Category: Financial Plan

Should I Buy Bitcoin? Part 1: What Cautious Investor Should Know

Posted on by Brian Colvert

Should I Buy Bitcoin?

If you have been asking yourself, “Should I buy Bitcoin?” you are not alone. Bitcoin has become one of the most talked-about financial topics of the last two decades, but for many cautious investors, it still feels confusing, volatile, and difficult to evaluate. It started as an obscure digital experiment, traded for less than a penny, and has since grown into one of the largest monetary assets in the world. Some people see it as the future of money. Others see it as speculation. Many smart investors are somewhere in the middle.

They are curious, but cautious.

They have heard about Bitcoin for years, they have watched it move through extreme highs and painful drawdowns. Many have seen friends, coworkers, institutions, companies, and even governments begin to pay attention. But they still have the same honest questions:

  • What actually is Bitcoin?
  • Why does it matter?
  • Is it too risky?
  • How do people store it safely?
  • Is it something that belongs in a serious financial plan?
  • And maybe the biggest question of all: should I buy Bitcoin?

This article is based on Part 1 of a two-part conversation between Brian from Bonfire Financial and Bitcoin educator Pasco.  The purpose of the conversation was not to hype Bitcoin, pressure anyone to buy, or make price predictions. It was to have a simple conversation about what Bitcoin is, how it works, why serious investors are paying attention, and what cautious investors should understand before taking action.

Whether you decide to own Bitcoin or not, understanding it matters. Any asset this volatile, this misunderstood, and this widely discussed should not be approached casually. It needs to fit inside a real financial plan, not a guess, a hunch, or a fear-of-missing-out decision.

Keep reading, or if you prefer to listen or watch… check out the Podcast or full YouTube video.

Why Bitcoin Matters Now

For years, Bitcoin felt like something happening on the fringes of finance. It was associated with tech enthusiasts, early adopters, online forums, and people willing to take unusual risks. But that perception has changed.

Bitcoin has been around since 2009. In that time, it has gone from being ignored by traditional finance to being discussed by financial advisors, institutions, corporations, governments, and retirement-minded investors. The question is no longer simply, “Is Bitcoin real?” Increasingly, the question is, “What role, if any, should Bitcoin play in a modern financial plan?”

Several things have helped bring Bitcoin into the mainstream conversation. The approval of spot Bitcoin ETFs made it easier for traditional investors to gain exposure through familiar investment channels. Institutional adoption brought more legitimacy to the asset class. Corporate balance sheets, sovereign discussions, and regulatory developments have also contributed to the sense that Bitcoin is no longer just an internet novelty.

But mainstream attention does not automatically make something appropriate for every investor.

That distinction matters.

A cautious investor should not buy Bitcoin simply because it is popular. They also should not dismiss it simply because it is unfamiliar. The better approach is to slow down, understand what it is, examine the risks, and then decide whether it fits their goals, timeline, portfolio, and risk tolerance.

What Is Bitcoin?

At its simplest, Bitcoin is decentralized digital money. That phrase sounds simple, but each word matters.

It is digital, meaning it exists electronically rather than as paper bills or physical coins. It is money because people use it to store, send, and transfer value. And it is decentralized because no central bank, government, company, or single authority controls the network.

Most people are used to money being controlled by institutions. Dollars are issued by the government. Bank accounts are managed by banks. Credit card transactions are approved by payment networks. Wires and transfers often require permission, business hours, processing systems, and third parties.

Bitcoin works differently.

The Bitcoin network allows value to be transferred peer-to-peer without relying on a traditional financial intermediary. That does not mean it is simple in every technical detail, but the basic concept is straightforward: Bitcoin is a system for storing and moving value without needing a central authority to approve or control every transaction.

This is one of the reasons Bitcoin is so different from the money most people use every day.

Bitcoin and the Problem of Trust

In the traditional financial system, trust is everywhere.

You trust your bank to hold your money, you trust payment processors to approve transactions and you trust custodians to manage assets. Governments and central banks to maintain the value of currency over time and you trust institutions to keep systems running, maintain access, and follow the rules.

Bitcoin was designed to reduce the need for that kind of trust.

Instead of relying on one central authority, Bitcoin relies on a distributed network. Transactions are verified by participants across the network. The history of transactions is recorded on a public ledger. The rules of the system are transparent, and the supply schedule is known in advance.

That is a very different model than the one most investors grew up with.

For cautious investors, this can feel both empowering and intimidating. On one hand, Bitcoin offers a form of ownership and transfer that does not depend on a bank or central authority. On the other hand, that also means the investor must understand new responsibilities, especially when it comes to security and custody.

Why the Fixed Supply Matters

One of Bitcoin’s most important features is its fixed supply.

There will only ever be 21 million Bitcoin.

That supply cap is central to how many Bitcoin supporters think about the asset. Unlike government-issued currencies, which can be created in larger quantities over time, Bitcoin has a predetermined issuance schedule. New Bitcoin enters circulation through mining, but the amount released over time decreases through a process known as the halving.

Roughly every four years, the block reward paid to miners is cut in half. In Bitcoin’s early years, miners received 50 Bitcoin per block. That reward has declined over time and is now much lower. The next halving is expected in 2028, which will continue reducing the rate at which new Bitcoin is created.

Why does that matter?

Because supply and demand matter in every market.

If an asset has a fixed supply and more people want to own or use it over time, that can create upward pressure on price. That does not mean Bitcoin moves in a straight line. It definitely does not mean there is no risk. But the fixed supply is one of the reasons Bitcoin is often discussed as a potential hedge against currency debasement and long-term inflation.

This is also where Bitcoin becomes interesting to investors who are concerned about the purchasing power of the dollar. If the supply of dollars expands significantly over time, each dollar may buy less in the future. Bitcoin’s supporters argue that a fixed-supply asset offers a different kind of monetary structure.

Again, that does not make Bitcoin risk-free. It simply explains why some investors believe it deserves a place in the conversation.

What Is the Blockchain?

The word “blockchain” gets thrown around constantly, often in ways that make it sound more complicated or more magical than it really is.

In the context of Bitcoin, the blockchain is essentially a ledger.

It is a record of transactions. Transactions are grouped into blocks, and those blocks are linked together in chronological order. Each block contains a batch of transactions, and the chain of blocks creates a historical record of activity on the Bitcoin network.

One helpful way to think about it is as a story that has been written over time. Each new block adds another page to the story. Because the blocks are linked cryptographically, changing the past becomes extremely difficult. The network is designed so that the history of transactions can be verified by participants rather than trusted blindly.

That is part of what makes Bitcoin powerful. It is not just that transactions happen digitally. It is that the system creates a transparent, verifiable history of those transactions without depending on one central recordkeeper.

For the average investor, you do not need to understand every technical detail of cryptography to understand the basic idea. The blockchain is the public ledger that records Bitcoin transactions and helps the network maintain integrity.

What Is Bitcoin Mining?

Bitcoin mining is another term that can confuse people.

Mining does not mean people are digging digital coins out of the ground. It refers to the process by which transactions are processed, blocks are added to the blockchain, and new Bitcoin enters circulation.

Miners use specialized computers to perform work for the network. Their job is to process transactions and compete to add the next block. This process is called proof of work.

Miners are rewarded for successfully adding blocks to the chain. They may receive newly issued Bitcoin, along with transaction fees. Over time, as the block reward continues to decline through halvings, transaction fees are expected to become a more important part of miner compensation.

Mining is important because it helps secure the network. It makes it costly to attack the system and helps ensure that the transaction history remains reliable.

For cautious investors, the key takeaway is this: mining is part of the infrastructure that allows Bitcoin to function without a central authority. It is one of the mechanisms that keeps the network operating and secure.

On-Chain Transactions and the Lightning Network

Bitcoin can be used in different ways.

An on-chain transaction is a transaction recorded directly on the Bitcoin blockchain. This is often compared to a wire transfer, although the comparison is imperfect. On-chain transactions can be highly secure, verifiable, and final, but they may not be ideal for every small everyday purchase.

The Lightning Network is a separate layer built on top of Bitcoin that allows for faster and cheaper transactions. It is often discussed as a way to make small Bitcoin payments more practical. For example, buying coffee with Bitcoin would be more realistic over Lightning than through an on-chain transaction.

The distinction matters because many people misunderstand Bitcoin’s usability. They may assume that Bitcoin is only a slow, clunky settlement system. Others may assume it is already perfect for every payment use case. The reality is more nuanced.

Bitcoin’s base layer is designed for security and final settlement. Layers like Lightning can improve speed and lower costs for smaller transactions.

For investors, this matters because Bitcoin is not only discussed as a price speculation. It is also a monetary network with different layers and use cases.

Self-Custody: What It Means and Why It Matters

One of the biggest ideas in Bitcoin is self-custody.

Self-custody means you hold your own Bitcoin rather than relying on an exchange, bank, or third-party custodian to hold it for you.

In the traditional financial system, most people are used to custodians. A bank holds your cash. A brokerage custodian holds your investments. A retirement plan provider administers your account. If something goes wrong, there is usually a customer service number, a password reset process, or some institutional backstop.

Bitcoin changes that.

If you self-custody Bitcoin properly, you have direct control. No bank has to approve your transaction, no exchange has to grant access, and no institution is holding the asset on your behalf.

That is powerful, but it also comes with responsibility.

If you lose access to your private keys or seed phrase, you may permanently lose access to your Bitcoin. If someone steals that information, they may be able to take your Bitcoin. Unlike a fraudulent credit card charge, there may be no simple reversal process.

This is one of the most important things cautious investors need to understand. Bitcoin gives people more control, but it also requires better education and security.

“Not Your Keys, Not Your Coins”

The phrase “not your keys, not your coins” is common in the Bitcoin world.

It means that if you do not control the private keys to your Bitcoin, you are relying on someone else to give you access. If your Bitcoin sits on an exchange, you may have price exposure, but you do not have the same level of direct ownership as someone who controls their own keys.

This became especially important after major failures in the crypto industry, including exchange collapses that left customers unable to access funds. The lesson for many investors was clear: leaving assets on an exchange can create third-party risk.

That does not mean every investor must immediately self-custody everything. It does mean investors should understand the trade-offs.

