Finance 101: July 2025
In July the financial advisors at Ruedi Wealth Management wrote four more columns for The News-Gazette’s Business Extra section. Make sure to look for them every Saturday in the weekend edition of the paper, but in case you missed any in July all four are below.
One Big Beautiful Bill Act
Paul Ruedi
On July 4th President Trump signed the “One Big Beautiful Bill Act” (OBBBA) into law, a sweeping $4.5 trillion package that cements many of his first-term tax cuts and introduces a handful of new provisions aimed at workers, families, and businesses. Though we will have to wait and see what the large-scale economic impact of the bill is, the bill includes some tax changes that will impact both workers and retirees in the near future.
Under the new bill, the standard deduction, which was nearly doubled in 2018 after the Tax Cuts and Jobs Act, will increase even further from $15,000 to $15,750 for single filers, and will increase from $30,000 to $31,500 for couples filing jointly. The lifetime gift and estate tax exclusion amount, which were also doubled under the Tax Cuts and Jobs Act, will also increase further from just under $14 million to $15 million for single filers, and from $27.98 million to $30 million for joint filers.
As part of the new bill, tipped employees can deduct their tip income from their federal taxable income up to a maximum $25,000 dollars. Hourly workers can deduct up to $12,500 of overtime from their federal taxable income, or $25,000 for joint filers. It is very important to note that though these exemptions apply to federal income taxes, they do not apply to payroll, state, or local taxes.
Another key provision of the bill is an increase in the SALT (short for state and local tax) deduction. Under current law, savers can deduct up to $10,000 of state and local taxes (property taxes and income taxes) from their federal taxable income. The new bill increases that amount to $40,000 from 2025 onward until it is scheduled to return to $10,000 in 2030. However, the SALT deduction begins to phase out for people with more than $500,000 of income.
Though the bill did not live up to Trump’s promise of ending taxes on Social Security, seniors will experience a tax break in the form of an extra $6,000 senior tax deduction for people age 65 and older. This deduction is in addition to the current $2,000 deduction for single filers ($3,200 for married filing jointly).
In addition to the changes above, the child tax credit will increase slightly, a new “Trump” savings account for children can be established, people will be able to deduct up to $10,000 of auto loan interest on American-made vehicles, and the uses for 529 plans will be expanded. If you are wondering how these changes could impact you, you may want to talk to a financial advisor.
Paul Ruedi is the CEO of Ruedi Wealth Management in Champaign, Illinois.
Finding the Sweet Spot of Investing
Paul Ruedi
For most people, investing feels like a choice between two extremes. Do you go all-in on the stock market, chasing high growth while bracing for gut-wrenching drops? Or do you play it ultra-safe with bonds, accepting modest returns in exchange for peace of mind? It’s the classic battle between the tortoise and the hare. But what if the smartest path was neither?
I recently performed an analysis of investment returns over a 30-year horizon that revealed a powerful lesson for everyday investors. Instead of just looking at average returns, I examined the “risk spread”—the gap between a typical, middle-of-the-road outcome (the median) and a historically worst-case outcome (the minimum). A wider spread means a more unpredictable outcome.
At the edges of the investing spectrum, the spread is widest. A 100% stock portfolio — the hare in our story — shows a high median annualized return, but its worst-case scenario is significantly lower, leaving it with a wide risk spread of 3.04%. This is the price of admission for high growth potential: the risk of a severe drop-off if things go wrong.
Surprisingly, the "safe" 100% bond portfolio — our tortoise — is not as predictable as it seems. While stable, its worst-case returns can be severely damaged by periods of high inflation. This gives it the largest risk spread of all, at 3.10%. The biggest danger to investors over a 30-year time horizon isn’t a market crash, but the silent erosion of your money’s buying power.
The risk spread is high at 100% stocks and 100% bonds, but it dips dramatically in the middle, creating a “U” shape if you plot the spreads on a graph. The sweet spot, the bottom of the “U,” lies with balanced portfolios. An allocation of 50% stocks and 50% bonds, for instance, had a risk spread of just 2.06%.
This is the magic of diversification in action. In a balanced portfolio, asset classes work as a team. The stocks act as the engine for growth, pushing for higher returns. The bonds act as a shock absorber, providing a cushion during the inevitable market downturns. They don’t eliminate risk, but they raise the floor on your worst-case outcome, narrowing the gap between your best and worst returns.
