by Jonathan G. Cameron, CFP®

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, turns out to be much harder 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.  As with any change, anticipated or otherwise, we regroup; we make budget adjustments; and move forward.  Whatever the life change, you hopefully take wise counsel and update your financial plan accordingly.

Money Changes

By ...

By Glenn J. Downing, MBA, CFP®

Usually when we think of estate planning we have in mind the orderly transition of assets at death. Death is something that you have a 100% chance of experiencing – we just don’t know when. Tomorrow isn’t promised to us – and neither is this afternoon, for that matter. Consequently it is prudent to plan for this eventuality.

What Documents Do You Need?

A valid will

A basic will is the foundational document of estate planning. You need that once you own real property or begin to accumulate assets. Typically, at the earlier stages of life, most of what you have is going to pass by operation of a beneficiary arrangement – by contract, in other words. Think life insurance or IRA and 401(K) beneficiaries. What won’t pass by operation of contract? everything else that you own. This would be real property, or your car, for example – assets that cannot have a beneficiary attached to them.

Guardianship for your...

By Glenn J. Downing, MBA, CFP®

Should I Pay my Mortgage Off Early? This is actually a FAQ – a frequently asked question, so I thought I’d spend a little time on it here. Some other mortgage-related topics we’ve addressed are these:

• Your First Home Purchase I
• Your First Home Purchase II
• Using an IRA for a First Home Purchase
• The Fifteen Year Mortgage

A Mortgage Example

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. 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 mortgage,...

 By Glenn J. Downing, MBA, CFP®

 529 College Savings accounts just got better! 

A 529 college savings account is one in which money is invested for a beneficiary’s future college expenses.  The account grows without taxation, and funds are eventually distributed with no federal taxation for the beneficiary’s qualified education expenses.  The growth never gets taxed!*  This is a huge benefit. 

 The states each sponsor a 529 plan.  Florida’s is the Florida Pre-Paid.  A parent goes online during open enrollment in the autumn and chooses an option:  tuition only, or tuition and housing.  Once enrolled, the parent pays a monthly fee.  The benefit is that the child goes off to college with all tuition paid for!  Fees and expenses are not covered, and those can be considerable.  The prepaid plan is best suited for a conservative investor.

 Most states 529 plans are of the mutual fund...

by Glenn J. Downing, MBA, CFP®

The Secure Act of 2019 changed the rules for non-spouse beneficiaries of inherited IRAs.  The rules now are simply that the beneficiary of such an IRA has 10 years to distribute it in its entirety.  No required minimum distributions are necessary during this time. 

This is a big change from previous rules.  Prior to the Secure Act, the non-spouse beneficiary could "stretch" the IRA out of his own life expectancy.  Say granddad left an IRA to the grandson.  The grandson's life expectancy (from an IRS table) was 70 years.   The year after death the grandson would take the beginning of year balance and divide it by 70.  The following year he'd take the beginning of year balance and divide it by (70-1).  And so on.  The result was that the IRA could grow enormously during this time.  

If You are a Non-Spouse IRA Beneficiary, You Have Some Choices.

You can simply sell the assets and...

by Jonathan G. Cameron, CFP®

Here is something we hear on occasion at CameronDowning: “I’m not sure an IRA is for me. I hear it may be too risky.” The problem with this statement is that an IRA, or Individual Retirement Account, is not an investment. So what is an IRA?

An IRA is Technically an Account Registration

It holds investments, but is not an investment itself. You can put all kinds of investments within an IRA. Consequently, stocks, bonds, mutual funds, CDs, and even gold bullion are investment options within an IRA. You can be 100% in cash in an IRA, which by definition has no risk. We’ve also commonly seen annuities put in IRAs which is typically not a good idea, and I discuss why here.

So What Exactly is an IRA?

Getting the terminology right is important. Picture a candy wrapper holding chocolate inside. An IRA is like the candy wrapper. Likewise, there are different kinds of candy wrappers just like there are various kinds of IRA...

by Jonathan G. Cameron, CFP®

Your emergency fund is foundational to any financial planning. Here I discuss what it is (and what it is not), why you need to have one, and how much should be in it. 

At the Margin 

An economics professor once said that if you fall asleep in class and he calls on you to just reply, "at the margin," and you’ll likely have the right answer. The entire study of economics is about what happens at the margin: the next unit of production, the next unit of income, the next dollar of debt payment.  Think about it: bankruptcies happen when there’s just one dollar more due that you simply cannot pay. So in talking about an emergency fund, we’re talking about what happens at the margin of your financial life. You’re keeping cash set aside to make sure that you’ll never get to that point where you don’t have the next marginal dollar.

What’s an Emergency Fund For?

Emergencies happen in life:  this is...

Glenn J. Downing, MBA, CFP®

What kinds of insurance do you offer?

We broker life insurance, disability income insurance, and long-term care insurance. In obtaining Insurance coverage for our clients, We shop the market for the most suitable product at the best price.

Can I get auto or homeowners through you?

No – that requires another license which we do not hold. As part of a complete financial planning engagement, we will evaluate the client’s risk exposure in these areas, and recommend coverage changes as appropriate. We are glad to refer you to insurance agents who can assist you with these policies. BTW we neither pay nor accept referral fees from other professionals, nor do we accept any liability for their actions.

What role does life insurance play in a financial plan?

A crucial part. A life insurance death benefit can complete the overall plan in the event of an untimely death.

Tell me about life insurance for tax-free income.

The strategy is to purchase a...

by Glenn J. Downing, MBA, CFP®

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, and not unexpected in these days of free resources online.  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.  See my blog post about the advice industry here.  

Is There a Conflict of...

by Glenn J. Downing, MBA, CFP®

Why do financial planning?

Short answer: because no one can hit a moving target. The financial plan informs all financial decisions: how to invest, what to save and where, and what insurance should I purchase or drop.

What should I expect when I come in to see you?

At the time you made your appointment you would have discussed your concerns with one of our associates.  After determining if you would be a good fit to work with us, you have been given a list of documents to upload for the financial planners to view before your meeting.

When you come in we’ll meet in one of the conference rooms at our Miami office. We’ll give you a bit of personal introduction and will be interested to learn how you came to us.

From there, we listen and ask questions.  We want a general snapshot of your financial position, and we’ll really want to understand your specific concerns and goals for our engagement.

Toward the end of this initial...