Using an exchange may feel easier, especially for beginners. Self-custody can provide greater control, but it requires education, planning, and good security practices. Some investors may use a combination of approaches. Others may work with professionals to build a custody process that reduces single points of failure.

The main point is not to rush. The main point is to understand what kind of ownership you actually have.

The Real Risks of Bitcoin

Bitcoin is not risk-free.

Any honest conversation about Bitcoin must include the risks. For cautious investors, this is where the conversation becomes especially important.

  1. The first major risk is volatility. Bitcoin can move dramatically in short periods of time. It has experienced large drawdowns in the past, and there is no reason to assume volatility will disappear completely. An asset that can move significantly in a week, month, or year must be sized appropriately.
  2. The second risk is custody. If you self-custody Bitcoin and make a serious mistake, the consequences can be permanent. Lost keys, poor storage, scams, and security errors can result in irreversible loss
  3. The third risk is emotional decision-making. Bitcoin attracts hype. Investors may be tempted to buy aggressively after a big price increase, then panic during a decline. That kind of behavior can turn a potentially strategic allocation into a gambling experience.
  4. The fourth risk is regulatory uncertainty. Bitcoin has become more mainstream, but regulation can still evolve. Investors should pay attention to how rules, reporting requirements, custody standards, taxation, and investment product access may change over time. Bitcoin has become more accepted, but that does not mean the regulatory environment is finished evolving.
  5. The fifth risk is scams and misinformation. Because Bitcoin is technical and still unfamiliar to many people, bad actors often take advantage of beginners. Fake investment platforms, phishing links, fraudulent wallet support, impersonators, and “guaranteed return” offers are all real dangers. If someone is promising a risk-free way to make money with Bitcoin, that should be a major red flag.
  6. The sixth risk is overconfidence. Some investors hear the Bitcoin story, understand the fixed supply, see the historical performance, and immediately want to go all in. That can be dangerous. Even if someone believes Bitcoin has long-term potential, that does not mean it should dominate their portfolio. A good investment can still become a bad decision if it is oversized, misunderstood, or purchased for the wrong reasons.

This is why Bitcoin should be approached with humility. It may have a place in a portfolio, but it should not replace a real financial plan.

Volatility Is Not a Side Note

One of the most important things cautious investors need to understand before buying Bitcoin is volatility.

Bitcoin can move dramatically. It has had periods of extraordinary growth, but it has also experienced sharp drawdowns. For investors used to traditional portfolios, those swings can feel intense.

Volatility does not automatically mean Bitcoin is bad. Many long-term assets experience volatility. Stocks, real estate, oil, and other assets can all move up and down. But Bitcoin’s volatility can be especially difficult because the asset trades around the clock, is heavily discussed online, and often attracts emotional behavior.

That creates a real behavioral challenge.

It is one thing to say, “I am a long-term investor,” when the price is rising. It is another thing to remain disciplined when the price is down significantly and every headline feels negative.

This is where planning matters.

Before buying Bitcoin, investors should ask themselves:

  • How would I feel if this dropped 30 percent?
  • How would I feel if it dropped 50 percent?
  • Would I panic sell?
  • Would this affect my retirement plan?
  • Would I still be able to meet my income needs?
  • Would I be tempted to buy more at exactly the wrong time because of fear of missing out?

These questions are not meant to scare people away. They are meant to help investors be honest.

If a Bitcoin position is sized correctly, volatility may be tolerable. If it is too large, volatility can take over the entire financial plan.

Bitcoin as Part of a Portfolio

When people ask, “Should I buy Bitcoin?” they often want a simple answer.

Yes or no.

But for serious investors, the better answer is usually more nuanced.

Bitcoin should not be evaluated in isolation. It should be evaluated in the context of a full financial plan.

That means looking at your income, expenses, retirement timeline, cash reserves, tax situation, existing investments, real estate, business interests, estate plan, and risk tolerance. Bitcoin may be interesting, but it is still only one piece of the bigger picture.

For some investors, Bitcoin may serve as a small alternative asset allocation. And for others, it may not be appropriate at all. For some, the best first step may be education before any purchase is made.

The key is position sizing.

A small allocation may allow an investor to participate in Bitcoin’s potential upside without putting the entire plan at risk. A large allocation can create stress, concentration risk, and emotional decision-making.

This is especially important for people nearing or already in retirement. When you are still working and accumulating assets, you may have more time to recover from volatility. When you are depending on your portfolio for income, large swings can have a bigger impact.

That does not mean retirees can never own Bitcoin. It means the decision requires more care.

Bitcoin should fit the plan. The plan should not bend around Bitcoin.

The Problem With FOMO Buying

One of the most dangerous ways to buy Bitcoin is through FOMO. The fear of missing out is powerful. Bitcoin has had massive price moves in the past, and many people know someone who bought early and did well. That creates a feeling of urgency.

But urgency is not the same as wisdom.

When investors buy because they feel late, rushed, or embarrassed that they missed earlier opportunities, they often make poor decisions. They may buy too much, buy at emotionally heated moments, or fail to understand custody.  A cautious investor should resist the pressure to act before understanding.

There will always be another headline or another price prediction. Just as there will always be someone online saying Bitcoin is going much higher or going to zero.

None of that replaces a plan.

The better approach is to slow down and ask:

  • What do I actually understand?
  • What am I still confused about?
  • What would I be buying?
  • Why would I be buying it?
  • How much would be appropriate?
  • How would I hold it safely?
  • What would cause me to sell?
  • How does this fit with the rest of my financial life?

If you cannot answer those questions, the next step may not be buying Bitcoin. The next step may be learning more.

How to Start With Bitcoin the Right Way

For cautious investors who decide they want to take the next step, the best approach is usually not to go all in.

A better approach is to start with education.

Learn what Bitcoin is, how it is different from other cryptocurrencies.  Take the time to understand how the network works at a basic level. Learn what self-custody means, what private keys are and what exchanges do. Be aware of how scams work. Learn how taxes may apply and how volatility can affect your behavior.

Then, if Bitcoin still makes sense, start small.

Starting small allows investors to get familiar with the process without putting meaningful wealth at risk. It also gives them time to learn the practical side of Bitcoin ownership.

Some investors may choose to buy through a reputable, regulated exchange. Others may use Bitcoin ETFs for exposure inside traditional accounts. Others may eventually explore self-custody with a hardware wallet. Each approach has trade-offs.

Buying through an exchange may be easy, but it introduces third-party custody risk if the Bitcoin is left there.

Using an ETF may be convenient inside a brokerage or retirement account, but it is not the same as holding Bitcoin directly.

Self-custody may offer more control, but it requires more education and responsibility.

The right path depends on the investor.

The important thing is to understand what you are doing before moving large amounts of money.

What Is Self-Custody?

Self-custody means holding your own Bitcoin rather than relying on a third party to hold it for you.

In traditional finance, people are used to custodians. Banks hold cash. Brokerage firms hold investments. Retirement account providers hold assets. If you lose a password, you can usually reset it. If there is fraud, there may be processes to dispute or reverse transactions.

Bitcoin works differently.

If you hold your own Bitcoin, you control the keys that allow the Bitcoin to move. That control is powerful because it means no bank, exchange, or institution has to give you permission. But it also means you are responsible for protecting access.

That is why self-custody is both one of Bitcoin’s greatest strengths and one of its biggest learning curves.

A hardware wallet is one common tool for self-custody. It helps keep private keys offline and away from many online threats. But even with a hardware wallet, the investor must properly secure the recovery phrase. If that phrase is lost or stolen, the Bitcoin may be gone permanently.

This is where cautious investors need to be especially careful.

Investors should not rush into self-custody. Start by learning how it works, practicing with small amounts, and documenting the process carefully. Families should also coordinate self-custody with their estate plan.

When one spouse understands Bitcoin but the other does not, access and continuity can become a planning problem. Heirs also need clear instructions, because confusion after death or incapacity could leave the Bitcoin unreachable. Careless storage of recovery information creates a separate security risk and can put the asset in danger.

Bitcoin custody is not just a technical issue. It is a financial planning issue.

Not Your Keys, Not Your Coins

One of the most common phrases in Bitcoin is “not your keys, not your coins.”

The idea is simple. If someone else controls the keys, you are depending on them. You may have a claim on Bitcoin, but you do not have the same kind of direct control as someone who holds their own keys.

This became especially clear after the collapse of major crypto platforms. Many people believed they owned assets safely because they could see balances on a screen. But when the platform failed, they learned that access and ownership were more complicated than they realized.

That does not mean every investor must immediately self-custody everything. It does mean investors should understand the difference between exposure and control.

  • A Bitcoin ETF can provide price exposure.
  • An exchange account can provide convenient access.
  • Self-custody can provide direct control.

Each option has benefits and risks.

The right answer depends on the investor’s goals, technical comfort, account structure, estate plan, and risk tolerance. But no investor should confuse convenience with safety or assume that all forms of Bitcoin ownership are the same.

Dollar Cost Averaging and Taking Baby Steps

For cautious investors, dollar cost averaging may be worth considering.

Dollar cost averaging means buying a fixed dollar amount at regular intervals rather than investing one large lump sum all at once. This approach can help reduce the emotional pressure of trying to perfectly time the market.

With Bitcoin, this can be helpful because price swings can be dramatic. Someone who invests a large amount all at once may feel immediate regret if the price drops. Someone who builds a position gradually may have more time to learn, adjust, and remain disciplined.

Dollar cost averaging does not remove risk. It does not guarantee profit. It does not prevent losses.

But it can help investors avoid making one emotional, all-or-nothing decision. It also lines up with one of the most important themes from the conversation: baby steps.

You do not need to understand every technical detail on day one. Nor do you need to buy a large amount, and  you do not need to become a Bitcoin expert overnight.

  • You can start by learning.
  • You can ask questions.
  • You can understand the risks.
  • You can get familiar with the tools.
  • You can decide whether a small allocation makes sense.

That is a much healthier path than rushing in because a price chart looks exciting.

The Biggest Mistakes Beginners Make

Many Bitcoin mistakes happen early.

