Is It Better to Borrow From a Bank or Private Lender?

Is It Better to Borrow From a Bank or Private Lender?

By Tex Freitag

If you’re considering a personal or business loan to get you through a financial hardship, you need to know the difference between a bank and private lender.

Many people need financial help from time-to-time, and most commonly this is in the form of a loan. While there is a myriad of loan types on offer today, two of the most common include a standard bank loan and a private lender loan.

But what is the difference between these two loans and why choose one over the other? Let’s see how private lender differ from bank loans and the pros and cons of each:

How Do Private Lenders Work?

Private lenders are generally businesses or individuals looking to invest in sound business opportunities. In other words, they are in the business of making money, by lending money in the form of an investment. Check out Money Trumpet for brilliant private lender access.

Private lenders are more entrepreneurial in nature, so the outcome of their investments vary. This means that a private lender can be a little more lenient when it comes to qualifying for a loan.

Private lenders have one main priority when lending money: mitigating risk. Some of the most important considerations they will look at when making an investment include: market value, borrower equity, and credit, additional collateral, pricing strategy, exit strategy, and due diligence.

How Do Traditional Bank Loans Work?

Banks are the largest lending institutions you can get and probably the first place people think of when considering a loan. This is especially true for businesses. Bank loans typically offer the lowest-cost financing, but they’re not always easy to qualify for.

Bank loans are often secured by collateral if you have a poor credit score or financial history. The interest rate on a bank loan is determined by your credit score, too. Bank loans must be paid back over a certain period of time, with regular payments usually deducted off your checking account each month.

If you qualify for a bank loan, this is one of the most affordable ways of maintaining cash flow for a business. It also allows you the opportunity to expand your business without huge loan repayments hanging over your head.

The Pros and Cons of Private Lender Loans

To continue reading, please go to the original article here:

https://lenpenzo.com/blog/id60561-is-it-better-to-borrow-from-a-bank-or-private-lender.html

My Life Philosophy: 51 Lessons From 51 Years

My Life Philosophy: 51 Lessons From 51 Years

 By J.D. ROTH  25 March 2020

Happy birthday to me!

Today, I turn fifty-one. Holy cats, that's old! It's also a very, very strange time in this world. Kim and I had planned to celebrate by spending the weekend with my brother somewhere else in Oregon. With the coronavirus crisis in full swing, that's not going to happen. Oregonians have been ordered to stay at home with family unless absolutely necessary. So, we'll celebrate today with the dog and cats.

As I do every year here at Get Rich Slowly, I'm going to commemorate my birthday by sharing some of the most important things I've learned during my time on Earth. These are the core pieces of my life philosophy.

I'm no wiser or smarter than anybody else. And I'm certainly no better. But I am an individual. I'm my own person with my own personal preferences and personal experiences.

These have all jumbled together over the past fifty years to give me a unique perspective on life (just as you have a unique perspective on life). To quote my favorite poem:

Much have I seen and known; cities of men And manners, climates, councils, governments,

Myself not least, but honour'd of them all; And drunk delight of battle with my peers,

Far on the ringing plains of windy Troy. I am a part of all that I have met…

So, these fifty-one nuggets of wisdom are things I've found to be true for me — and, I believe, for most other people. (But each of us is different. What works for me may not work for you.) These beliefs make up the core of my personal philosophy of life.

For obvious reasons, some of these notions overlap with the core tenets of the Get Rich Slowly philosophy. Plus, long-time readers will recognize this as an article I update every year on my birthday.

Some of these ideas are original to me. Some aren't. When I've borrowed something, I've done my best to cite my source. (And I've tried to cite the oldest source I can find. Lots of folks borrow ideas from each other. There's nothing new under the sun and all that.)

Here are fifty-one principles I've found to be true during my fifty-one years on this planet. I'll lead with this year's new addition.

Love yourself. All my life, I've struggled with low self-esteem. There have been times when I've hated myself. Last year was especially tough for me as anxiety and depression proved to be crippling for several months. Working with a therapist has helped. She's helped me to understand that it's important to learn to both accept myself and love myself — even though, like everyone, I'm imperfect. I still have a long way to go, but I'm making progress.

