7 Financial Life Hacks While Living in Miami

1. Create a budget.
If this sounds too obvious, I’ll say it again for reinforcement – are you maintaining a budget? Seriously. Miami is one of the flashiest cities in the world. If you don’t have a budget I’ll put it another way — Estas loco? It has been proven that our propensity to spend money in Miami is directly proportional to our physical proximity to Brickell/Downtown Miami and South Beach. A budget is by far the best way to keep track of your money. If you have a budget, you’re already way ahead.

2. Want to build up your credit score fast?
Pay your bills on time. In other words, “Do what you say you’re going to do, Miami.” Your payment history comprises 35% of your credit score. By contrast, your length of credit history accounts for only 15% of your overall score.

3. Time is your biggest asset.
Spend extra time with the people you care for most in life. This is easier said than done in Miami traffic. You’ll need to...

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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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How Much House Can I Afford?


You’ve saved up your down payment, interest rates are good, and the time is right. So how much house can you afford to buy? There is a qualifying ratio lenders look at when approving you for a mortgage.

Debt to income qualifying ratio
The place to begin is your monthly gross income. That is, your income before any deductions for taxes, retirement plan contributions, or other payroll deductions. Bottom line: for those with excellent credit, the debt to income qualifying ratio lenders look for generally fall between 40-50%. In other words, lenders divide up all your monthly debt payments (including a proposed housing payment) by your gross monthly income. The result is a percentage. Debt payments include things like housing, credit card, student loans, and car payments.

Can you handle the debt payments?
Lenders want to see how you manage existing debt. They want to know if you are a responsible borrower before approving you for a mortgage. If your monthly debt payment is below the...

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What is a Stretch IRA?

The stretch IRA is one in which the beneficiary chooses not to distribute the inherited account all at once, but to take required minimum distributions according to his (own) life expectancy. Please refer to my previous post about RMDs.

If you are a non-spouse IRA beneficiary, you have some choices. You can simply sell the assets and distribute them to yourself. This must be done by the end of the fifth year after the IRA owner died. The amount distributed is added to your taxable income for that year, and can run you right up the tax brackets. The taxation sort of makes sense, though, in that the traditional IRA owner was never taxed on the contributions to the account, nor on the growth within the account. So at distribution the IRS gets its own.

Even better, though, is the option of stretching the IRA. This simply means taking required minimum distributions over the beneficiary’s life (beginning the year after inheriting the account). Since the younger beneficiary has a...

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Your Emergency Fund: What You Need to Know


Your emergency fund is foundational to any financial plan. Here I discuss what it is (and what it is not), why you need to have one, and how much should be in it. Also included in your financial foundation are wills, trusts, living wills, and guardianship arrangements, as well as basic insurances. Even if you are already retired this is just as, if not more, important.

The emergency fund – planning ahead
An economics professor once said that if you fall asleep in class and he calls on you just shout out, 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. 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...

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Investing for Millennials

Investing for Millennials is an important topic for a generation set to inherit a massive amount of wealth over the next few decades. Millennials will likely inherit $30 trillion from boomers over the next 30 years[1]. While the stock market is volatile, it continues to rise and break new highs. The questions for Millennials are, “When is the right time to invest? Where do I start?”

Investing for Millennials – three keys to keep in mind
Market timing is a losing formula
When it comes to investing for Millennials we tell them, “You cannot time markets.” This is very important. Waiting for the right time to buy or sell is the realm of day traders. In other words, if you think you’ll get ahead by picking the right day to start investing, chances are there will always be a better day. Certain investments are attractive because of brand popularity or hype, but are often bad investment choices for the investor. It is a big temptation to “time”...

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Top Five Mistakes People Make With Their Money


Thinking about David Letterman retiring and all those Top Ten lists. I thought it might be fun to compile one of my own. To wit:

The Top Five Mistakes People Make With Their Money
This is a list compiled after about 20 years of experience. You’ll find a video version just below.

Mistake #5
You eat out way too much. This is what your kitchen is for! If you get a sandwich and a coffee in Miami on a daily basis, you’ve spent ($10/day * 20 days) $200 in a month! How about all that fast food? I’m seeing families who spend several hundred dollars each month eating out, when a little planning and Publix time could save much of that money and everyone would be healthier and richer for it.

Mistake #4
You don’t have enough life insurance. What happens if you get hit by a bus? Are your existing savings enough for your surviving spouse and children? Term insurance is relatively cheap and easy to obtain. No excuses. See Mistake #5.

Mistake #3
You don’t have an emergency...

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Don’t Get Distracted by Financial Headlines – Stick to Your Financial Plan

financial planning money Jul 25, 2017

We’ve all seen the financial headlines:

“Sell everything and buy gold!”

“Time to take profits off the table!”

“The market is poised for a big upswing – get in now!”

“Make 16% guaranteed with tax lien certificates!”

“Buy my real estate flipping system and control your own rental empire!”

…I’m getting an Excedrin headache.

The Trap of Financial Headlines

If you’re like many people, reading the financial headlines every day can make you crazy. Yet you continue to watch in order to stay informed. You want to be in the know about financial markets so you follow CNBC, Money Magazine, The Wall Street Journal, The New York Times, and others. Some outlets are better than others. There is so much economic uncertainty in the air, so you invest time and energy reading, or listening, to these “experts” to get a sense of what you need to do with your money.

We believe the best investor is an...

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What Happens When My Mother Runs Out of Money?

financial planning money Jul 18, 2017

Increasingly as we work with people of retirement age, we’re hearing a new concern: What happens when my mother runs out of money? This is something relatively new. Those in their middle ages used to be called the sandwich generation, because they were in the middle, caring for both their children and their parents. But this is something new . . . we’re speaking of people in their 60’s and 70’s caring for parents in their 80’s and 90’s.

By the time we hit our latter 60’s, most of us hope that the retirement nest egg is firmly in place, children are married off, and grandchildren are a joy. But since we’re all living so much longer, caring for one’s very elderly parents is now a large financial planning topic.

Medical issues are a primary cause for concern
Too often we see the client who is concerned about his parents outliving their assets. A parent with a long and debilitating illness is a common story, which can lead to an...

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The FRS Investment Option


FRS participants have a choice among two retirement plan options:
The investment option, which is a defined contribution plan (DC)
The pension option, which is a defined benefit plan (DB)
In previous posts, I covered both the FRS Pension Option and the DROP (Deferred Retirement Option Program). In this post, I’m presenting the FRS Investment Option.

The salient feature of any DC plan is the number of contributions that can go into an individual’s account. On the other hand, with a defined benefit plan (also known as a pension plan) there is a pension formula. The inputs are usually based on years of service and average or final compensation. The formula calculates a pension amount that is guaranteed over the pensioner’s lifetime or lifetimes of the pensioner plus spouse. Here, though, I’m focusing in on the FRS investment option, which is the FRS defined contribution plan.

How much money goes in?
ERISA statues define limits to contributions. ERISA is the...

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