  1. The first mistake is buying without understanding. This is common. Someone hears about Bitcoin, sees the price moving, and buys before they know what it is. That creates emotional ownership instead of informed ownership.
  2. The second mistake is buying too much. Even if Bitcoin has long-term potential, an oversized position can create stress and lead to bad decisions.
  3. The third mistake is leaving Bitcoin on an exchange without understanding the risk. Exchanges can be useful, especially for beginners, but leaving assets there indefinitely can introduce third-party risk.
  4. The fourth mistake is mishandling self-custody. Some people move too quickly into wallets and keys without understanding how recovery works. That can be dangerous.
  5. The fifth mistake is falling for scams. Bitcoin transactions are irreversible. If someone tricks you into sending Bitcoin, there may be no way to get it back. This makes skepticism essential.
  6. The sixth mistake is confusing Bitcoin with every other crypto asset. Bitcoin is often grouped into the broader crypto category, but it has unique characteristics, history, network effects, and monetary properties. Investors should understand exactly what they are buying.
  7. The seventh mistake is failing to connect Bitcoin to a financial plan. Bitcoin should not be a side bet that lives outside the rest of your financial life. It should be evaluated alongside everything else you own.

Should I Buy Bitcoin?

So, should you buy Bitcoin?

The honest answer is: maybe.

That may not be the exciting answer, but it is the responsible one.

Bitcoin may make sense for some investors. It may not make sense for others. For many people, the right answer may be to learn first and decide later.

Before buying Bitcoin, a cautious investor should be able to answer a few basic questions:

  • Do I understand what Bitcoin is?
  • Do I understand why it has value to some people?
  • Do I understand the fixed supply?
  • Do I understand the volatility?
  • Do I understand custody risk?
  • Do I know how I would buy it?
  • Do I know how I would hold it?
  • Do I know how much I would buy?
  • Do I know why that amount fits my plan?
  • Do I know what would make me sell?
  • Do I know how this affects my taxes and estate planning?

If the answer to most of those questions is no, then buying Bitcoin may not be the right first step.

Learning may be the right first step.

The goal is not to avoid Bitcoin out of fear. The goal is to avoid making an uninformed decision.

Why a Fiduciary Perspective Matters

Bitcoin is one of those topics where incentives matter.

There are many people online who want you to buy something, trade something, click something, or believe something. Some may be sincere. Others may be compensated in ways that are not obvious.

For cautious investors, that matters.

A fiduciary financial advisor is required to put your interests first. That does not mean every advisor understands Bitcoin deeply. But it does mean the conversation should begin with your financial life, not with someone else’s sales pitch.

A fiduciary conversation about Bitcoin should include risk, position sizing, taxes, custody, estate planning, retirement income, liquidity, and your broader goals.

  • It should not be based on hype.
  • It should not be based on fear.
  • It should not be based on what someone on the internet says will happen next.
  • It should be based on your plan.

That is especially important for investors near retirement or already retired. A bad Bitcoin decision may not just affect a brokerage account. It could affect income planning, withdrawal strategies, family wealth, charitable goals, and peace of mind.

This is why Bitcoin should be discussed with seriousness. Not as a trend, a lottery ticket, or as a guaranteed answer, but as a volatile, important, misunderstood asset that may or may not belong in a thoughtful financial plan.

Final Thoughts: Learn First, Then Decide

If you have been asking, “Should I buy Bitcoin?” the best first step is not to rush into a yes or no answer. The best first step is to understand what Bitcoin is, how it works, what risks come with it, and whether it has a place in your broader financial plan.

Bitcoin is decentralized digital money with a fixed supply, a global network, and a very different structure than the traditional banking system. That is exactly why it has become such an important financial conversation. But Bitcoin is also volatile, custody matters, scams exist, regulation can evolve, and emotional decision-making can lead to real mistakes.

For cautious investors, the right approach is not hype. It is education.

That is why Pasco created Bitcoin Minded, a self-paced course designed to help people learn Bitcoin in a structured, plain-English way before making decisions.

bitcoin minded

And this conversation is not over. Be sure to stay tuned for Part 2 next week, where Brian and Pasco continue the discussion and dive deeper into how Bitcoin may fit inside a real financial plan, including risk, custody, position sizing, and the practical steps investors should understand before taking action.

Whether you decide to own Bitcoin or not, understanding it matters. And if you do decide to buy, make sure it is part of a plan. Not a guess.

Retirement Investing Strategy: How $100K Can Grow Into $2 Million

Posted on by Brian Colvert

How a Smart Retirement Investing Strategy Can Help $100K Grow Into $2 Million

Can $100,000 really grow into $2 million by retirement?

For many people, that number feels unrealistic. It sounds like something that only happens if you pick the right stock, get lucky with the market, inherit money, or earn an extremely high income.

But that is not usually how retirement wealth is built.

In reality, growing $100K into $2 million often comes down to a handful of simple but powerful retirement investing strategies. They are not flashy. They do not require perfect market timing. And they definitely do not require chasing the next hot investment.

They require consistency, patience, discipline, and the right structure.

Today we will break down five reasons some retirees are able to turn $100,000 into $2 million or more, and how you can apply those same principles to your own retirement plan.

Keep reading, or if you prefer to listen or watch… check out the Podcast or full YouTube video.

1. Let Compounding Do the Heavy Lifting

The first major reason $100K can grow into $2 million is the power of compounding. Compounding is when your money earns returns, and then those returns begin earning returns of their own. Over time, that snowball effect can become incredibly powerful.

For example, if $100,000 grows at an average annual return of around 10%, it can grow to more than $1.7 million over roughly 30 years. That does not happen because of one lucky investment. It happens because time and growth are working together.

The problem is that compounding is hard to see in the beginning. In the early years, the growth can feel slow. You may not feel like much is happening. But later, the growth can accelerate because your gains are building on prior gains.

That is why one of the biggest mistakes investors make is interrupting compounding too early. They get impatient. They move in and out of the market. They stop investing during scary periods. Or they keep too much money sitting in cash because they are waiting for the “perfect” time to invest.

But compounding rewards time in the market, not perfect timing. The sooner you start and the longer you stay invested, the more opportunity your money has to grow.

2. Contribute Consistently

Compounding is powerful, but it needs fuel.

That fuel is consistent contributions.

Most people who build serious retirement wealth do not do it by investing one time and walking away forever. They build wealth by putting money away consistently over many years.

That may mean contributing to a 401(k), Roth IRA, brokerage account, SEP IRA, SIMPLE IRA, or another investment account. The exact account depends on your situation, but the habit is the same: money goes in regularly.

One of the best ways to make this happen is to automate it.

Willpower is not a great retirement strategy. Life gets busy. Expenses pop up. Markets get scary. It is easy to talk yourself out of investing when you have to manually make the decision every month.

Automation removes that friction. When contributions happen automatically, you are no longer relying on motivation. You are building the habit into your financial system.

That is how retirement wealth is usually created. Not through one dramatic decision, but through repeated decisions made easier over time.

A strong retirement investing strategy should answer questions like:

  • How much are you saving each month?
  • Which accounts are you contributing to?
  • Are your contributions automatic?
  • Are you increasing contributions as your income grows?
  • Are you taking advantage of employer matching when available?

If you want $100K to become $2 million, consistency matters. A lot.

3. Stay Invested When the Market Drops

This is where many investors lose momentum. It is easy to say you are a long-term investor when the market is going up. It is much harder when your account is down 20%, 30%, 40%, or more.

When the market drops, people do not usually think in percentages. They think in dollars.

A 20% decline on a $1 million portfolio is not just “20%.” It feels like $200,000 is gone. That can be emotionally brutal, especially for people approaching retirement.

This is when investors often panic. They sell. They move to cash. They abandon the strategy they built during calmer times.

The problem is that selling after a major decline can lock in losses and make it harder to recover.

For example, if you have $100,000 and the market drops 50%, you now have $50,000. To get back to $100,000, you do not need a 50% gain. You need a 100% gain.

That is why your investment strategy needs to match your actual risk tolerance before the downturn happens. If your portfolio is too aggressive, you may not be able to emotionally stick with it when things get rough. But if your portfolio is too conservative, your money may not grow enough to support the retirement you want.

The goal is not to build the most aggressive portfolio possible. The goal is to build a portfolio you can stay invested in through different market cycles.

Because the investors who benefit from long-term growth are usually the ones who remain invested long enough to experience it.

4. Keep Investment Fees Low

High fees can quietly eat away at your retirement savings.

That is why fees are often called the silent killer of investment returns. Many investors do not realize how much they are paying inside mutual funds, ETFs, annuities, insurance products, alternative investments, or retirement plans. The fees may be disclosed, but they are often buried in long documents most people never read.

Even a small difference in fees can have a major impact over time.

For example, there is a big difference between an investment charging 0.03% and one charging 1.5%. That difference may not feel huge in one year, but over decades it can add up to a substantial amount of money.

The issue is not that every fee is bad.

Sometimes paying for advice, planning, or professional management can make sense. The real question is whether you understand what you are paying and whether you are receiving value for that cost.

A good retirement investing strategy should help you identify:

  • Fund expense ratios
  • 401(k) administrative fees
  • Advisory fees
  • Annuity or insurance product fees
  • Trading costs
  • Hidden or layered investment expenses

If you have a 401(k), you can often find fee information on your quarterly statement, summary plan description, or by asking your plan administrator. You can also look up fund tickers through financial research sites to review expense ratios.

The bottom line is simple: the less you lose unnecessarily to fees, the more of your return you keep. And the more you keep, the more you can compound.

5. Use the Right Mix of Retirement Accounts

Building $2 million is one thing. Keeping more of it is another.

This is where account structure becomes incredibly important.

Many people save heavily into a 401(k), which can be a great tool. But if all of your retirement savings are in pre-tax accounts, you may create a tax problem later.

Money taken out of a traditional 401(k), traditional IRA, SEP IRA, SIMPLE IRA, or profit-sharing plan is generally taxed as ordinary income. That means every dollar you withdraw can increase your taxable income in retirement.

If all of your retirement income comes from pre-tax accounts, you may have less flexibility to manage your tax bill.

That is why it can help to build wealth across different types of accounts.

