The Fifteen Year Mortgage

This is a really good FAQ – a frequently asked question. Instead of taking out a 30-year mortgage, should I take out a 15-year loan? How much more are the payments? How much would I save? Can I afford it? Great questions all.

A Sample 30-Year Mortgage
Let’s use a sample mortgage. $400,000 borrowed, at 4.5%, over 30 years. The monthly payment is $2026.74. That means over the life of the mortgage you will have paid $729,626.85 in principal and interest payments to repay that $400,000 loan – and, of course, $329,626.85 of that amount is interest.

You pay interest each month on the unpaid balance. That means in early years your payment is mostly interest, with very little principal repayment. In later years, situation reverses: you pay mostly principal, with much of the interest having been paid in the earlier years.

Using our sample 30-year mortgage, in the first year you will have shelled out $24,320.88 – your monthly payment times 12. Of that amount, $17,867.98...

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Using an IRA for a First Home Purchase

A first home purchase is a big financial commitment. Not only are you taking on a mortgage, but you often need to deplete cash reserves to come up with the down payment. But what if you don’t have enough socked away for a down payment? or what if you prefer not to use all your cash reserves, leaving some cushion in your savings account? Normally the Internal Revenue Service levies a 10% penalty on distributions from a Traditional Individual Retirement Account (IRA). They make an exception on distributions up to $10,000 for a first home purchase.

How does the IRS define a first home purchase?
To qualify, it’s important to know how the IRS defines a first time homebuyer. According to IRS Publication 590-B, a first time homebuyer is defined in the following way:

Generally, you are a first time homebuyer if you had no present interest in a main home during the 2-year period ending on the date of acquisition of the home which the distribution is being used to buy, build, or...

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The Top 4 Financial Priorities for Young Professionals

Retirement isn’t first priority when planning for young professionals. That’s OK!
Young professionals are expected to accomplish a lot early in life. You’re beginning to make real money. Time to get sound financial advice to establish a good foundation from someone you trust. The problem is most financial advisors focus primarily on retirement planning. When working with young professionals, I believe this is a mistake. Focusing only on retirement planning with young professionals is a huge missed opportunity. Let me explain:

Where do I start? The top 4 financial priorities of young professionals
With young professionals, we start the financial planning conversation with:

  • Debt payoff
  • Saving for a home down payment
  • Building an emergency fund
  • Wealth building (including retirement)

In addition, actively maintaining a budget is essential to establishing a strong financial foundation.

You see the difference? Most financial advisors do not spend time working with clients...

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Savings Incentive Match Plan for Employees
The SIMPLE IRA is the Savings Incentive Match Plan for Employees. The SIMPLE allows for both employer contributions and employee deferrals. The plan is deal for employers who want to contribute something – but not a lot – to employee retirement accounts.

A big part of retirement plan design has to do with discrimination. The IRS wants to be sure that the plan does not discriminate, meaning that the plan’s benefits are available across the board to all employees – both management and rank-and-file.

SEP Recap
This post is the second in a series of two about retirement plans available to the small business. Previously I discussed the SEP IRA, or Simplified Employee Pension. The most notable thing about the SEP is that money goes into an employee’s account from only one source – the employer’s contribution. The same percentage of earnings – up to 25% – must be contributed across the board. If...

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With this blog post I’m beginning a two-part series about retirement savings plans available to the small business owner. Earlier Jonathan and I have written about the Traditional IRA and the Roth IRA. In this piece I’m going to explain the Simplified Employee Pension, or SEP IRA. It is best used in a small shop, with few (or no) employees. It can be established by an individual proprietor, filing a Schedule C, or by a corporation, LLC, or partnership.

The SEP – Simplified Employee Pension
The SEP is designed for the business owner with few employees. Money goes into the SEP from employer contributions only. All contributions are tax-deductible to the employer. There is no opportunity for employee deferrals. A SEP IRA account is opened for each participant, and all funds contributed are immediately vested. (There is an older version, called a SARSEP, or salary reduction SEP. Although many are still out there, they cannot be opened after 1996.)

The employer must...