Self-care comes first. If you're not healthy, it's tough to be happy. Before you can take care of your friends and your family, you need to take care of yourself. Eat well. Exercise. Nurture your mind, body, and spirit. Your body is a temple; treat it like one. If you don't have your health, you've got nothing.

To continue reading, please go to the original article here:

https://www.getrichslowly.org/my-life-philosophy/

Getting Comfortable With the Uncomfortable

Getting Comfortable With the Uncomfortable

April 16, 2020 Banker On FIRE Personal Development 11

Feeling comfortable?

In a way, aspiring to financial independence is all about comfort.

Forgetting what the jam-packed commute feels like.  Never having to deal with workplace politics again.  Leaving all the money worries behind and spending the rest of your days in a state of pure bliss and relaxation.

If that doesn’t sound absolutely grand, I don’t know what does.  That is, until you consider all the thorny patches on the road to this state of hedonistic nirvana.

The most obvious one is spending less than others.  In a society where the majority of people are programmed to spend at least as much (if not more) than they make, putting a lid on your spending isn’t easy. There are good reasons for it, too.  Humans are social animals.  Ever since we emerged as a species, social acceptance played a key role in our survival.

Just imagine getting kicked out of the cave for being “different”.  That certainly didn’t increase anyone’s chances of making it through the night – and keeping their genes in the pool.

As a result, thousands of years down the road we are now coming off the assembly line with a default setting that causes us to mimic the behaviour of our “pack” to avoid a disastrous outcome.

It takes a lot of hard work and painful introspection to re-program the way our brains are designed to work.  And the further up the food chain you are, the starker the comparison.

Some people just can’t bear to rock the iPhone 6 like I have been for the past five years.  For others, flying commercial is an absolute deathblow to social ambitions (unless you can claim it’s all about climate change).

No matter how obnoxiously wealthy you may be, there’s always someone with a bigger yacht – or a prettier private island… tough life!  And if you do manage to get your own psyche under control, you’ve then got to get your significant other on board too.

For many people, it’s a task akin to having to stare down Federer’s serve at love – forty, what with the ball boys, audience and umpire all squarely in his corner.

Making More Money

There is an alternative of course.  Find some middle ground in terms of spending and focus on increasing your earnings instead.

But dig one level deeper and you’ll find that it’s not so straightforward either.

To continue reading, please go to the original article here:

http://bankeronfire.com/getting-comfortable-with-the-uncomfortable?utm_source=rss&utm_medium=rss&utm_campaign=getting-comfortable-with-the-uncomfortable

Why It Makes So Much Sense To Own REAL Assets

Why It Makes So Much Sense To Own REAL Assets

Notes From The Field By Simon Black 

April 16, 2020   Bahia Beach, Puerto Rico

Earlier this week we talked about why the economic consequences of this pandemic could last a lot longer than what a lot of people expect.

Now, I say all of this from a position of complete ignorance and uncertainty. Nobody knows what’s going to happen next, or how long this pandemic will last.

But to simply expect that everything will return to normal in a few weeks-- and willfully ignore the countless other possibilities-- seems a bit foolish.

Worldwide, the number of deaths from Covid-19 reached 138,000. That’s more than double the number of deaths from 10 days ago. So it’s still growing.

Singapore was initially successful in controlling the virus outbreak. But they’re now experiencing a nasty second wave of infections.

In the US alone, more than 20 million people have lost their jobs so far, and the government’s $350 billion program to bail out small businesses has already run out of money.

It’s great to hope for the best. But let’s be realistic: there are a lot of reasons why the economic consequences of this pandemic could be long-lasting.

And that’s what brings me to real assets.

If the negative consequences linger, it’s reasonable to expect that governments and central banks will shovel piles of cash into their economies at a feverish pace.

Most developed nations have started this already.

In Australia, the government has passed at least $130 billion in stimulus measures so far-- a princely sum in a country where the population is just 25 million people.

The British government has passed hundreds of billions worth of loan guarantees, grants, and tax cuts.