The key takeaway is that smart investing isn't an all-or-nothing game. It's about building a resilient portfolio that can deliver growth without exposing you to the punishing lows of the extremes. By finding your own "sweet spot," you aren't just investing; you are building durable, long-term wealth. If you aren’t sure how to find your investing “sweet spot,” you may want to talk to a financial advisor.
Paul Ruedi is the CEO of Ruedi Wealth Management in Champaign, Illinois.
Giving with Warm Hands
Paul Ruedi
When we work with families with children, a common goal for parents, is often to pass some of their wealth down to their children. The default position seems to be to let assets pass to their children upon their death. I suppose this is because our typical clients are the “millionaire next door” investors who prioritize frugality, grit, and hard work. They usually want to avoid spoiling their children for fear of negatively impacting their character and work ethic.
The downside of planning to give assets to children when you pass away is that you don’t get to see the impact your giving has. That is why I often suggest to my clients who value this, to consider giving their children some of their inheritance early, “with warm hands.” This allows them to see the impact of their gifts on their children while they are still around. But there are some things parents need to be aware of when they give “with warm hands,” especially if they plan to give one child their inheritance early, while they wait to give others their inheritance upon their passing.
The first thing I caution people is that if you give money to your children, or other family members regularly, they begin to expect that money. For this reason, I suggest gifts should be given with the emphasis that these gifts will not be made regularly and should not be counted on forever. If gifts have been made regularly, I often suggest skipping a year just to make sure their gifts are not relied upon.
Now suppose for example a person has $1,000,000 they intend to pass on to their four kids. One of those kids has fallen on hard times and could really use $250,000 now instead of a larger amount in the future. It is okay to give that child $250,000 now. But you need to be extremely clear with all your kids that this now results in that child receiving no inheritance at the parents’ passing, while the others will receive 1/3 of whatever future amount is going to be passed down. Since that money will likely be invested, the amounts received later by the other children will be larger than $250,000.
When giving with warm hands, especially when those gifts are given to different people at different times, communication and planning is key. Everything must be done in a transparent fashion and meticulously tracked so everyone involved understands that things are being done fairly. If you need help with that, you may want to talk to a financial advisor.
Paul Ruedi is the CEO of Ruedi Wealth Management in Champaign, Illinois.
Does Your Stuff Own You?
Paul R. Ruedi, CFP®
Growing up in a financial advisor’s household, I was treated to many dinner table conversations about wealth. Though you may expect these conversations would be centered around the next hot stock or financial innovation, that wasn’t usually the case. Lately, many of those financial discussions have centered around how you spend your money and how that spending can impact your life.
Last month my brother David and I had an interesting conversation. As you get older and further into your career, you tend to want to enjoy the fruits of your hard work. For some this means expensive toys, for others a larger house, for others a nicer car.
However, does all this stuff really make you feel better? The more we thought about it, the more having a lot of extra stuff seemed like a trap bound to cause even greater anxiety. Because once people have signed up for greater spending on all this new stuff, nobody wants to give it up and take a step backwards.
Then it occurred to us, there are likely a lot of people spending their lives working jobs they don’t like just to be able to afford things they don’t really need. Perhaps it is to keep up with the Joneses. Perhaps it comes from a place of love and wanting to give your family the best life possible.
Whatever your reason for spending a little more on a nicer lifestyle you must be careful, because having a lot of extra stuff can be a trap. At a certain point, you stop owning your stuff, and your stuff starts to own you.
Beyond the spending aspect, having a lot of extra stuff requires your time and attention. Some things you have to register, maintain, and store. Some things you need to get inspected or pay taxes on every year. If you don’t have the time to be able to do these things, you will have to pay someone to do them, making ownership of those items that much more expensive.
That is why as much as we think saving and investing money requires careful consideration, how you spend your money requires an equal amount of consideration, and can have an even larger impact on your peace of mind.
That is not to say don’t enjoy your money by spending it on things that make you happy. Just be careful not to lock yourself into a situation where you have a lot of pressure to keep a high-paying job or make more money to keep up with your lifestyle. Don’t let your stuff own you.
Paul R. Ruedi is a CERTIFIED FINANCIAL PLANNER™ professional with Ruedi Wealth Management in Champaign, Illinois.
*Disclaimer: Past performance is no indication of future results. You should not make any investment decisions without first performing your own due diligence and consulting your financial advisor.