No One Uses Cash Anymore!

 By Glenn J. Downing, MBA, CFP®

I can now pay for a Tesla with Bitcoin.  And the Mayor of Miami wants to pay City employees in Bitcoin and allow tax payments in the same cryptocurrency.  Honestly, until I can go into Bloomingdale's and buy a shirt with Bitcoin, it doesn't much matter to me.  

And neither should it to you, if you’re in the process of getting your financial house in order.  In my world of financial planning and investment management, the basics are still the pathway to financial freedom and prosperity:  spend less than what you earn and invest the rest. 

No One Uses Cash Anymore

The rub is that many people don’t know what they spend because no one uses cash anymore.  It used to be that if a man wanted to impress a lady, he’d flash a bankroll when paying the restaurant check.  Now, she’d probably flee the table at such Neanderthal behavior:  it is the gold or platinum cards that...

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When Does a Refi Make Sense?

by Glenn J. Downing, MBA, CFP®

With mortgage rates so low, we’ve been looking at mortgage refinancing for a few of our clients lately, to see if it might be in their best interests.  Here’s what we know: 

  • For those with strong credit, 30-year rates are just below 3%, and 15-year rates are in the 2.6% range. This makes sense in that the lender takes on less risk in loaning out mortgage funds for just 15 years, as opposed to 30 years.  Consequently, there is a better rate on offer.  The rate difference we see here, about 0.4%, won’t be enough to compensate for lopping 15 years off the payment period.  It’ll help some, but the 15-year mortgage will definitely carry a higher payment. 
  • It costs money to initiate a new mortgage – as much as 3% to 5% of the mortgage itself. There are lots of costs and taxes involved, including application fee, title search, title insurance, appraisal, transfer taxes, etc.  Typically...
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Now That’s Just Stupid!

Although I usually blog about financial topics. Now and then I like to switch it up and get personal.  That's the case here - a few observances of the absurdities in modern life.  I hope you are amused!

--GJD

I Got Carded! 

While on vacation recently I stopped at a store to pick up a bottle of wine – we’d been invited to someone’s home for dinner.  The young woman at the checkout asked for my driver’s license.  I asked why, as I had cash ready in my hand to pay for my purchase.  She replied, “You’re buying alcohol.  We need to verify your age.”  To which I replied, incredulously, and probably a bit too loudly  – “Honey – just look at me!”  At that point another clerk came over and explained that the store’s policy is to card everyone who is purchasing an alcoholic beverage with no exceptions, and that retaining her job is more important than this particular...

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Don’t Move Employer Stock into Your IRA!

Don't Move Employer Stock into Your IRA!*

*That is, don’t do it without reading this first. 

If you have employer stock in your company retirement plan, there are some special tax benefits that you’ll lose if you put that stock into an IRA.

Generally, when you leave your employer you’ll roll your retirement account out to an IRA.  Once you’ve passed age 59½ you can take distributions from the IRA with no tax penalty, but all distributions are taxable at ordinary income rates.  In current brackets these will typically be from 22% to 37%. 

Net Unrealized Appreciation

But there’s a special provision for employer stock.  You can distribute the stock from your retirement plan in kind, moving it to a non-tax qualified account.  Your taxable event will be only the stock’s basis.  Then when you sell the stock you’ll be taxed only on the gain over the basis, and at the more favorable long-term capital gains...

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Will Social Security be There When I Retire?

 

By Glenn J. Downing, MBA, CFP®

This piece is the third in a Social Security trilogy.  The first is Social Security Benefits, and the second is Taxation of Social Security

A common question I’m asked in a financial planning engagement is this:  Glenn, should I plan on receiving Social Security?  Will it even be there for me?  I’ll say yes – plan on it.  Social Security is the third rail of politics, and it is my belief that it will always be there in some form or another.  For those of you who’ve never lived in a city with a subway, the third rail is an electrified rail that runs along the tracks.  There is a foot from the rail car that rides along the third rail, thus powering the car with electricity.  Pretty much instant electrocution if you touch it.

Throughout its history Congress has bought itself votes by increasing the benefit, but they haven’t always raised revenue, i.e. taxes, in a...