Germany’s government has passed more than 750 billion euros worth of loans and stimulus programs.

Canada’s central bank slashed its benchmark interest rate to 0.25%, and cut bank reserve requirements, in addition to billions of dollars in stimulus programs.

And the United States government has spent trillions of dollars already; plus the Federal Reserve has conjured more than a trillion dollars out of thin air to loan money to banks and businesses.

It’s likely they’ll keep printing money if the economic pain persists.

Second wave of outbreaks? Print another trillion dollars to bail out businesses.

Massive corporate layoffs? Print another 2 trillion dollars to bail out employees.

Skyrocketing loan defaults? Print another 5 trillion dollars to bail out the banks.

Now, consider that they’d be printing all this money at a time when economies are shrinking by 20% or more.

So we’d see a tidal wave new money flooding into an economy where fewer goods and services are being produced.

This is precisely how a currency loses value: if there’s less stuff in an economy, but more paper money, it means all the stuff has to become more expensive relative to the paper money.

That’s ultimately what inflation is.

Throughout history whenever this situation has arisen, it’s almost invariably been a good idea to own real assets, i.e. direct ownership of an asset that cannot be conjured out of thin air by a central bank.

Real assets include things like productive land, shares of a well-managed private business, or physical gold and silver.

These are assets that cannot be willed into existence by a government or central bank. And they don’t simply exist on paper, or as an entry on a balance sheet.

They’re real. And they tend to do very well in an inflationary environment where ridiculous sums of money are being printed.

Most people don’t have an easy opportunity to buy productive land or shares of a well-managed private business.

But gold and silver are totally within reach. And here’s something really interesting about them:

The chart below shows you the ratio over the past 50 years between the price of gold and the “M0 monetary base”.

As you can see, right now this ratio is well below its long-term average.

(M0 is just one method economists use to measure the supply of money in the US economy. But using other methods, like M2 money supply, the ratio is still below its long-term average.)

This low ratio suggests that the gold price is cheap relative to the amount of money in the economy right now. And it stands to reason that the amount of money in the economy is going to increase a LOT.

And that means the price of gold could also increase a lot.

But if gold is relatively cheap, silver is even cheaper.

As I wrote to you on Monday, the gold / silver ratio is near an all-time high. In other words, it takes twice as much silver to buy a single ounce of gold relative to the long-term average.

So while there’s a good case that the price of gold can increase quite a bit, it’s possible that the price of silver could rise even more.

There are, of course, risks. Nothing is certain, especially in this environment.

But there are some inexpensive ways to bet on rising gold and silver prices where you could make potentially 10x your money or more, even with limited amounts of capital.

We’ll talk about these next week.  For now, stay safe and healthy.

https://www.sovereignman.com/trends/why-it-makes-so-much-sense-to-own-real-assets-27658/

To your freedom & prosperity, Simon Black, Founder, SovereignMan.com

The Seven Stages Of Sudden Wealth

The Seven Stages Of Sudden Wealth

By Douglas Wolford

The path to wealth is often a slow one, a journey that takes place one step at a time over the course of several decades. But for some people, certain events—receiving an inheritance, selling a successful business, winning the lottery—can create a rags-to-riches experience, seemingly overnight.

When that happens, the results can be both thrilling and confusing. I’ve seen many clients, colleagues, and close friends go through a period—and a process—of adjustment to sudden wealth that, unless anticipated and managed consciously, can be very jarring.

The goal of this primer is to provide a preview of the psychological transformation you, or someone you care about, may encounter when coming to terms with this newfound wealth. And so, with respect to Elizabeth Kübler-Ross, on whose famous model this primer is loosely based, I offer you what I call the Seven Stages of Sudden Wealth.

Opening Thoughts: Let’s be clear— there are many, many worse things in life than quickly coming into money. But sudden wealth does have its challenges. Perhaps the most difficult part is the sense of isolation: no one wants to hear someone complain about the difficulties of being rich.

Thus, it’s important to connect with a community of people who understand both the trials and privileges of good fortune, and can help you create a plan for the years ahead. The sooner you can do this, the more likely you are to come to terms with your new life in a healthy, productive manner.

