant charitable contributions, be sure to coordinate with a Certified Public Accountant or CERTIFIED FINANCIAL PLANNER™ professional to make sure you are maximizing any potential tax benefits.

Merry Christmas and Happy Holidays!

Published in the Victoria Advocate

Christopher Laughhunn CPA/CFP® is the Tax & Accounting Principal for Keller & Associates CPAs, PLLC and an Associate Advisor for KMH Wealth Management, LLC.