Financial Goals: Your Prioritization Guide

Financial Goals: Your Prioritization Guide

Beth Braverman

 You already know the most basic principle of personal finance--spend less money than you make. Once you’ve got that covered, however, figuring out how to achieve all your financial goals at once can feel overwhelming.

 Should you direct any extra cash toward paying off your student loans or saving for retirement? Building an emergency fund or chipping away at credit card debt?

 As you grow your family and advance in your career, there may be even more competing goals, such as buying a house, saving for your kids’ college education or taking a dream vacation.

 In general, this is how you might think of prioritization for your financial goals, from the most to the least important.

 (Of course, the more complicated your finances, the more you’ll benefit from working with a financial planner who can help you navigate your specific situation.)

 1. Protect Yourself Against the Unexpected

 Before working on almost any other long-term financial goals, you’ll probably want to have at least three to six months’ worth of expenses in a liquid account that you can access in case of emergencies.

 “An emergency fund gives you the ability to stay on track no matter what your other goals are,” says Rich Ramassini, a Certified Financial Planner and senior vice president at PNC Investments. This is true even if you have credit card debt. “Let’s say you want to aggressively pay down your credit cards, but your car breaks down and you need a $2,000 repair. If you don’t have an emergency fund, guess where that money is coming from?”

 Bonus: Rising interest rates mean that you save money in an online savings account and it should earn at least a small return.

 Helping to protect against the unexpected also means making sure that you have adequate insurance coverage. That often includes health insurance, auto and home (or renters) insurance, life insurance and disability insurance.

 Although insurance premiums can put a dent in your cash flow, they tend to be relatively cheap compared to the expenses you’d face in a worst-case scenario without such coverage.

2. Start Saving for Retirement

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

https://meetfabric.com/blog/prioritization-financial-goals-short-term-long-term

Where Do I Store My Wealth?

Where Do I Store My Wealth?

From Crisis To Confiscation— By Jeff Thomas     International Man

International diversification of wealth (no matter how large or small) can save your economic freedom.

Although most of our readers thoroughly understand this concept, one of the most oft-heard concerns is that, by offshoring assets, one may not be able to get to them as easily as they now can. Here’s the response to that, and some practical advice on what you can do to protect yourself.

Let’s say you presently regard yourself as being economically diversified. You own stocks and bonds, you have some cash, you have a retirement fund and you have a bit of gold stuffed away at home. On the surface, it would seem that you’re covered. Trouble is, you have all your wealth in one jurisdiction, and should that jurisdiction find itself in an economic crisis, all that “diversification” will be seriously at risk.

Of course, it’s human nature for us to want to keep our wealth close at hand. It feels more secure than having it miles away from us. We tend to follow this concept even though we’re well aware that to have our wealth really close (i.e., on our person) we would be asking to have someone with a gun take it away.

Although we understand this, we somehow manage to convince ourselves that our own government, should they decide that they wish to get their hands on our wealth, is less of a threat to us than some thief. If we’re being really truthful with ourselves, governments pose a greater threat than the average thief, as they can steal legally.

Confiscations and Bubbles

In recent years, the governments of the US (in 2010), Canada (in 2013) and the EU (in 2014) have passed bail-in legislation, allowing the confiscation of deposits in bank accounts.

When confiscation does occur, I believe it will happen without warning, as it did in Cyprus. One day, you wake up and your money is gone. What can you do? Nothing. It’s legal.

But you may still be all right, since you’re diversified. How about your retirement fund? Well, both the US and EU have announced that, should the investments of your fund be deemed to be at risk, the government will ensure that you will not lose your money, by requiring that your fund be heavily invested in government Treasury bonds, which are guaranteed.

 However, should there be an economic crisis, that guarantee will quickly go south.

Again, when this happens, it will happen suddenly, without warning.

Well, how about those stocks and bonds? You broker assures you that he has wisely invested your money in a variety of stocks and bonds and he declares that your investment is therefore diversified.

Trouble is, the bond and stock markets are presently in the greatest bubbles the world has ever seen. Even a minor crisis can put a pin to those bubbles without warning.

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

http://www.internationalman.com/articles/where-do-i-store-my-wealth

Brain Meets Money

Brain Meets Money

Richard Quinn    HumbleDollar

HOW OFTEN DO you think about money? Hey, you just did. Seriously, we think about money every day and sometimes every hour. Some studies say we ponder financial matters even more often than the old standby: sex.

We’ve been thinking about the stuff for a long time. Money goes back about 3,000 years. Paper currency can be traced to China in 700 BC. They didn’t fool around: Their currency stated that all counterfeiters would be decapitated. I’m guessing counterfeiting was rare.