Stage One: Numbness and Disbelief

These feelings may be amplified if you come from a modest background. The contrast between what your life has been and the new direction it is taking may be too overwhelming to process quickly—both for you and the people around you. Just like any shock to the mind, it takes time to adjust and comprehend the new life that is just around the corner.

Be easy on yourself, and give yourself time to absorb your new situation. ‘Is this really happening? How is this possible?’ It’s not uncommon to go through a lengthy period of numbness and disbelief, particularly in the period between learning that a hefty sum is headed your way and actually receiving it.

It is totally normal to feel like everything is ‘unreal’ or that you are having an out-of-body experience. Spouses, friends, and family members may have similarly shocked reactions.

Stage Two: Generosity and Expansiveness

As you get used to the notion of having money, it’s natural to want others to become comfortable with the idea too. In our culture, there is a growing sense of discomfort about being richer than other people around you. This is the time when people often begin sharing their money with others in an attempt to make those around them feel as if they are also wealthy.

 The intent can be noble—who wouldn’t want to share good fortune with their friends and loved ones? But there can be an underlying sense of guilt at work as well, with lavish gifts being used to mollify these sordid feelings.

To continue reading, please go to the original article here:

https://www.summitas.com/files/pubarea/article/Convergent%20-%20Seven%20Stages%20-%202015%2009.pdf

Income Isn’t Wealth

Income Isn’t Wealth

John Goodell    April 15, 2020

MY WIFE AND I recently read The Ant and the Grasshopper, from Aesop’s Fables, to our youngest daughter. If you recall, the grasshopper mocks the ant for spending all his free time amassing food. But when winter comes, the starving grasshopper begs for assistance—and the ant refuses.

Lately, I’ve been struck by the irony of this parable. As we celebrate the role of physicians in keeping us all safe from a virus, that same virus is slowly starving physicians of their salaries. How am I acutely aware of this bizarre conundrum? I’m married to a family physician.

Before you break out the world’s tiniest violin, allow me to paint a picture of what I and others are witnessing across the nation. The economics are startling, even if the personal finance lessons are a well-worn, cautionary tale.

Since this virus’s arrival on our shores, more or less all of us are now under some kind of quarantine, except essential workers. As hospitals have halted their elective procedures to free up bed space and medical equipment, their revenue has taken a massive hit.

In addition, many outpatient clinics have closed to prevent the spread of the coronavirus. Our once-booming economy has now ground to a halt—even for the medical field.

Those clinics that remain open have seen a dramatic decline in patients, who are presumably afraid they’ll get the virus by visiting the doctor. I went to my doctor’s office recently. It was a ghost town.

It’s usually packed with people, but there were no other patients the entire time I was there. Many offices, including my wife’s, have gone to virtual medicine via video platforms, which has helped alleviate—but not eliminate—the financial burden.

Keep in mind that these same doctors are on standby if or when hospitals become overwhelmed. They will begin seeing patients to relieve the strain on hospital staff. In fact, that exact scenario is playing out in New York right now. Other hospital systems around the country have told their physicians to be prepared to do the same.

To continue reading, please go to the original article here:

 https://humbledollar.com/2020/04/income-isnt-wealth/

Are You Living Beyond Your Means?

Are You Living Beyond Your Means? The Warning Signs to Watch For
Post From Invested Wallet

Posted in Dinar Recaps Archives on 7/9/2019

In our consumer and debt-heavy society, living beyond your means is all-too-common. And unfortunately for us, it can put us in tricky financial situations.

Considering how easy it is to impulse buy online and use credit cards we end up spending more than we make.

This process has become so normalized, that we overlook the financial dangers and live a lifestyle that can be too expensive for our own good.

While it may seem okay because so many are living beyond their means, it shouldn’t mean you need to endanger your own financial well-being.

Below are a few warning signs you should watch to ensure you are not living beyond your means.

You Notice You are Living Paycheck to Paycheck

78% of full-time workers said they live paycheck to paycheck (CNBC)

Now, this might not signal right away that you are living beyond your means. You might be underpaid, living in an expensive area, or have some other financial circumstances putting you in this situation.