Pre-tax accounts

These include accounts like traditional 401(k)s, traditional IRAs, SEP IRAs, SIMPLE IRAs, and profit-sharing plans.

You may receive a tax benefit when you contribute, but withdrawals are generally taxable later.

Roth accounts

Roth IRAs and Roth 401(k)s are funded with after-tax dollars. The potential benefit is that qualified withdrawals can be tax-free in retirement.

This can give you more flexibility later, especially if tax rates rise or your taxable income is higher than expected.

Taxable brokerage accounts

Brokerage accounts are funded with after-tax dollars. You do not receive the same upfront tax break as a pre-tax retirement account, but you may have more flexibility with withdrawals, capital gains treatment, and access before retirement age.

Having a mix of account types can give you more options.

For example, in retirement, you may choose to take some income from a pre-tax account, some from a Roth account, and some from a brokerage account. That can help you manage your taxable income, coordinate with Social Security, and potentially reduce unnecessary taxes.

This is one of the biggest differences between simply accumulating money and building a real retirement income strategy.

The goal is not just to grow the account balance, it is to create flexibility, control, and income that supports the life you want.

The Real Retirement Investing Strategy

The retirees who grow $100K into $2 million usually do not get there because they made one genius investment.

  • They usually get there because they followed a few core principles for a long period of time.
  • They understood compounding.
  • They contributed consistently.
  • They stayed invested through difficult markets.
  • They paid attention to fees.
  • They built wealth across the right types of accounts.

None of these strategies require you to predict the future. None require you to time the market perfectly. And none require you to chase whatever investment is popular this year.

But they do require a plan.

Without a plan, it is easy to make emotional decisions. It is easy to overpay in fees. It is easy to end up with all of your money in one tax bucket. And it is easy to build wealth without knowing how to turn that wealth into retirement income.

That is where many people get stuck. They save. They invest. They accumulate.

But when retirement gets closer, they realize they do not have a coordinated strategy for taxes, income, risk, withdrawals, and long-term flexibility.

Bringing It All Together

A smart retirement investing strategy is not just about picking investments. It is about building a system that helps your money grow, protects you from emotional decisions, reduces unnecessary costs, and gives you flexibility when you need income later.

Turning $100K into $2 million does not happen overnight. It happens through time, discipline, and structure.

  • The earlier you start, the more powerful compounding can become.
  • The more consistently you contribute, the more fuel you give your plan.
  • The better your portfolio fits your risk tolerance, the more likely you are to stay invested.
  • The more you understand your fees, the more of your return you can keep.
  • And the better your account structure, the more control you may have in retirement.

That is the difference between simply having investments and having a retirement strategy.

Next Steps

If you are serious about retirement, do not stop at asking, “Am I invested?”

Ask better questions:

  • Do I have the right retirement investing strategy?
  • Am I saving enough?
  • Am I using the right mix of accounts?
  • Am I paying too much in fees?
  • Could taxes take more of my retirement income than they need to?
  • Do I know how I will turn my portfolio into income?

At Bonfire Financial, we help people answer those questions through a more complete planning process.

The Bonfire Method is designed to help you look at your full financial picture, including investments, taxes, income, risk, and retirement goals, so you can make smarter decisions with more confidence.

If you want to know whether your current strategy is built to support the retirement you actually want, schedule a call with Bonfire Financial.

A better retirement does not happen by accident. It starts with a better strategy.

Jump Start Your Year: New Year Financial Tips for Smarter, More Intentional Planning

Posted on by Brian Colvert

The start of a new year is one of the best opportunities you get to reset, realign, and simplify your financial life. The goal is to spend a short, focused window of time putting the right systems in place so the rest of the year runs smoothly.

These new year financial tips are designed to help you do exactly that.

Whether you are still saving for retirement or already retired and managing distributions, this guide walks through the most important financial moves to make at the beginning of the year.

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Why New Year Financial Tips Matter

Most financial stress does not come from lack of knowledge. It comes from lack of structure.

When savings, investments, spending, and withdrawals are not clearly set up, everything feels harder than it needs to be. You end up reacting instead of planning.

The goal of these new year financial tips is simple:

  • Automate what can be automated

  • Review what actually matters

  • Make small adjustments that create long-term impact

  • Free up mental energy for the rest of your life

If done correctly, you should not feel the need to constantly check accounts, worry about missing deadlines, or scramble at the end of the year.

Tip 1: Reset Your Financial Mindset for the Year

Before touching any accounts, take a step back.

The new year is not about perfection. It is about alignment.

Ask yourself:

  • What do I want my money to do for me this year?

  • Do I want more simplicity, more flexibility, or more growth?

  • What caused financial stress last year?

Clarifying this first helps ensure your financial decisions actually support your real life.

Tip 2: Automate Your Savings First

If there is one principle that matters most, it is automation.

Automation removes emotion, procrastination, and decision fatigue.

If you are still working and saving for retirement:

  • Review your 401k or employer plan contribution percentage

  • Increase contributions if your income has increased

  • Confirm contributions restarted correctly for the new year

If you crossed a new age threshold:

  • Age 50: Confirm catch-up contributions are enabled

  • Ages 60–63: Review enhanced catch-up contribution rules if applicable

Once automated, savings happen without ongoing effort.

Tip 3: Review Contribution Limits and Catch-Ups

Every new year brings updated contribution limits. Missing these adjustments can mean missed opportunities.

At the start of the year:

  • Review current 401k contribution limits

  • Confirm IRA and Roth IRA limits

  • Verify catch-up eligibility

  • Adjust payroll deductions if needed

These are small changes that can significantly impact long-term outcomes.

Tip 4: Automate Savings Outside of Employer Plans

Employer plans are easy because they come directly out of payroll. Other savings require more intention.

Helpful new year financial tips here include:

  • Automating Roth or Traditional IRA contributions

  • Setting up backdoor Roth contributions if applicable

  • Scheduling brokerage account contributions

  • Rebuilding or maintaining an emergency fund

Monthly or quarterly automation keeps savings consistent and removes guesswork.

Tip 5: Optimize Your Health Savings Account

Health Savings Accounts (HSAs) are one of the most powerful and underused planning tools.

At the beginning of the year:

  • Confirm HSA contributions are automated

  • Review contribution limits

  • Ensure funds are invested, not sitting in cash

  • Check investment allocation inside the HSA

When used correctly, an HSA can play a meaningful role in long-term planning.

Tip 6: Review Your Investment Allocations

This is not about frequent trading or market timing.

It is about making sure new money is being invested the way you intend.

Take 15 to 30 minutes to:

  • Review asset allocation

  • Confirm risk level aligns with goals and timeline

  • Ensure new contributions are invested properly

  • Rebalance if allocations have drifted meaningfully

Once complete, step away.

Tip 7: Stop Checking Your Accounts Too Often

One of the most overlooked new year financial tips is knowing when not to look.

Constant monitoring increases stress without improving outcomes.

Consider:

  • Limiting reviews to quarterly or semiannual check-ins

  • Avoiding daily or weekly market tracking

  • Focusing on long-term progress instead of short-term movement

A good plan does not require constant supervision.

Tip 8: Shift Strategy If You Are Retired

If you are retired, your focus shifts from saving to spending.

Start the year by:

  • Reviewing required minimum distributions

  • Deciding how and when withdrawals will occur

  • Automating monthly or quarterly distributions if appropriate

  • Aligning withdrawals with actual spending needs

Consistency helps smooth market volatility and simplifies cash flow.

Tip 9: Plan Required Minimum Distributions Early

RMDs are required regardless of market performance.

Helpful new year financial tips for RMD planning include:

  • Confirming your required distribution amount

  • Deciding whether to take distributions monthly, quarterly, or annually

  • Avoiding last-minute year-end withdrawals

  • Planning for taxes in advance

This removes unnecessary pressure later in the year.

Tip 10: Review Charitable Giving Strategies

If charitable giving is part of your plan, early planning matters.

At the start of the year:

  • Confirm eligibility for qualified charitable distributions

  • Decide on annual giving amounts

  • Automate monthly or quarterly donations if possible

  • Coordinate with charities ahead of time

This simplifies giving and keeps it aligned with your financial strategy.

Tip 11: Review Last Year’s Spending

January is the ideal time to look back.

Not to judge, but to adjust.

Review:

  • Actual spending versus expectations

  • Categories that increased or decreased

  • Whether inflation or lifestyle changes impacted costs

Use this information to make realistic adjustments going forward.

Tip 12: Reevaluate Your Goals

Financial plans should evolve as life evolves.

As part of your new year financial checklist:

  • Review retirement timelines

  • Adjust savings if goals have changed

  • Reassess income needs

  • Confirm risk tolerance still fits your situation

Small adjustments now prevent larger corrections later.

Tip 13: Eliminate the End-of-Year Rush

One of the biggest benefits of early planning is avoiding December stress.

By planning now, you can:

  • Front-load decisions instead of procrastinating

  • Address tax strategies early

  • Build flexibility into your plan

Planning early creates options. Waiting removes them.

Tip 14: Coordinate With Professionals Early

January is one of the best times to talk with advisors.

Consider:

  • Meeting with your financial advisor, also a good time to make sure they are a fiduciary fee-only advisor

  • Checking in with your CPA before tax season peaks

  • Reviewing any new tax rules or planning opportunities

Early conversations are calmer and more productive.

Final Thoughts

Strong financial planning is not built on constant action. It is built on a thoughtful structure.

When your savings, investments, spending, and distributions are set up correctly, your financial life runs quietly in the background. You are not reacting to markets, scrambling at year-end, or constantly second-guessing decisions. The work is done once, and the benefits show up all year long.

These new year financial tips are about building that kind of structure. Automating what can be automated. Reviewing what actually matters. Making thoughtful adjustments now so you are not forced into rushed decisions later.

The most successful financial plans are not built on constant activity. They are built on clarity, discipline, and systems that allow you to focus on the parts of life that matter more than money.

If you spend a short amount of time at the beginning of the year putting this framework in place, you give yourself something valuable in return: confidence, flexibility, and peace of mind for the months ahead.

That is what it means to truly jump start the year.

Next Steps

If the idea of a quieter, more intentional financial plan resonates, a conversation can help turn that framework into something personal and actionable.