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The Ten Most Important Ages in Financial Planning

By Glenn J. Downing, MBA, CFP®

I thought I’d put together a short list of the most important ages in financial planning.  The ages on the list changed a bit in 2020, so a review is in order.  Look up your age and see what’s happening for you!

Age 21 – UTMA account becomes the child’s 

An account registered as a Uniform Transfers to Minors Act is one in which a trust is created by the donor for the benefit of the minor child.  The donor retains his status as trustee until the child reaches the age of majority – 21 in Florida.  Be careful if you’re using an UTMA for college funding:  at age 21 the minor comes of age and can use the money in the account for anything he wants, including blowing it on a Ferrari.  There’s nothing the donor can do at that point – he’s lost all control. 

Age 30 – Coverdells must be distributed

A Coverdell is the original education savings account. ...

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Real Estate Investing Part II

By Glenn J. Downing, MBA, CFP®

Some of the biggest fortunes made in the United States have been made in real estate.  Think about it:  you use someone else’s money (via a mortgage) to make a purchase.  It is a passive investment in that you collect the rents, pay the bills, and keep what’s left over.  Not only that, but while you’re collecting those rents, the property is appreciating in value, and you’re paying the mortgage down.  So by the end of the year you have profited in three ways!

Previously, in Part I, I used an example of a rental condo apartment.  Here in Part II I'll evaluate the purchase of a single-family home.  

In this example the numbers work 

Income

I’ll use a different data set than in Part I.  Now you’re purchasing a single family residence for $350,000, again with 20% down.  You can rent the house for $2800/month.  The annual income is $33,600.

Expenses...
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Real Estate Investing Part I

By Glenn J. Downing, MBA, CFP®

I get a lot of questions on this topic, particularly for people thinking of real estate investing as sort of a retirement pastime.  So I thought I’d go into a little bit.  Here in Part I I’ll address cash flow issues, and how to determine if a particular property will work for you as an investment.  In Part II I’ll build on that, and show you how I as a professional financial planner would evaluate an income property held as an investment by a client. 

Cash Flow

It’s all about the cash flow – rents received less expenses incurred must be positive!  But there are expenses you might not have considered. 

Income

First, project out your income.  That is the potential market rent times 12 months less a vacancy factor – typically 5% to 10%.  Your rental units will most likely not be rented for a solid 12 months each year.  When one tenant moves out, there is preparation to...

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Don’t Make These 2 Mistakes with Your 457 Plan!

By Glenn J. Downing, MBA, CFP®

457 plans are a type of retirement account offered largely to certain governmental employees.  We see them available typically to police officers and fire fighters as an avenue for supplemental retirement savings.  The 457 is a place to accumulate retirement savings over and above your pension.  As such, the 457 is a type of non-qualified deferred compensation, rather than a qualified plan that comes under ERISA (Employee Retirement Income Security Act) legislation.  Please see my  previous post about 457 plans here

There were a lot of terms there, but they’re important, so let me break it down a bit.  ERISA legislation determines whether an employer’s retirement plan is qualified or not.  Qualified, meaning that the employee can defer income to the retirement account on a pre-tax basis.  The most popular of these is the 401(K) plan.  Others are profit sharing plans and money...

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My Top Ten List of Things to Waste Money On

 

By Glenn J. Downing, MBA, CFP®

This is a really personal list.  It is complied from years of observing the human condition and reading good novels.  It is intended to be humorous, yet I’m fully aware that it might hit some raw nerves.  So for the intrepid souls out there, read on . . .

Counting down to number one, we have:

#10.  Beer

Now I enjoy a brew as much as the next guy, but why spend a lot of money on something you’re going to literally piss away?  Why not get a whisky instead?  You’ll get the same buzz and not have to keep running to the gents.

#9.  Cine Bistro

Go once if you don’t believe me, but you’re going to drop $100 on a movie and a meal for two.  How much nicer to dine at a proper restaurant and then go see a show afterwards for the same money. 

#8.  True Religion jeans

One of my daughters used to work at True Religion in Dadeland Mall.  Spending $300 for denim that is faded and...

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