However, a lot of times you may be upgrading your lifestyle or just overspending that causes you to barely squeak by every pay period.

Take a step back, look at your paycheck and see where your money is going every week. You may discover that there are some cutbacks you can do to help you get out of the paycheck to paycheck slump.

I’ve been there before and it’s not fun. Even though I was only making $36,000/year at the time, had I not been overspending on my lifestyle that situation would have been different.

You Have Little Saved or No Emergency Fund

One thing I roll my eyes to in most personal finance articles is when they talk about having an emergency fund. We all should know it’s important to have one and we all do typically want to save money.

To continue reading, please go to the original article at

https://investedwallet.com/living-beyond-your-means/

5 Reasons Why The ‘V-Shaped Recovery’ Is A Fantasy

5 Reasons Why The ‘V-Shaped Recovery’ Is A Fantasy

Notes From The Field By Simon Black 

April 14, 2020  Bahia Beach, Puerto Rico

The big story over the last few days has been ‘reopening the economy’.

And that’s certainly a nice idea. Countless people have been living in despair over the last month, and the prospect of everything going back to normal soon feels really great.

I certainly hope for the best.

But a couple of weeks ago I quoted James Stockdale-- one of the toughest men who ever lived-- talking abut how he cultivated the mental strength to survive 7 torturous years as a Prisoner of War in North Vietnam.

And I thought it would be relevant to re-post his advice here.

When asked, “Who didn’t make it [out of the POW camp],” Stockdale replied,

Oh that’s easy. The optimists. They were the ones who said, ‘we’re going to be out by Christmas.’ And then Christmas would come, and Christmas would go.

And then they’d say, ‘We’re going to be out by Easter.’ And then Easter would come, and Easter would go. And then Thanksgiving. And then it would be Christmas again.

And they died of a broken heart.

“This is a very important lesson,” Stockdale continued. “You must never confuse faith that you will prevail in the end—which you can never afford to lose– with the discipline to confront the most brutal facts of your current reality, whatever they might be.

There’s clearly been a lot of positive data lately showing that the growth rate of the virus seems to be slowing, and that the mortality rate is lower than originally estimated.

This is all good news.

But we’re seeing a lot of ‘Stockdale optimists’ right now who only look at the good news and refuse to confront brutal facts.

Many of the world’s most prominent financial markets have been bitten by Stockdale Optimism; stocks, for example, are way up because investors believe everything is about to return to normal and the economy will experience a ‘V-shaped recovery’.

(This means that the economy will bounce back as quickly and aggressively as it stalled.)

But anyone with the discipline and emotional courage to confront the most brutal facts of our current reality realizes that ‘normal’ is still far away.

Here are a few things to consider:

1) Hardcore PTSD

We’re now living in a world where hugging is considered an act of biological terrorism.

It would be silly to think that everyone will come out of hiding and go back to normal… packing bars, airplanes, shopping malls, elevators, offices, etc. like we used to do.

There’s going to be some serious, worldwide Post-Traumatic Stress Disorder. Millions of people will permanently change their behavior, reduce consumption, stay home, and avoid contact with others.

And this is clearly going to have a lingering economic impact.

2) RIP Small Business

Countless small businesses ‘temporarily’ closed last month. Many of them will never reopen.

Others have had to make deep cuts and lay off a number of employees in order to survive.

But even when economic conditions finally start to normalize, many small business owners will realize, “Gee I didn’t actually need some of those workers.”

They’ll do the math and determine that the business can be more profitable and efficient without all the employees. And some of those temporary job cuts will become permanent.

3) Big business downsizing

Ditto for big businesses. A typical medium-sized or large company can lay off at least 10% of its workforce with minimal impact to operations. Nearly everyone has fat to trim.

And so a lot of big companies who have laid off their workers will not hire everyone back.

Moreover, big companies now have an opportunity to shrink their overhead further by reducing their office footprints.

Executives now realize that many employees can work from home. And frankly, many employees prefer it.

This will likely reduce demand for office space, causing a steady increase in commercial property vacancy rates.

