Mike Johnson, CFP® Teacher Wealth
- Virtual, Des Moines,, IA 50310
- (515) 985-5500
About Mike Johnson, CFP®
Hello, I’m Mike. I founded Teacher Wealth to raise the standard of financial advice to educators. As a former teacher, I understand the challenges that educators face with their finances; as well as the unique opportunities. Unfortunately, in many ways, the financial services community has ignored the profession.
I am trying to change that. Teachers deserve better!
Many families just need someone to walk with them as they make important decisions. To really get to know them. To ask them the right questions. To challenge them. To offer them accountability. I am honored to be this person for my clients.
At Teacher Wealth clients get holistic, life-centered financial planning advice. We like to say that “it’s not just about the money.” Instead, the focus is on how the money can best create clarity, security, and fulfillment in our lives.
Professionally, I’m a board member of the Financial Planning Association of Iowa and the Iowa Jump$tart Coalition.
On the personal side, I’ve been married to my best friend Tisa for over 15 years. We live in chaos most of the time in our Des Moines, Iowa home as we raise our four awesome kids. We do our best to prioritize our marriage over everything else except our faith. We are active members of Holy Trinity Catholic Church in Des Moines.
As I write this, many Americans are about to receive a second round of stimulus checks from the federal government. The goal from the government’s perspective is to get those dollars into the economy and encourage spending to prime the wheels of an economic recovery.
For those of you receiving checks, this might mean an opportunity to make progress in your finances that you have been looking for.
Being strategic is key. And having the logical part of your brain make the decision instead of the emotional part of your brain which leads us astray many times is crucial. Because it is so easy to have your emotions take over it’s important to decide how to use the money BEFORE you receive it.
Below is one way to think through the process. And by the way, we are specifically talking about stimulus checks here, but this is just as applicable to other instances of receiving sudden money like an inheritance or bonus check.
If you are struggling with paying your bills, feeding your family, and paying for medical expenses like so many Americans because of the current economic situation or Covid related items, this of course is where you should put the money.
Along those lines, if other government help like unemployment insurance is keeping you afloat and there is a chance that the necessities might be an issue when those helpful programs end, then parking these dollars in cash at the ready when down the line you again might need it for necessities is probably a good idea.
If you are not in the above scenario then you can begin to think in terms of, “How will these dollars best put me on the path of future financial success?”
Paying down high-interest debt like credit cards is probably the place that gives you the most bang for your buck. If you pay down a credit card with 13% interest (or more!) and not having to pay that interest in the future, this is the equivalent of getting a 13% guaranteed rate of return on your money. For those of you who don’t know much about investing and potential rates of return, that is an awesome return!
If you have credit cards and other high interest debt out of the way, beefing up your emergency savings is a good next step. A good rule of thumb is to have three to six times your monthly expenses in a separate account set aside for true emergencies. Most Americans have no way near this amount.
If you have had to spend down your savings because of the economy, now is a great time to start to replenish it. And if you are like most Americans who have trouble keeping more than $500 in your savings, you now have an opportunity to more than double that!
Invest for growth
The next place to look is your long-term savings. The dollars like these for retirement and/or other long-term goals should not be put into a zero-risk savings account, but instead invested for growth. For most, this means investing in the stock market in some form. Once you decide to go the route, there is still a decision on what type of account to use.
Putting your money away into a Roth IRA earmarked for retirement is the first place to begin. As long as you have earned income of the equivalent amount you may contribute up to $6,000 per year into a Roth IRA. ($7,000 if you are age 50 or over.) These dollars will be invested and earnings will be tax-free at retirement when withdrawn. Putting your stimulus money away into this type of retirement account is a great start on your way to building your retirement funding.
If you are already maxing out your Roth IRAs then investing for growth in a taxable investment account can also be appropriate. Even though these dollars will not grow tax-free like the Roth IRA, based on the current tax rules most will still get to pay more attractive tax rates on capital gains and dividends than ordinary income rates. Additionally, because these dollars are not in a retirement account, you have access to them before age sixty, so you are able to use these dollars before retirement.
Splurge - strategically
Spending your money isn’t necessarily a bad thing. Especially if you have checked off all of the above items. But, being strategic is still smart.
First, if you are still not where you want to be with the above-mentioned items, spending a small amount like 20% and putting the bulk into getting your finances strengthened can be a fine strategy. It allows you to move toward progress and get some unexpected wants at the same time.
Second, if you are going to spend the money, you might as well spend it on something that will make you happier in the long run. Research shows that spending money on experiences instead of stuff usually makes people happier. Finding ways to use the money that saves you time can be another way to get the most out of your spending. Studies also show that giving money away can be more satisfying than spending money on yourself. During a time of the pandemic, high unemployment rates, and tough economic times you might find helping someone down and out can be just what the doctor ordered.
To restate again, if you find yourself in a time of sudden unexpected money, (not just receiving a stimulus check) the above framework can be helpful to make sure you are using the money in a way that is best for you. There can be other things to consider and your specific situation is unique so what is best for one person isn’t necessarily the best for you.
If you need help thinking through these types of decisions, this is one of the many things we do. Don’t hesitate to reach out to get help.
There seems to be a trend going on:
Merrill Lynch announced that they will end paying their advisors on clients who have less than $250,000 in managed household assets. (This does not mean by the way that the client stops paying their fee.)
Wells Fargo Advisors discourages their advisors from working with households with less than $250,000 by decreasing their payout.
RBC Wealth Management restored its zero-payout policy on those with less than $100,000..
These are just three examples of many of the traditional wealth management firms continuing to move away from helping middle class Americans. The incentives these companies are establishing are literally to not work with and/or provide less service to average folks like teachers. Sure, they will help anyone who has built up some investable assets; but what if you haven’t?
In contrast, Teacher Wealth was built and designed to offer help to teachers and everyday workers. Whether you already have many assets to your name or don’t have a dime saved, our mission is to raise the standard of financial planning advice for Iowa educators.
Hard-working educators who desperately need help navigating important decisions like purchasing and refinancing their homes, buying the appropriate insurance, making investing decisions, and deciding where to allocate their dollars. Anything that has to do with money in your life (which is most things) we are there to help you with. Even if that is just listening to an idea or asking questions from an outside perspective.
Because we are fee-only we don’t earn money for selling specific products or redirecting clients toward certain offerings. Instead we sit at the same side of the table and help determine which products and services are best for their specific needs and situation. It is a collaborative process where the incentives are pointed in the right direction.
Even those who have zero investment dollars can still get quality advice. (In fact, this situation is very common for public school teachers because many have their entire retirement wealth wrapped up in their state pension plan, like IPERS for those in Iowa.) Our flexible fee structure allows for educators (i.e. heroes) to get the life-centered comprehensive financial planning they deserve no matter what their current financial situation and background.
If you are needing help in your financial life, reach out today for a no-obligation conversation to see if we are a good fit to help you.
It’s certainly been a time of uncertainty. Feeling a lack of control in our lives is an issue that we are all dealing with and more pointedly is causing strain on our mental health.
Although it is easier said than done, only focusing on what we CAN control is a pursuit that has major benefits. Making a list of things you have the power to control is time well spent.