Step back, review where things are today, and make sure your plan is built to support the life you want, not distract from it. No rushing. No pressure. Just clarity around what matters and how to structure your finances so they work in the background.

If this is the year you want confidence instead of constant decision-making, we’re here to help you get there.

You can schedule a call with our team today to start the conversation.

Year End Planning – The Two Minute Drill for Your Financial Life

Posted on by Brian Colvert

Year End Planning: Your Guide to Finishing the Year Strong

As the calendar turns toward the final weeks of the year, it becomes clear how quickly time moves. Life fills up, schedules accelerate, and before we know it another December arrives. While the holiday season often brings celebration and reflection, it also presents one of the most important financial opportunities of the year. Thoughtful Year End Planning ensures you take advantage of key tax benefits, avoid costly penalties, and position yourself for a stronger financial foundation heading into teh new year.

 Year End Planning is not about scrambling or stressing. Instead, it is about making smart, timely decisions that help you keep more of what you earn and stay on track toward your long term goals. Whether you are still actively saving for retirement or already enjoying it, the last part of the year is the moment to make sure your accounts, contributions, and required actions are in good order.

This guide walks through the most important Year End Planning steps to consider. We will cover health accounts, retirement plans, Roth strategies, Required Minimum Distributions, charitable giving, and more. Each section is designed to help you understand what needs to happen before December 31, why it matters, and how to maximize the benefits available to you.

Let’s begin.

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Why Year End Planning Matters

Year End Planning gives you the chance to close the year with clarity and control. Many tax advantaged financial opportunities are tied to the calendar year. If they are missed, they cannot be corrected retroactively. The last weeks of the year create a natural deadline that requires decisive action.

Proactive Year End Planning can help you:

• Reduce taxable income
• Maximize tax advantaged savings
• Use funds that will otherwise be forfeited
• Optimize charitable giving strategies
• Avoid penalties
• Confirm that your financial strategy remains aligned with your goals

Most importantly, Year End Planning helps prevent reactive decision-making. When you intentionally prepare, you make the most of your financial landscape instead of leaving opportunities on the table.

Understanding Your Health Accounts: FSA and HSA

Health accounts are one of the most overlooked parts of Year End Planning. They are also among the most impactful, especially from a tax perspective. Two main types of accounts are tied to healthcare costs: the Flexible Spending Account (FSA) and the Health Savings Account (HSA). Both can provide substantial benefits, but each functions differently, especially at year end.

Flexible Spending Accounts: Use It or Lose It

An FSA allows you to set aside pre-tax dollars to pay for qualified medical expenses if you participate in a low deductible health insurance plan. FSAs are incredibly beneficial, but they come with a strict rule: they are use it or lose it accounts.

If you have unused FSA funds by the end of the year, those dollars may be forfeited. Some employers allow a small carryover amount or a brief grace period, but many follow the strict calendar deadline.

As part of your Year End Planning, review your FSA balance as early as possible. If you still have remaining funds, consider eligible expenses such as:

• Prescription medications
• Over the counter drugs
• First aid supplies
• Contact lenses and glasses
• Sunscreen
• Medical devices
• Certain wellness items

Retailers often label items as FSA eligible, making it easier to identify qualifying purchases. The key is awareness. These funds are yours, and Year End Planning ensures they do not go unused.

Health Savings Accounts: Maximize Your Contribution

An HSA operates differently from an FSA. It is available to individuals with high deductible health plans and is widely considered one of the most powerful tax advantaged vehicles available.

HSAs offer a triple tax benefit. Contributions are tax deductible, growth is tax deferred, and withdrawals for qualified medical expenses are tax free. HSAs also roll over from year to year and can accumulate indefinitely. They even function as a supplemental retirement account for medical expenses later in life.

As part of your Year End Planning, confirm that you have fully funded your HSA for 2025:

• Single coverage limit: 4,300
• Family coverage limit: 8,550
• Catch up contribution for age 55 and older: Additional 1,000

>>>> Check here for the most current limits.

You can view your contributions through your employer benefits portal or your health plan administrator. If you are not yet at the maximum, consider increasing your final payroll contributions or making a lump sum deposit before year end.

The more you fund your HSA, the more long term tax advantage you gain.

Maximizing Retirement Savings Before the Deadline

Retirement accounts remain one of the most critical components of Year End Planning. Certain contributions, particularly to employer sponsored plans like 401ks, must be completed by December 31 to count for the current tax year.

401k Employee Contributions

If you participate in a 401k, your employee contribution must be processed by December 31. Employer contributions, such as profit sharing, can often be made later, but your personal salary deferrals are tied to the calendar year.

For 2025, the limits are:

• Standard contribution limit: 23,500
• Catch up contribution (age 50 and older): Additional 7,500
• Special catch up for ages 60 to 63: 11,250 instead of 7,500

This means individuals aged 60 to 63 can contribute up to 34,750 in total.

>>>> Check here for the most current limits.

Whether you choose pre tax or Roth contributions, the action must occur before year end. If you are behind on your savings goals, consider adjusting your final pay periods of the year to boost your contributions.

Traditional vs Roth 401k Contributions

Choosing between pre tax and Roth contributions is a personal decision based on your current income, future tax expectations, and financial priorities.

• Traditional 401k contributions reduce your taxable income today.
• Roth 401k contributions are made with after tax dollars but grow tax free.

If you no longer qualify to contribute to a traditional Roth IRA due to income limits, your workplace Roth 401k may be your only remaining tax free savings option. Year End Planning is the moment to ensure you are taking advantage of it.

Roth Conversions: A Powerful Year End Opportunity

Roth conversions involve moving funds from a traditional IRA or 401k into a Roth account. This shifts the tax burden to the current year but provides the benefit of tax free growth and no required minimum distributions in the future.

Unlike IRA contributions, Roth conversions must be completed before December 31. They cannot be retroactively applied to a prior year.

Why might you consider a Roth conversion during Year End Planning?

• You expect to be in a higher tax bracket later.
• This year is a low income year.
• You want to reduce future RMDs.
• You want to leave tax free assets to heirs.

Before converting, it is wise to consult with your financial advisor or CPA. Roth conversions can affect Social Security taxation, Medicare premiums, and your overall tax bracket. With proper planning, however, they are one of the most valuable tools available.

Required Minimum Distributions: What You Need to Know

If you have a traditional IRA, SEP IRA, SIMPLE IRA, or certain employer retirement plans, the IRS requires you to begin withdrawing funds once you reach age 73. These Required Minimum Distributions, or RMDs, ensure that tax deferred dollars eventually become taxable income.

Your first RMD must be taken by April of the year following the year you turn 73. Every year after that, your RMD must be taken by December 31.

Year End Planning is the time to verify:

• Have you taken your full RMD for the year
• If you turned 73 this year, will you take your first RMD now or wait until early next year
• If you have multiple accounts, are you taking the correct amount from each

Missing an RMD results in a steep penalty. Avoiding that penalty is one of the most important Year End Planning tasks for retirees.

Qualified Charitable Distributions (QCDs)

For individuals who give to charity, a QCD can be a highly effective strategy. A QCD allows you to direct up to 100,000 per year from your IRA to a qualified 501c3 charity. The distribution counts toward your RMD and is not included in your taxable income.

QCDs allow you to:

• Support causes you care about
• Reduce taxable income
• Satisfy your RMD without increasing your tax liability

If you write checks from an IRA checkbook (common with Charles Schwab accounts), make sure the charity cashes the check before year end. Some organizations delay processing donations until January, which can create reporting issues. Sending QCDs early in December and keeping detailed records is essential.

Additional Year End Planning Actions to Consider

While health accounts, retirement savings, and RMDs are the most time sensitive steps, Year End Planning also includes several broader financial reviews.

Charitable Giving and Tax Deductions

If you plan to itemize deductions, year end is a good time to finalize charitable donations. You may consider:

• Cash gifts
• Donor advised fund contributions
• Gifting appreciated securities
• Qualified Charitable Distributions (if applicable)

Gifts must be completed by December 31 to count for the current tax year.

Portfolio Rebalancing and Tax Loss Harvesting

Although not required by year end, many investors use December as a moment to rebalance their portfolios back to their target allocation. Market movements throughout the year can shift your risk exposure.

Tax loss harvesting may also be available. This involves selling investments at a loss to offset taxable gains. It is a specialized strategy and should be discussed with your advisor.

Reviewing Employer Benefits

Open enrollment typically occurs in the fall, but Year End Planning gives you a chance to confirm your benefit choices, especially if you are adjusting contributions to FSAs, HSAs, or retirement plans for the coming year.

Evaluating Cash Flow and Savings Goals

Year end is an ideal time to look forward as well as backward. Consider:

• Are you on track for your emergency fund goals
• Do you need to adjust automatic savings for 2026
• Are there financial milestones you want to prioritize next year

Good planning now makes next year smoother and more predictable.

The Human Side of Year End Planning

We understand that even with the best intentions, financial planning can slip through the cracks. Life gets busy. Work demands increase. Family schedules take center stage. That is precisely why Year End Planning exists. It provides a clear moment to pause, recalibrate, and make sure your financial systems are working for you.

No one enjoys paying more taxes than necessary. Year End Planning gives you the tools to minimize tax burden, maximize savings, and protect your long term security. When done well, it transforms December from a stressful deadline into a meaningful opportunity.

Our team is here to help you navigate these decisions thoughtfully. Whether you need to review contribution levels, analyze Roth conversion strategies, calculate an RMD, or simply understand what steps apply to your unique situation, we are ready to support you.

Finishing the Year with Confidence

As the year comes to a close, take the time to review your accounts, contributions, and required actions. The goal of Year End Planning is not perfection. It is awareness, clarity, and intentional action.

By focusing on the steps that matter most, you can:

• Protect your tax advantages
• Reduce unnecessary financial stress
• Strengthen your retirement outlook
• Support the causes you care about
• Enter 2026 with confidence

Year End Planning is one of the most impactful habits you can build. When you take advantage of each year’s opportunities, you create powerful momentum for your financial life.

If you would like guidance or want to review your personal situation, our advisors are here to help.

Schedule a call today with our team to get started!

