April 2021 Newsletter
Submitted by Dorval & Chorne on April 1st, 2021By Keagan Kinsella | April 1, 2021
Happy April! Spring has sprung, and the newest newsletter is here! This month we are going to be talking about:
- March Madness & market madness… Putting “expert” knowledge to the test?
- Television meets taxes: Question of the Month inspired by the popular Netflix series, Schitt’s Creek
- My personal tire rotation revelation at the autobody shop!
In my expert opinion… March & Market Madness
If you’ve been following college basketball, you know that ‘tis the season of March Madness! After a year as crazy as 2020, it seems only appropriate that going into the Sweet 16, we’ve experienced the most mathematically upset-heavy opening round of the tournament! I mean, Oral Roberts, a 15 seed, took down a #2 seed (Ohio State), and went on to win their next game to advance to the Sweet 16! To put it in perspective, 4.25% of ESPN bracket submissions correctly predicted Oral Roberts to beat Ohio State. Crazy stuff.
These days, is anything predictable? Nobody could foresee that in 2020 the world would enter pandemic-mode and the economy would take a nose dive (we’re talking a 30% decline in the S&P 500, and historically high unemployment rates)! Yet there were experts who predicted that the economy would steadily boom in 2020. There were also experts who predicted the exact opposite! Would you find it interesting to know that since 2010, of 62 surefire market calls the experts gave, only 17 were right. That’s just 27%. I’m not big into stats, but I wouldn’t bet my financial future on that expert’s prediction.
Whether it’s basing your March Madness picks off of what the top bracket analysts say, or listening to the stock market guru that is always popping up on social media, it is so tempting to fall into the trap of feeling their predictions are automatically the truth.
We believe financial planning shouldn’t revolve around guesses or predictions of what the stock market, taxes, or President does! Instead, we focus on your reality, and your situation by controlling the things you can control. We can talk about how you should save, or allocate your investments based on your goals and resources. You can’t control a global pandemic, or what GameStop stock does in a trading day. After all, there is only one expert when it comes to how you feel about your financial situation, and that’s you!
Question of the month: “Write it off, David!”
After basketball wraps up, that leads into the second most exciting season of the year… tax season! Which, have you heard is now extended an extra month (May 17th) due to the recent IRS announcement? This month’s question comes from David Rose, one of my newsletter subscribers, from Schitt’s Creek… (If you’re picking up on my Netflix show reference, this column will make more sense).
I was recently watching Season 2, Episode 6 where David experiences confusion about what a write off means. He is working for a local store in town and discovers the magic of being able to go on a spending spree and call it a tax “write off”! He later discovers that doesn’t mean anything he writes off is free… When asked if he knew what a tax write off was he said, “Yeah, it’s when you buy something for your business and the government pays you back for it.” Uh oh…
While hopefully you are a little more…aware, there is often confusion around the difference between tax write-offs, deductions, and credits!
For starters, a tax write-off and deduction are the same thing. Deductions lower your taxable income, but the amount you save on taxes depends on your tax bracket. For a business owner, many business expenses can be claimed as deductions. For example, if you deducted $100 for a business expense, that doesn’t equate to a free $100! Rather, you’d save the additional taxes you would have had to pay on that $100 being added onto your income.
The more confusing subject might be the difference between a deduction and a tax credit. An example of a credit would be the child tax credit, earned income tax credit, or the lifetime learning/American Opportunity (education related) tax credits. A credit is an actual subtraction from your tax liability! If you owe $6,000 in taxes, and you get the Child Tax Credit ($2,000 per child under 17), you’d subtract $2,000 from your final tax bill!
Hopefully that helps explain the difference between some common tax lingo terms. Unfortunately, David, the IRS isn’t in the business of paying you back. It usually works the other way around .
Fluent in finance, but not so much automobile!
This past month, I went to go get my oil change and for the first time in my life…get my tires rotated! For some reason, I never realized getting your tires rotated was something that needs to be done every once in a while? As any enlightened internet user would do next, I Googled “How often do I need to get a tire rotation?”. I saw several different results pop up, “3,000 to 5,000 miles,” “5,000 to 8,000 miles,” or even up to 10,000 miles! Despite being confused to what the right answer was, I was definitely in those ranges, so I decided to go in.
When I got to the auto maintenance place, I told them what I was looking to have done and what I had read online through my research. The worker servicing my car looked at my tires, and after measuring the treads—he came back and said that they are looking good right now, and there was no need to rotate them yet! He said instead to rotate them at my next oil change. In my head, I celebrated a little because it cut $25 off the bill, but I was also confused why my situation didn’t follow along with the guidelines I found from the “experts” on Google?
I’ll start by saying, I am under the assumption he was doing what is in my best interest, rather than not caring about my car and too lazy to rotate my tires. But that is completely possible! Regardless, I wasn’t about push back on his advice, because l definitely don’t feel like I am proficient enough in “car” talk to be able to ask the right questions… but I trusted him, because he was looking at my tires specifically! Google didn’t know anything about my car.
My auto appointment made me think of how often people come into our office after reading things on Google, or social media—and they are being bombarded with so much information, they don’t know what applies to them! And a lot of the specifically nurses we meet with are very up front with the fact that they don’t “speak finance,” and just want someone to tell them what to do.
Similar to how the worker at the auto place was able to answer my question, and give me advice based on his evaluation of my situation-- that is exactly what we do for those who meet with us! We look at you as an individual, rather than just giving cookie-cutter advice to everyone. And just like the auto worker, we do it with your best interest in mind. Financial planning is focused on your goals, and what brings you quality of life, not what Google, or a retirement calculator tells you!
All right, that’s it for this month. Stay tuned for my next newsletter where I will continue to share and inform in new and creative ways. If you want to sign up for the newsletter email, click here (and let others know they can sign up.) Last but not least, let’s connect on LinkedIn!
Advisory services provided through AdvisorNet Wealth Management (AWM). Dorval & Chorne Financial Advisors and AWM are not affiliated.