Even Disney’s Chairman Bob Iger recently said his company will reopen “with less office space.”

4) Retail was dying before this started. . .

Let’s be honest-- retail stores were already dying before this pandemic; the entire industry is being swallowed up by Amazon.

A number of major retail chains (Sears, Macy’s, Pier 1 Imports, etc.) filed for bankruptcy well before the pandemic started. Plenty of others were on the ropes.

And now with so many places on lockdown, many of them simply will not survive.

Between the continued rise of e-commerce, the lockdown consequences, and the lingering PTSD that could keep millions of people from visiting stores, physical retail is in pretty serious trouble.

Retail makes up roughly 10% of the work force in the US alone (according to estimates from the Aspen Institute), so it’s not hard to imagine a few million job losses just from this one sector… not to mention the impact to the real estate market of so many shops and malls going under.

5) Additional outbreaks

While the social distancing and lockdown measures have reduced the rate of contagion, it’s important to remember that some places (like Hong Kong and Singapore) already experienced a second wave of outbreaks after they loosened their restrictions.

Yet the ‘V-shaped recovery’ fantasy completely ignores this very real possibility… and the huge economic consequences it would have.

In fact, any of the five points I mentioned above could have a nasty impact-- to the unemployment rate, financial markets, GDP, real estate prices, corporate earnings, government deficits, etc.

But they’re all being ignored.

The prevailing narrative right now is that we’re out of the woods and the economy is about to come roaring back.

And that would certainly be nice.

Staying positive is great. Like Stockdale said, we know that we will prevail in the end.

But it’s important to be realistic-- to confront the most brutal facts of our reality. And our reality is that the consequences of this pandemic could last much longer than many people are choosing to believe.

 To your freedom & prosperity, Simon Black, Founder, SovereignMan.com

https://www.sovereignman.com/trends/5-reasons-why-the-v-shaped-recovery-is-a-fantasy-27655/

5 Money Lessons Grandparents Can Teach Their Grandkids

5 Money Lessons Grandparents Can Teach Their Grandkids

Starting as young as age 3, your grandchildren could reap a lifetime of rewards from these five basic financial skills.

If you are like many grandparents, you like your kids, sometimes, but you LOVE your grandkids. Being a grandparent is a special honor. You have a unique ability to shape your grandkids well beyond just spoiling them with sweets and sending them home.

Given how important financial skills are to succeeding at life, it’s surprising schools don’t teach our children more about money. As a grandparent, however, you can teach your grandkids important financial lessons — and you should! These lessons can leave a positive mark on your grandkids for decades to come.

Lesson 1 (ages 3-8): Delay gratification.

You may have to wait to buy something. This is a hard lesson for people of any age to learn, but building the foundation early is a key to financial success. It’s easy for adults simply to buy things for grandchildren who are looking up at them with pleading eyes. 

Instead, help them save money and set a goal to buy the item of their dreams. Create a “savings jar” that is clear, so they can see the progress, and help them count the money as they add to it.

Lesson 2 (ages 8-14): Hard work never hurt anyone.

There is a sense of satisfaction in us all when we work hard for something and achieve it. While we’re certainly happy to live in a country and time where 8-year-olds are not working in factories, completing some kid-friendly chores around your home — like raking leaves, dusting or cleaning up the garage — could help teach a valuable lesson about work and reward.

As your grandkids get older, encourage them to become entrepreneurs by starting their own business babysitting, pet sitting or mowing grass. It’s a lesson that will serve them well throughout life.

To continue reading, please go to the original article here:

https://www.kiplinger.com/article/retirement/T065-C032-S014-5-money-lessons-grandparents-can-teach-grandkids.html

5 Ways NOT to Gift to Children

5 Ways NOT to Gift to Children … and 5 Better Ideas

By DANIEL A. TIMINS, ESQ., CFP® | Law Offices of Daniel Timins

Parents who mean well sometimes put their children in a position to blow it.

Giving to children can be a weakness. We often want to help children actualize their financial goals and give them an easier life than we might have had. However, gifting to children can also be a disaster:

We all realize that many children are irresponsible with money, do not have enough life experiences yet to protect it, and are targets of those interested in getting a piece of the money you gave them.