Making It Count: How to Balance Living for Today and Saving for Tomorrow

Posted on by Brian Colvert

Living for Today

“Live for today.” It’s a popular phrase, often used to justify a spontaneous purchase, a once-in-a-lifetime trip, or even just a splurge on a fancy dinner. But when you’re trying to plan for the future, that mindset can feel risky. So, how do you walk the line between enjoying life now and being responsible about your future?

In this post, based on insights from our recent episode of The Field Guide, we explore what it really means to live for today while still planning for tomorrow. We break down why the balance is more of an art than a science, how risk tolerance and personal experience shape financial choices, and ways to build a plan that supports both joy and security.

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The Myth of the Perfect Equation

Too often, financial advice is reduced to formulas: save X% of your income, invest in Y, and you’ll be fine. But that one-size-fits-all approach rarely works. Why? Because everyone has a different comfort level, past experience, and vision for what makes life fulfilling.

What makes one person feel secure could leave another anxious. For example, traditional advice suggests keeping three to six months of expenses in an emergency fund. But if you lived through a financial crisis, lost a business, or faced long-term unemployment, that might not feel like enough. You might want a year or more of expenses in cash. And that’s okay.

Financial planning must account for human nuance. It has to be personal. That means accepting that your version of “right” might not look like anyone else’s and putting aside the fear of missing out. Instead of seeking a perfect algorithm or rigid formula, the real strategy lies in flexibility, adjusting as your life, income, goals, and even the economy change.

What It Means to Live for Today

Living for today isn’t about reckless spending. It’s about aligning your financial choices with what brings you meaning and joy. That could be:

  • Taking a family vacation
  • Learning a new skill or hobby
  • Traveling to experience new cultures
  • Hosting a big family reunion
  • Attending a cooking class or enrolling in art school
  • Starting a small side business based on passion

These experiences create memories and fulfillment that can never be duplicated. And while they might not offer a monetary return, their emotional ROI is priceless. Money is a tool, not the goal. The balance sheet is important, but it isn’t where life happens. No one wants to reach retirement with a full bank account but a list of regrets.

When you invest in experiences that feed your soul, the returns go beyond numbers. They improve mental well-being, strengthen relationships, and offer a sense of purpose. We believe in balance, not deprivation, read our perspective in Why the FIRE Movement is BS.

Your Lifestyle Is the Starting Point

When making spending decisions, always start with your lifestyle. If your current standard of living includes mid-range hotels and coach flights, that’s the baseline you should work from. It’s easy to fall into the trap of upgrading everything because “it’s a special occasion.” But if you can’t afford luxury in your everyday life, why stretch to afford it on vacation?

Instead of chasing someone else’s version of the good life, define your own. Choose experiences that truly resonate with you. If you hate wine, don’t waste your money on a vineyard tour in Tuscany. Do what you love, in a way that fits your means.

Your lifestyle should guide your choices and that includes how you travel, dine, shop, and even give. If you’re giving up your future stability to appear wealthier in the present, you’re not living for today. You’re borrowing from tomorrow. Use this as a guide when determining the best age to retire.

Timing Matters More Than You Think

We all assume we have time. Time to travel. Time to learn. Time to reconnect. But what if you don’t?

As we age, physical limitations, unexpected health issues, or just the demands of life can chip away at those opportunities. A dream trip put off for “someday” may not be possible when that day finally comes.

Living for today is also about recognizing the fragility of time. If there’s something meaningful you want to do, find a way to do it now, even if it’s on a smaller scale.

Even delaying by a few years can change your capacity to fully enjoy an experience. Climbing a mountain or hiking Machu Picchu might not feel as doable at 70 as it would at 50. Your energy, enthusiasm, and ability to embrace adventure evolve with time.

How to Spend Without Regret

Spending money isn’t bad. Overspending is. And often, regret doesn’t come from what we buy, but how we buy it.

Here are a few ways to spend without guilt:

  • Plan ahead: Build the experience into your budget. Save for it in advance.
  • Stay within your lifestyle: Enjoy what’s aligned with your means.
  • Get creative: Use points, miles, and off-season deals.
  • Focus on meaning: Choose experiences that deeply matter to you or your family.

Most people don’t regret the experiences they invest in. They regret the ones they missed.

Remember, spending isn’t just about dollars, it’s about values. Make sure your money is going toward things that truly reflect your priorities, not someone else’s expectations.

The Financial Foundation

Enjoying the present doesn’t mean abandoning your future. It means building a strong financial foundation that gives you the freedom to enjoy life today.

Make sure you:

  • Max out retirement contributions (401(k), Roth IRAs, etc.)
  • Keep a realistic emergency fund
  • Manage excess debt wisely
  • Invest consistently over time
  • Pair CDs with your short-term goals to lock in higher rates safely, see our deep-dive on how CDs work
  • Revisit your financial plan at least once a year
  • Consider creating a “fun fund” for guilt-free spending

Think of it this way: responsible planning gives you permission to spend. When the basics are covered, you can enjoy your money guilt-free.

Conversations That Matter

If you’re unsure whether a big purchase or experience fits into your plan, talk to a financial advisor. Not to get permission, but to get clarity.

Sometimes you need a second set of eyes to say, “Yes, you can absolutely afford this. Here’s how.” Or, “Let’s find a smarter way to do it.” Either way, it helps eliminate the stress of guessing.

A great advisor doesn’t just manage your investments. They help you live the life you want with the resources you have.

These conversations matter even more when there’s uncertainty, market volatility, a job change, or a sudden windfall. Knowing how to navigate big shifts can be the difference between peace of mind and financial anxiety.

Your Values Should Drive Your Strategy

At the core of all good financial decisions are values. What do you care about? What kind of legacy do you want to leave? What makes you feel most alive?
When you base your plan around what matters most, it becomes easier to:

  • Say no to things that don’t serve you
  • Spend confidently on what does
  • Adjust your goals when your life changes

Living for today means honoring those values now, not just someday.

Final Thoughts

Living for today doesn’t mean blowing your savings or ignoring the future. It means being intentional. It means knowing your priorities, staying within your lifestyle, and making room for experiences that bring you joy.

You worked hard for your money. It should work hard for you, not just someday, but today. Whether you’re planning your next trip, debating a big purchase, or just trying to feel less guilty about spending, remember this: You can’t take it with you. But you can make it count.

So spend wisely, plan boldly, and live fully.

Ready to build a plan that lets you live fully today and confidently into the future? Reach out to our team at Bonfire Financial. We’re here to help you find that sweet spot.

Mutual Funds Explained: Because No One Ever Actually Reads the Fine Print

Posted on by Brian Colvert

Mutual Funds Explained

Mutual funds are like your sock drawer. You know it’s full of something useful, but you’re never quite sure exactly what’s in there. Occasionally, you find something surprisingly valuable, kind of like that lost gift card from three Christmases ago.

Recently, at a dinner party, your friend confidently declared, “My Fidelity fund was up 25% last year!” And sure, that sounds impressive. But let’s face it, most of us aren’t entirely sure if that’s amazing or just dumb luck.

In this article, we’ll cut through the confusion, getting mutual funds explained clearly, highlighting mutual fund vs ETF differences, and squashing a few misconceptions along the way. And we’ll try to do it without making your eyes glaze over.

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Misconceptions: The Sock Drawer Problem

One of the biggest misunderstandings about mutual funds is that they’re all basically the same. But they come in countless varieties, much like those socks we mentioned earlier. They’re just bundles of stocks, bonds, or other investments, chosen by professionals. (Hopefully professionals who don’t rely on tips from Reddit.)

Here’s a fun-but-scary fact: there are around 8,700 mutual funds registered in the U.S. alone, and almost 135,000 if you toss ETFs into the mix. Compare that to just 6,000 publicly traded companies and you start wondering if everyone and their cat has their own mutual fund.

Clearly, understanding your mutual fund choices is important for smart financial planning.

Mutual Fund vs ETF Differences: Grandma Calls vs. Caffeine Moods

Mutual funds and ETFs might look like identical twins, but they’ve got distinct personalities. Mutual funds trade just once per day, kind of like your grandma calling every evening at exactly 7 pm. Predictable. Stable. Comforting.

ETFs, meanwhile, trade throughout the day, matching the unpredictable energy of someone who’s had three triple-espressos by noon…looking at you Dave. Understanding these differences matters, especially when you’re thinking seriously about optimizing your retirement accounts.

Beyond just trading behavior, mutual funds and ETFs differ in how they’re managed and taxed. Most mutual funds are actively managed, meaning a team of professionals is trying to beat the market by picking winning stocks. That often comes with higher fees, usually baked into something called an “expense ratio.” ETFs tend to be passively managed, simply tracking an index like the S&P 500. That hands-off approach often translates to lower costs and fewer surprise charges hiding in the fine print.

Then there’s how taxes work. ETFs are generally more tax efficient thanks to something called the “in kind redemption” process, which helps them avoid triggering capital gains distributions when investors buy or sell. Mutual funds? Not so much. If someone else in the fund sells a big chunk, you might end up with a tax bill even if you didn’t sell a thing. While grandma’s routine might be comforting, ETFs often give you more control, agility, and fewer tax headaches; we all can deal with less headaches, especially if you just had three triple-espressos.

Your Friend’s Mutual Fund Brag: The Biggest Misconception

Another classic misconception: vague bragging about owning a “Schwab fund.” Saying you own a mutual fund without knowing what’s in it is like proudly announcing, “I drive a vehicle,” without specifying if it’s a Ferrari or a riding mower. Details matter, especially when they involve your money.

Getting clarity about what’s in your fund helps you make smarter financial moves, such as improving your portfolio’s diversification. Plus, it’ll give you something clever to say the next time your friend starts talking finance.

Mutual Funds Explained 

Mutual funds aren’t a one-size-fits-all thing. Some focus on big, steady companies (“large-cap”). Others chase growth in smaller, ambitious ventures (“small-cap”). Then you’ve got funds that specialize in international markets or emerging economies. Some even hold gold, oil, or cows. Literal cows.

Understanding exactly what’s inside clears up confusion and gives you more confidence about where your money is going. And hey, confidence looks great on you.