Today, it costs two cents to manufacture a penny and almost eight cents to make a nickel. Result? Each year, we taxpayers lose about $85.4 million on the production of pennies and $33.5 million on nickels.

Gee, at that rate, those of us on Social Security could receive a $2-a-year raise if they made cheaper money. Who needs pennies anyway? Money is no more than a piece of metal or paper—basically worthless, except you can get stuff for it because the people who sell you stuff can get other stuff with the money you give them.

Does money make us happy? Benjamin Franklin didn’t think so. “Money never made a man happy yet, nor will it. The more a man has, the more he wants. Instead of filling a vacuum, it makes one.”

The evidence suggests Ben was right, but try telling that to addicted lottery players. I recall a TV show depicting the impact of winning the lottery on people. Instead of making the winners happy, it often messes up their lives, mostly because they’re ill-prepared to handle the money and because they thought spending would make them happy.

One winner stands out in my memory. He bought several pieces of used heavy construction equipment just to have. He didn’t know the tax withholding on his winnings wouldn’t cover all of the tax he owed. He eventually lost all of his prize possessions and a great deal more to the IRS.

Another family lived in a trailer and, instead of moving, expanded it, bought each child their own ATV and gave each an allowance of $1,000 a month. The kids were ostracized at school and had to leave.

“The conviction of the rich that the poor are happier is no more foolish than the conviction of the poor that the rich are,” offered Mark Twain. Indeed, if you Google the subject of happiness and money, you will find assessments from every point of view. But none concludes that money buys permanent happiness, only fleeting pleasure perhaps.

On the other hand, money can relieve stress—or create it. If you don’t have enough to pay the bills, more money will help. But if you have plenty of money, the fear of losing some may be stressful.

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

https://humbledollar.com/2020/02/brain-meets-money/

IRS Rule Change Should Have You Rethinking How You Leave Assets to Heirs

IRS Rule Change Should Have You Rethinking How You Leave Assets to Heirs

Brian J. O'Connor Sun, July 30, 2023

Managing your taxes can be one of the most complex aspects of estate planning and a new IRS rule change continues that trend. The rule, published at the end of March, changes how the step-up in basis applies to assets held in an irrevocable trust. If you need help interpreting the IRS rule change or setting up your estate, consider speaking with a financial advisor.

What Is a Step-Up in Basis?

When someone inherits an asset with unrealized capital gains, the basis of the asset resets or "steps up," to the current fair market value, wiping out any tax liability for the previously unrealized capital gains.

For example, if you purchased stock for $100,000 more than a year ago and sold it now for $250,000, you would pay capital gains tax on the $150,000 profit above the original basis of $100,000. If you inherit that stock, however, your new basis steps up to $250,000 and you'll pay tax only if you sell the stock for more than that amount.

To protect their assets, many people place them in an irrevocable trust, which means they lose all ownership rights to the assets. Instead, the trust becomes the owner of the assets for the benefit of the trust's beneficiaries.

How IRS Rule Change Impacts Irrevocable Trusts

Previously, the IRS granted the step-up in basis for assets in an irrevocable trust but the new ruling – Rev. Rul. 2023-2 – changes that.

Unless the assets are included in the taxable estate of the original owner (or "grantor"), the basis doesn't reset. To get the step-up in basis, the assets in the irrevocable trust now must be included in the taxable estate at the time of the grantor's death.

That's the bad news.

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

https://finance.yahoo.com/news/want-leave-assets-heirs-irs-105000681.html

Why the IRS Is Making a Big Tax Collecting Change — and How It Affects You

Why the IRS Is Making a Big Tax Collecting Change — and How It Affects You

David Nadelle  Fri, July 28, 2023

In what its calls a “major policy change,” the Internal Revenue Service (IRS) announced July 24 that it would be discontinuing its practice of unannounced visits to taxpayers. The agency cited a need to increase safety standards for the public and its employees — and to stop scam artists from posing as IRS agents to threaten taxpayers.  The change is part of a larger operational policy reconstruction brought upon by the passing of the last year’s Inflation Reduction Act as well as the delivery of the new IRS Strategic Operating Plan in April.

“We are taking a fresh look at how the IRS operates to better serve taxpayers and the nation, and making this change is a common-sense step,” IRS commissioner Danny Werfel said. “Changing this long-standing procedure will increase confidence in our tax administration work and improve overall safety for taxpayers and IRS employees.”

For decades, IRS employees have sometimes visited taxpayers in person, unannounced and unarmed, to resolve account balances and to collect unpaid taxes and unfiled returns.

However, since the Inflation Reduction Act provided for an increase in funding to help improve IRS services and technology, a number of Republican lawmakers assumed this money would be used to increase the number of employees and, in turn, escalate audits. This would ostensibly lead to unwanted and unnecessary home visits.