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The Advice Industry, Part II

financial planning Jun 28, 2018

A lot has happened in our regulatory world since I posted the original blog piece. The DOL rule is void. The SEC is opening up a public comment period about its new standards of client care.

The government regulates this industry – investments, advice, and insurance – via the Securities and Exchange Commission (the original 1940 Investment Advisers Act), the Department of Labor (ERISA comes under DOL, or the Employee Retirement Income Security Act), and the insurance commissioners of the 50 states. Just as it takes a team to give a client comprehensive advice (financial planner, investment adviser, estate attorney, accountant, and maybe more), apparently it takes a team of government agencies to regulate all of us in the industry to their satisfaction.

The Now-Dead DOL Rule
The 1940 SEC Act requires a fiduciary standard of client care. As I noted in Part I, The SEC granted exceptions to the brokerage industry, and a much lower suitability standard became the norm. A few...

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Why Should I Pay a Fee for Financial Advice?

Should I Pay a Fee for Financial Advice?
From time to time I’m asked, Glenn: there are plenty of financial guys out there. They’ll do financial planning for free. So why should I pay you guys?

Good question! To answer it, let me give you a little background.

Back say, 50 years ago, if you needed professional financial advice, from whom could you get it?

  • banker
  • stockbroker
  • insurance agent
  • accountant

What’s the issue about taking advice from these providers? It is the potential for conflict of interest. What do I mean by that? Well, the banker wants to open time deposit accounts and initiate loans. The stockbroker wants to trade stocks in your account. The insurance agent makes a living selling policies. The accountant, on the other hand, focuses on preparing financial statements and doing tax returns.

Is there a conflict of interest?
Now see where I’m going with conflict of interest? If the banker recommends a one-year CD, is it because that is the best...

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Financial Windfalls: Money Changes, Life Changes

A few months ago I heard Susan Bradley from the Sudden Money® Institute say something quite profound regarding our relationship with money and financial windfalls:

When life changes, money changes.
When money changes, life changes.
The order in which change happens makes a big difference. The latter statement, referring specifically to financial windfalls, is a much harder change to handle for most people than the former statement. Let me explain.

Life Changes
Life changes are a constant: marriage, babies, a new home, family milestones, divorce, promotions, demotions, getting fired, moving to a new city, kids going to college, changes in health status (ourselves or in a loved one), growing old, and death. These are some examples of life changes. As with any change, anticipated or otherwise, we make budget adjustments and plan ahead. The unknown can become overwhelming at times. This is why we often tell clients to do what you can. We help find solutions for what’s possible....

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Homestead Exemption for First Time Home Buyers

Congratulations! You’re a first-time home owner in Miami, FL and you’re settling into your new place. The first year of home ownership brings many changes – new commute to work, new paint on the walls, and remodeling the bathroom. It’s an exciting time as you make your house a home, and start a new chapter in life while building personal equity. But one thing that could get lost in transition is remembering to file for your Florida Homestead Exemption. Not filing for a Homestead Exemption will likely cost you money.

What is a Homestead Exemption?
A Homestead Exemption accomplishes three main things — it reduces your property tax bill, protects you from creditors, and protects a surviving spouse when the other home owner dies.

How can you claim your Homestead Exemption?
In Florida you have to claim a Homestead Exemption – that is, it is not automatic. In Miami-Dade county, you can claim your exemption online on the Miami-Dade Property Appraiser...

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A Beginner’s Guide to Buying Life Insurance


This is life insurance 101 – written for those looking to buy their first life insurance policy.

Life insurance 101
You are a Millennial. You’ve launched your professional career and are building a solid financial house for yourself. Life insurance is part of the foundational structure of this financial house, along with your estate documents. Check out our short video on basic estate documents. Once you’ve read my post on life insurance 101 and established coverage, there’s no need to revisit your coverage until a life event takes place (marriage, baby, new mortgage, etc.).

Who needs to buy need to buy life insurance?
This is perhaps the most important question when it comes to life insurance 101. Some life agents will say “everyone”. In my opinion, you have a life insurance need when someone else is depending on you for a living. If you do not have other substantial assets, you probably need to buy life insurance. Let’s say you’ve got...

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