Another consideration is performance reporting. Mutual funds often compare their results to a benchmark, like the S&P 500, but actively managed funds do not always beat those benchmarks. In fact, many underperform after accounting for fees. That is why it is smart to look past just past performance and ask whether the fund’s strategy, costs, and holdings align with your long-term plan. Because at the end of the day, investing should serve your goals, not just chasing returns, or cows in some instances.

Understanding Mutual Funds Matters

Navigating thousands of mutual funds and ETFs can be overwhelming, no matter how smart you are. That’s why working with a CFP® is a pretty smart move. Think of us like your financial Siri, except funnier, and more helpful.

When you clearly understand your investments, you feel calmer, smarter, and way less stressed. Not a bad trade-off.

Ready for Clarity? Let’s Chat

We’ve covered a lot here, but at the end of the day, your financial goals are unique, and personalized advice is crucial.

So, if you’re ready for tailored financial help (minus the judgment), go ahead and schedule a free introductory call. Because your retirement plan deserves better than vague bragging at dinner parties. 

High Net Worth Financial Planning – What You Need to Know

Posted on by Brian Colvert

High net worth financial planning is essential for preserving, growing, and strategically managing wealth. While having substantial assets may provide financial security, a well-structured financial plan ensures that your wealth aligns with your long-term goals, minimizes tax liabilities, and provides a clear roadmap for investments, estate planning, and risk management.

Many individuals with a high net worth question the need for financial planning because they aren’t worried about running out of money. However, as Brian discusses in The Field Guide podcast, a financial plan is more than just a tool —it is a blueprint for decision-making. It helps ensure that every financial move aligns with broader goals, whether it’s investments, taxes, estate planning, or philanthropy.

Even the wealthiest individuals benefit from a structured approach to their finances. In this guide, we break down why financial planning is essential for high net worth individuals and families, the key components of a strong financial plan, and how working with a fiduciary financial advisor can provide a roadmap to financial security and success.

Listen Now:

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Why Financial Planning Still Matters for Wealthy Individuals

Many assume that because they have substantial assets, they don’t need a financial plan. However, financial planning isn’t just for those worried about running out of money—it’s about making informed decisions, optimizing opportunities, and helping to ensure financial stability across generations.

Here’s why having a customized financial plan is crucial:

1. Ensuring Your Investments Align with Your Goals

A financial plan acts as a roadmap, helping you align your investments with your lifestyle, retirement, and legacy goals. Without a clear plan, it’s easy to make impulsive investment decisions that may not serve your long-term interests.

As Brian mentions, many clients approach him with specific investment ideas—such as buying Bitcoin or allocating more funds into tech stocks like Apple and NVIDIA, or other AI investments. However, without a plan, it’s impossible to determine whether these investments align with personal financial goals. Are you looking to grow wealth aggressively, or are you risk-averse and more focused on wealth preservation? These questions must be addressed before making investment decisions.

2. Managing Risk and Market Volatility

Even wealthy investors need to consider risk management. Market downturns, economic shifts, and unforeseen expenses can impact anyone. A solid financial plan ensures that you have diversified investments and strategies to mitigate risks.

In the podcast, Brian highlights how some investors chase trends without considering whether they can stomach the volatility. For example, Bitcoin may be a great long-term investment, but if a client is highly risk-averse and uncomfortable with large fluctuations in value, it may not be the right fit. A financial plan helps align investment choices with an individual’s risk tolerance and financial objectives.

3. Optimizing Tax Strategies

Those with substantial assets are often in higher tax brackets, making tax-efficient investing and estate planning essential. Without strategic tax planning, you could end up paying significantly more in taxes than necessary.

A good financial plan considers:

  • Which accounts to invest in for tax efficiency
  • When and how to withdraw funds to minimize tax liability.
  • Strategies for charitable giving to optimize deductions.

4. Legacy and Estate Planning 

Wealth preservation isn’t just about making money—it’s about ensuring your assets are passed down effectively. A well-structured estate plan as part of your larger financial plan ensures that your wealth is protected and allocated according to your wishes.

Many individuals fail to update their estate plans, leaving their heirs with unnecessary tax burdens or legal complications.

1,000 adults with over $3 million in investable assets were surveyed and found that only 48% of them had the three most basic planning documents in place: a will, a healthcare proxy and power of attorney. That is a shocking statistic. A financial plan helps you keep estate strategies up to date and aligned with your long-term vision.

5. Philanthropy and Charitable Giving

Many successful individuals want to leave a lasting impact through philanthropy. A financial plan helps structure tax-efficient charitable giving, maximizing the benefits for both you and your chosen causes.

Key Components of a Strong Financial Plan

To maximize and protect your wealth, your financial plan should include the following core components:

1. Investment Strategy & Asset Allocation

Investment planning goes beyond buying stocks and bonds—it’s about building a balanced portfolio tailored to your risk tolerance and financial objectives. Key strategies include:

  • Diversification: Spreading investments across various asset classes to minimize risk.
  • Alternative Investments: Private equity, hedge funds, and real estate can offer unique opportunities for wealth preservation and growth.
  • Tax-Efficient Investing: Using tax-advantaged accounts and strategies to reduce capital gains and income tax burdens.

2. Tax Optimization Strategies

Minimizing tax liabilities is one of the most valuable aspects of financial planning. Strategies include:

  • Tax-Loss Harvesting: Offsetting gains with losses to reduce taxable income.
  • Roth IRA Conversions: Managing income tax liabilities through strategic conversions.
  • Trusts & Charitable Giving: Using donor-advised funds or charitable remainder trusts to reduce tax exposure while fulfilling philanthropic goals.

3. Estate Planning & Wealth Transfer

Estate planning ensures that your assets are passed down efficiently. Key tools include:

  • Revocable & Irrevocable Trusts: Protecting assets from estate taxes and ensuring privacy.
  • Gifting Strategies: Annual gift tax exclusions and family limited partnerships to pass wealth tax-efficiently.
  • Business Succession Planning: If you own a business, structuring a succession plan is critical for maintaining generational wealth.

4. Risk Management & Insurance Planning

Risk management is a crucial component of high net worth financial planning. It ensures that your assets, income, and estate are protected against unforeseen circumstances such as market volatility, lawsuits, health crises, and other financial risks. A well-structured risk management strategy should include the following elements:

  • Asset Protection Strategies: Legal structures such as LLCs and asset protection trusts.
  • Life Insurance Planning: Using permanent life insurance as a tool for estate liquidity and wealth transfer.
  • Long-Term Care & Disability Planning: Ensuring you have adequate coverage in case of unforeseen health issues.

Common Mistakes High Net Worth Individuals Make Without a Financial Plan

Even those with substantial wealth can face financial pitfalls without a well-structured financial plan. Some of the most common mistakes high-net-worth individuals make include:

  • Lack of Investment Strategy: Without a clear investment strategy, individuals may take on excessive risk or miss out on key diversification opportunities. Over-concentration in certain stocks, industries, or asset classes can lead to significant financial losses.
  • Overlooking Tax Efficiency: Many wealthy individuals fail to take advantage of tax-efficient strategies, resulting in unnecessary tax burdens. Without proper planning, they may miss out on deductions, tax-deferred growth opportunities, and estate tax reduction strategies.
  • Neglecting Estate Planning: Failing to have a well-structured estate plan can lead to disputes, excessive estate taxes, and assets not being distributed as intended. A lack of trusts or beneficiary designations can create unintended complications for heirs.
  • Ignoring Risk Management: Wealthy individuals often underestimate risks such as lawsuits, asset protection, and long-term care expenses. Without proper insurance coverage or legal structures, their wealth could be vulnerable to unexpected claims or liabilities.
  • Spending Without a Long-Term Plan: A high income or large net worth does not guarantee financial security if spending habits are unchecked. Without a financial plan, individuals may deplete their wealth faster than expected, jeopardizing long-term goals like legacy planning or philanthropy.
  • Failing to Adapt to Market Changes: Financial markets fluctuate, and tax laws evolve. Without an ongoing financial strategy, individuals may miss opportunities to adjust their portfolios, capitalize on new tax incentives, or navigate economic downturns effectively.
  • Not Working with a Fiduciary Advisor: Many high net worth individuals rely on financial advice from brokers or advisors who may have conflicts of interest. Without a fiduciary advisor, they may receive guidance that prioritizes commissions over their best interests.
    A comprehensive financial plan helps mitigate these risks and ensures that high-net-worth individuals make informed strategic financial decisions. Working with an experienced financial planning team can help preserve wealth, reduce liabilities, and provide peace of mind for the future.

Final Thoughts

Financial planning is essential regardless of wealth level. A structured approach to investment strategy, risk management, tax optimization, and estate planning provides clarity, direction, and the ability to make informed financial decisions that align with long-term goals. Having a financial plan in place not only protects your assets but also allows you to take advantage of opportunities that align with your lifestyle and values.

By regularly reviewing and adjusting your financial plan, you can ensure that it remains relevant as your goals evolve and as financial markets shift. The right high net worth financial planning strategy allows you to build a legacy, protect your family’s future, and make confident financial decisions without unnecessary stress.

Next Steps- Get a Plan

If you’re looking for expert guidance tailored to your financial needs, our team at Bonfire Financial specializes in fiduciary, planning-based strategies designed to optimize your wealth. Contact us today to start building a financial plan that works for you.

Turning High Income into Lasting Wealth: Proven Strategies for High Earners

Posted on by Brian Colvert

Strategies for High Earners

Earning a high income is an incredible advantage, but it doesn’t automatically mean you’re building real wealth. Many high earners, whether doctors, business owners, pilots, executives, or professionals, find themselves living an expensive lifestyle without accumulating enough assets to sustain it long-term. Without a strategy, even a seven-figure salary can disappear quickly.

If you’re making $400K, $600K, or even more annually, the key question isn’t how much you make, but what you do with it. This article explores strategies for high earners to maximize their income, build long-term wealth, and avoid financial pitfalls.

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1. Automate Your Savings and Investments

One of the most effective strategies for high earners is automating savings. When money flows into your bank account, it’s easy to spend more than you intend. Automating your savings ensures you consistently put money aside before you even have the chance to spend it.