Here are five common and less-than-ideal gifting scenarios, and suggestions you can use to protect your assets:

1. Gifting a Child a Highly Appreciated Asset

Capital gains taxes elicit less attention than income and estate taxes because they are usually assessed at a lower percentage (15% or 20% for capital gains taxes vs. 40% for estate taxes). However, if you gift assets during your life, capital gains are the taxes that require the most vigilance to avoid.

If I gift my children my old shares of ABC company stock, which I bought for $10 a share and now sells for $100 a share, my child also receives my cost basis, meaning they have a $90 per share capital gain they owe taxes on.

The Better Idea: Gift cash or stock that has minimal appreciation. If I bequeath the stock after I pass away, the cost basis is “stepped up” to the value of the stock on the date of my death, meaning they now have a $100 cost basis per share and no capital gain if they sell it immediately. Therefore, you should hold onto highly appreciated stock and bequeath it after your passing so its cost basis “steps up” upon your death.

2. Naming Children as Joint Owners on Real Estate

In many parts of the country home prices have skyrocketed: For too many children the notion of ever becoming a homeowner without some help from family members is impossible. However, the issue that caused the problem in the first place (expensive housing) now snowballs, because Mom and Dad not only have to help with a down payment, they also have to name themselves on the mortgage.

There are additional issues that arise for different people buying real estate with their children: More wealthy individuals may be depleting their gift tax exemptions and not know it, children with their own college-age kids may be hurting their financial aid opportunities if the real estate is a second residence, and younger children with uncertain job opportunities may rely on Bank of Mom & Dad to pay mortgage and real estate taxes for a long time.

The Better Idea: Carefully consider the consequences of future real estate expenses and co-signing a mortgage with your child. Lay out expectations, and have a back-up plan of your own if your child cannot find stable income to fulfill his side of the bargain.

To continue reading, please go to the original article here:

https://www.kiplinger.com/article/taxes/T021-C032-S014-5-ways-not-to-gift-to-children-and-5-better-ideas.html

3 Ways to Instill Enduring Financial Values in Your Children

3 Ways to Instill Enduring Financial Values in Your Children

Leading by example is always a good idea, and the earlier you start, the better. These three lessons can get the whole family going in the right direction.

Passing down values related to family wealth is one of the most crucial, yet challenging, tasks for parents today. Children’s experiences with money during their formative years can shape how they save, spend and give for the rest of their lives.

What’s more, taking the right approach can ensure a family’s wealth is preserved through future generations. One recent study found that 70% of wealthy families lose control of their assets by the second generation, and 90% by the third. That’s a frightening prospect, especially when previous generations have taken so many steps to grow and maintain their wealth.

By setting a positive example and having meaningful conversations with their children, parents can teach three key lessons about money management.

No. 1: Teach them how to save

Helping children think beyond current wants and desires is no easy feat, which is why demonstrating the value of saving up for something is best accomplished through concrete examples and exercises.

Here’s one example. Plan an exciting family vacation a few months out. Establish that in order to save enough money for the trip, the family will need to limit the number of times they go out to dinner between now and then. This small compromise increases the perceived value of the vacation when it finally arrives.

Of course, there are many other examples and exercises to teach children the value of a dollar saved, such as using coupons at the grocery store or having a loose change jar in the kitchen. The key is to explain these concepts along the way, so children both hear and see best practices in action.

Many families also expose their children to long-term savings by bringing them to appointments with their financial adviser. Most children simply sit in the waiting room.

However, this trip gives parents an opportunity to explain that they are saving for retirement, planning for tax season or putting away money in a college fund. They can demonstrate that proper financial planning is important, complex and the reason they can provide a great lifestyle for their family.

No. 2: Teach them how to spend

Parents often debate the value of giving their children an allowance. When done in a disciplined way, an allowance can instill simple money management skills that children will carry with them for years.

To continue reading, please go to the original article here:

https://www.kiplinger.com/article/retirement/T003-C032-S014-income-annuities-take-risk-out-of-retirement.html