As CBS News reported, false and exaggerated information about IRS operating policies has resulted in its employees feeling less safe. Some agency antagonists went as far as to jump on social media and warn people of the IRS’s intention to arm its agents on taxpayer visits. This view has been vehemently denied by the IRS and its union, the National Treasury Employees Union (NTEU).

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

https://finance.yahoo.com/news/why-irs-making-big-tax-181541342.html

The Seven Deadly Sins Of The Wealth Management Industry

The Seven Deadly Sins Of The Wealth Management Industry

John Jennings  Contributor 

In his investment book “Where are the Customers’ Yachts?” Fred Schwed opens with the story that gives the book its title:

Once in the dear dead days beyond recall, an out-of-town visitor was being shown the wonders of the New York Financial District. When the party arrived at the battery, one of his guides indicated some handsome ships riding at anchor.

He said, ‘look, those are the bankers’ and brokers’ yachts.’

‘Where are the customers’ yachts?’ asked the naïve visitor.

Although the wealth management industry has evolved since Schwed’s book was published 81 years ago, the underlying issue remains: it is first and foremost a money-making machine for those who work in the industry. This doesn’t mean the wealth management sector is made up of bad people (I’m one of them!) but rather that their incentives aren’t usually aligned with acting in clients’ best interests. Like Upton Sinclair says, “It is difficult to get a man to understand something when his salary depends upon his not understanding it.”

According to Roman Catholic theology, the seven deadly sins are the primary feelings or behaviors that inspire further sin. The misaligned incentives of the wealth management industry roughly correspond to those deadly sins, and knowing them is essential to being a wise consumer of financial services. Once you understand what drives the wealth management industry, you can better choose which advisors to work with, evaluate their advice with clear eyes, and push back as necessary.

The Seven Deadly Sins Of The Wealth Management Industry Are:

1.    Advisors are incentivized to provide the least amount of service possible (sloth). An investment professional I know who works in the trust department of a large bank told me that a common refrain at their bank is “don’t wake the dead.” In other words, don’t call clients unless they call you first.

There’s a fundamental tradeoff in any business between customization and scalability. And it’s particularly acute in the financial services industry. Wealth management firms are incentivized to scale rather than customize because the more clients they can serve with limited people and resources, the higher the profits. By ignoring clients and being reactive rather than proactive, advisors can handle huge client loads, collect more fees and increase firm profitability.

2.    Advisors spend most of their time looking for their next client (lust). Years ago, I interviewed an advisor from a global investment brokerage who was looking to change jobs. When I asked why he was interested in our much smaller boutique firm, he told me he went into the financial services business to help people but doesn’t get to do that much. “About 80% of my time is spent on business development, and only 20% on actually advising and helping my clients,” he said.

Unfortunately, this is common in wealth management firms because they’re structured so that advisors “eat what they kill.” To make more money, they must constantly obtain new clients. As a result, most advisors spend most of their time wooing new clients instead of caring for those they already have.

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

https://www.forbes.com/sites/johnjennings/2021/05/26/the-seven-deadly-sins-of-the-wealth-management-industry/?sh=1877636a6a14

7 Little Changes That’ll Make Your Money Last for Generations

7 Little Changes That’ll Make Your Money Last for Generations

Ken Eyler CEO, Aquilance  Thu, July 27, 2023

I’m an Advisor to Wealthy Families: 7 Little Changes That’ll Make Your Money Last for Generations

You may have heard of the third-generation curse, which causes 90% of wealthy families to lose their money by the third generation. But some individuals manage to deplete their wealth even sooner, especially if they came into a lot of money quickly. For instance, athletes, entertainers, executives and entrepreneurs who achieve runaway success after years of financial hardship may suddenly find themselves with seven-figure bank accounts and no idea how to carefully spend and manage their money.

The same thing can happen to people who inherit a lot of money. In fact, money mismanagement is one of the primary factors in the third-generation curse if sound financial values and solid money management strategies weren’t passed on through the generations.

Many of these families did not start off wealthy, and had already developed sub-optimal money habits by the time they became wealthy. Often, it’s hard to change those habits that have been formed over a lifetime. But when you have money, you, unfortunately, become a target. Your behavior needs to change if you want to preserve your wealth.

GoBankingRates spoke to Ken Eyler, CEO of Aquilance, a financial administration company focused on bill pay, bookkeeping, and complex entity and investment reporting for wealthy families. He shared with us seven tips to preserve generational wealth, whether you are a new heir, a social media influencer who hit it big, or an entrepreneur who’s struggled for years before finding that business idea that set you up for life.