  • Max Out Your Retirement Accounts: Contribute the maximum allowable amount to your 401(k), IRA, or Roth IRA (if applicable). If you own a business, consider a SEP-IRA or Solo 401(k).
  • Set Up Automatic Transfers to Brokerage Accounts: High earners often hit retirement contribution limits quickly. A taxable brokerage account allows you to invest beyond those limits.
  • Leverage High-Yield Savings for Short-Term Goals: Automate transfers into high-yield savings accounts for planned expenses like vacations, home renovations, or large purchases.

By setting up these transfers to occur automatically, you remove the temptation to spend your entire paycheck and ensure consistent wealth accumulation.

2. Avoid Lifestyle Creep

A common trap for high earners is lifestyle inflation—the tendency to spend more as income increases. It’s easy to justify upgrading homes, cars, and vacations when your paycheck allows for it, but this can leave you with little to show for years of high earnings.

To combat lifestyle creep:

  • Define Your Wealth Goals: What does long-term financial success look like for you? Owning investment properties? Retiring early? Creating a passive income stream?
  • Keep Fixed Expenses in Check: Just because you can afford a bigger mortgage doesn’t mean you should take one. Be mindful of recurring costs like luxury car leases, club memberships, and high-end subscriptions.
  • Invest in Assets, Not Just Status Symbols: A $100,000 car loses value over time. A well-chosen $100,000 investment property generates income and appreciates in value.
    Maintaining a balanced approach to spending allows you to enjoy your wealth while securing your future.

3. Build Multiple Income Streams

Even high earners benefit from diversifying their income sources. Relying solely on a paycheck—even a large one—can leave you financially exposed if your industry changes or your role is impacted.

Consider these income streams:

  • Real Estate Investments: Rental properties provide consistent cash flow and potential appreciation.
  • Private Investments: Opportunities like private equity, venture capital, and angel investing can offer high returns, though they come with risk.
  • Side Businesses: Many professionals create consulting businesses, online courses, or digital products to diversify income.
  • Dividend Stocks and Bonds: A well-structured investment portfolio, specifically with dividend stocks,  generates passive income over time.

Building multiple income streams ensures financial stability and accelerates wealth accumulation.

4. Minimize Taxes Strategically

Taxes can significantly impact your ability to grow wealth. High earners must be proactive about tax planning to retain more of their income.

Key tax strategies for high earners:

  • Maximize Tax-Advantaged Accounts: Contribute to 401(k)s, HSAs, and Roth Conversions where possible.
  • Utilize Tax-Efficient Investments: Invest in municipal bonds, tax-efficient index funds, and real estate with depreciation benefits.
  • Take Advantage of Business Deductions: If you own a business, structure it to maximize deductions and reduce taxable income.
  • Work with a Tax Professional: A tax strategist can help identify deductions, credits, and investment structures that minimize your liability.

By implementing tax-efficient strategies, you can keep more of your earnings working for you.

5. Invest with a Long-Term Mindset

High earners sometimes fall into the trap of chasing quick returns or risky investments. A disciplined, long-term approach to investing is far more effective.

  • Diversify Your Portfolio: Don’t put all your wealth into a single stock, business, or asset class. Diversification is wildly important here.
  • Rebalance Regularly: Adjust your portfolio as market conditions change and your goals evolve.
  • Stay the Course: Market volatility is inevitable, but a long-term strategy yields strong results over time.
  • Invest in What You Understand: Avoid speculative investments unless you have deep knowledge of the space.

A well-structured investment strategy ensures your wealth grows steadily and sustainably.

6. Protect Your Assets and Plan for the Future

Earning and investing wisely is just part of the equation—protecting your wealth is equally important. Many high earners overlook estate planning, asset protection, and risk management.

  • Have Proper Insurance: Ensure you have adequate life, disability, and umbrella liability insurance.
  • Create an Estate Plan: Establishing a will, trusts, and power of attorney documents is crucial for protecting your assets and ensuring your wishes are carried out. Proper estate planning helps safeguard your wealth for future generations and provides clarity in managing your financial affairs.
  • Consider Asset Protection Strategies: High earners can be targets for lawsuits—proper legal structures (LLCs, trusts) can shield assets from unnecessary risk.

Planning for the future ensures that your wealth is preserved and passed on according to your wishes.

The Bottom Line:

Earning a high income is an incredible opportunity, but without a plan, it’s easy to end up with little to show for it. By automating savings, avoiding lifestyle creep, diversifying income, minimizing taxes, and investing wisely, you can turn your earnings into lasting wealth.

The key is consistency and discipline. Small, intentional decisions over time lead to big financial outcomes.

If you’re ready to take control of your finances and build real wealth, start implementing these strategies today. And if you’d like expert guidance in setting up a wealth plan tailored to your income and goals, reach out to us today and get the conversation started.

Roses Are Red, Violets Are Blue… Are Your Beneficiaries Still Right for You?

Posted on by Brian Colvert

Nothing says “I love you” like chocolates, flowers, and… updating your beneficiaries? That’s right! While it may not sound as romantic as a candlelit dinner, making sure your assets go to the right people is one of the most thoughtful things you can do for your loved ones.

Life happens—marriages, divorces, new babies, and unexpected events can change everything. Yet, many people forget to review and update their beneficiary designations, potentially leaving their hard-earned money to an ex-spouse, estranged relative, or even the government (yikes!).

Today we’ll break down why updating your beneficiaries is crucial, common mistakes to avoid, and how to make sure your financial love story has the perfect ending.

Listen anywhere you stream Podcasts

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What Is a Beneficiary? And Why Does It Matter?

A beneficiary is the person (or people) who will receive your assets—such as life insurance, retirement accounts, or investment accounts—when you pass away. Naming a beneficiary ensures your money goes exactly where you want it, without going through probate, the long and costly legal process of settling your estate.

Many financial accounts allow you to name both:

  • Primary beneficiaries – The first person(s) in line to receive the assets
  • Contingent beneficiaries – The backup(s), in case the primary beneficiary is no longer living

Where Do You Need to Name Beneficiaries?

You can and should assign beneficiaries to:

  • 401(k) and IRA accounts
  • Life insurance policies
  • Annuities and pensions
  • Brokerage and investment accounts (via a Transfer on Death designation)
  • Bank accounts (via Payable on Death designation)
  • Trusts and estate plans

If you don’t name a beneficiary, or if it is outdated, your assets may default to your estate and be subject to probate, causing delays, unnecessary taxes, and legal battles.

Common Mistakes to Avoid

1. Forgetting to Update After Life Changes

Major life events often impact financial plans. You might:

  • Get married but forget to update your 401(k), still listing your parents as beneficiaries.
  • Have kids but never add them
  • Get divorced but still have your ex-spouse listed as your life insurance beneficiary.

If you don’t update your designations, your assets may end up in the wrong hands.

2. Leaving It Blank

If you never designate a beneficiary, your assets will go to your estate by default. This means probate court decides who gets what, which can lead to delays, legal fees, and unintended consequences.

3. Not Naming Contingent Beneficiaries

A primary is important, but what if they pass away before you do? Without a contingent beneficiary, your assets could be tied up in probate.

4. Unequal Distribution

If you have multiple beneficiaries, double-check the percentages assigned. Mistakenly leaving one person out or assigning uneven percentages could cause family tension.

5. Naming Minor Children Directly

Children under 18 cannot legally inherit assets directly. If you name them as beneficiaries, the court will appoint a guardian to manage the funds. Set up a trust to make sure everything is how you want it.

6. Assuming a Will Covers It

Even if your will states who should inherit your assets, beneficiary designations on financial accounts override a will. If your will and your beneficiary list don’t match, the beneficiary designation takes precedence.

7. Naming a Trust Incorrectly

Trusts can be a powerful estate planning tool, but they must be properly structured and funded. If your accounts are not titled correctly or beneficiaries aren’t aligned with the trust, the trust won’t control those assets as intended.

8. Forgetting to Update Employer Retirement Accounts

Your old 401(k) from a previous employer might still list your parents, an ex, or someone else you no longer intend to inherit your funds. Make sure to update all employer-sponsored accounts whenever you switch jobs.

How to Review and Update Your Beneficiaries

Updating is easier than you think. Here’s how to do it:

Step 1: Make a List of Your Accounts

Look at all your financial accounts that have beneficiaries, including:

  • Retirement accounts (401k, IRA, Roth IRA, pension plans)
  • Life insurance policies
  • Bank and brokerage accounts
  • Annuities and investment accounts
  • Trusts and estate documents

Step 2: Verify Your Current Beneficiaries

Log into your accounts or call your financial institution to check:

  • Who is currently listed as your primary and contingent?
  • Are the names, relationships, and percentages correct?

Step 3: Make Necessary Updates

To update, you’ll typically:

  1. Log into your financial institution’s website or request a beneficiary form.
  2. Choose your primary and contingent beneficiaries.
  3. Assign percentages to each.
  4. Review the changes and submit the form.

It’s a good practice to update beneficiaries once a year or after major life changes, such as marriage, divorce, or the birth of a child.

Special Situations: Who Should You Name as a Beneficiary?

1. If You are Married:

  • Your spouse is typically the default primary.
  • Name a contingent beneficiary (children, trust, or charity) in case your spouse predeceases you.

2. If You Have Kids:

  • Avoid naming minor children directly. Instead, use a trust or custodial account to manage the funds.

3. If You’re Divorced:

  • Remove your ex if they’re still listed.
  • Consider naming children, a new spouse, or a trust instead.

4. If You’re Single With No Kids:

  • Consider naming siblings, parents, nieces, nephews, or a charity.

5. If You Have a Trust:

  • Make sure your trust is properly funded and your beneficiaries align with it.

Final Thoughts: The Greatest Love Letter You’ll Ever Write

Estate planning and beneficiary updates might not be the most romantic topic, but they are one of the greatest gifts you can give to your loved ones. By keeping your designations up to date, you ensure that your hard-earned money goes exactly where you want it—without confusion, legal headaches, or financial heartbreak.

This year, take a few minutes to review everything. It’s a small step that can make a huge difference for those you love.

If you need help reviewing your overall plan? We’d love to help. Schedule a call with us today!

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