Tighten Your Security Profile

As an advisor to high-net-worth and ultra-high-net-worth families, I often encounter those who make easily avoidable mistakes with their fortunes. Many of these families did not start off wealthy, and had already developed sub-optimal money habits by the time they became wealthy.

I see security as one of the biggest vulnerabilities for families. One of the common pitfalls are folks who were accustomed to posting about their travels on social media, especially if they first made it big in the public eye.

But when they are traveling on private jets and leaving their multimillion-dollar homes, they open themselves up to threats when they reveal their whereabouts. My recommendation is to post after the fact instead of in the moment. Also, take seriously the importance of anonymity when checking into hotels or visiting tourist attractions.

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

https://finance.yahoo.com/news/m-advisor-wealthy-families-7-203337535.html

I Downsized for Retirement and Regret It: Be Aware of These 6 Pitfalls

I Downsized for Retirement and Regret It: Be Aware of These 6 Pitfalls

Andrew Lisa  Updated Thu, July 27, 2023

Generations of Americans have leveraged their homes to fulfill their retirement dreams by downsizing.

Buy a house fit for a family when you have one and build equity over the years. When the nest empties and retirement nears, sell it to buy something smaller, cheaper and more manageable, and use the difference to finance your glorious golden years.  Downsizing can come with hidden financial and emotional costs, however. It can also diminish both your nest egg and your peace of mind. Here are some examples of downsizing regrets and how to avoid them.

In the Post-Pandemic Era, Even Small Houses Come With Big Price Tags

In the 2010s, annual home appreciation reached a high of 8.9% in 2013 but typically hovered around 5% to 6% per year. Then, COVID ushered in the era of unaffordability.

According to Freddie Mac, prices rose by 11.3% in 2020, 17.8% in 2021 and 6.7% in 2022.

It’s good to sell when prices are high, but retirees looking to downsize will then have to buy in an under-inventoried housing market with a median sale price of $416,100, according to the St. Louis Fed. According to Money.com, prices rose fastest and highest in the Sun Belt, where retirees have flocked for generations.

Borrowing Is Burdensome

Some retirees might earn enough from the sale to buy their smaller home outright, but because of today’s sky-high prices, many will have to take out mortgages to avoid being house rich and cash poor. With rates near 7%, home loans haven’t been this expensive since 2002.

High Prices Could Mean High Taxes

Profits of up to $250,000 for individuals and $500,000 for joint filers are exempt from capital gains taxes. Those are fairly easy thresholds to meet in a normal housing market, but today’s downsizers are selling near the market’s peak, and if they breach those limits, they could owe as much as 20% on the profit.

Real Estate Transactions Aren’t Cheap

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

https://www.yahoo.com/finance/news/downsized-retirement-regret-aware-6-110017144.html

Stealth Wealth Secrets: 10 Tips for Living a Rich Life in a Low-Key Manner

Stealth Wealth Secrets: 10 Tips for Living a Rich Life in a Low-Key Manner

Crystal Maye  Thu, July 27, 2023

Stealth wealth, as explained by Experian, is all about financial privacy. In today’s society, broadcasting wealth on social media or even just among coworkers and friends can make you a target for exploitation. Whether bad actors attempt to hack your accounts or loved ones come with their hands out, showcasing your earnings may have unfortunate consequences.  Keeping information about your income and assets private can help protect you from a wide range of uncomfortable and potentially unsettling situations. Individuals who practice stealth wealth often have significant amounts of money, but few people know about it. They keep it under wraps in order to safeguard their assets.

For many people, stealth wealth may be one of the best ways to handle your money and create a stable financial future. Here’s what you need to know about the money trend.

What Is Stealth Wealth?

It’s unclear when the trend started, but in 2008 at the height of the Global Financial Crisis, the Tampa Bay Times reported on the effect that the downward economy had on recently minted millionaires.

As it noted, millionaires weren’t as ready to flaunt their riches as their predecessors. Many of them were living more reserved lifestyles, patiently waiting for the economy to turn around. They held onto their wealth instead of spending it on material things and those that did were greatly rewarded.

Fast forward 15 years and many of the OG stealth wealthers have kids who are coming of age or entering adulthood. They have likely learned from their parents’ financial practicality and played coy with their net worth. Whether they have established a name for themselves in business or simply live off of family money, they aren’t as willing to showcase their wealth to the world.

Why More People Are Choosing Stealth Wealth

As during the Global Financial Crisis, we currently find ourselves in a period of economic instability and uncertainty. To avoid financial hardship, people must take a long look at their lifestyles and how they spend money. By living a more fiscally responsible life, they can ensure stability in the future when the economy begins to turn around.

Practicing stealth wealth now can help you withstand any market fluctuations. It can help you provide for your family and allow you to live comfortably without the worry that people will come to you when they need money. Stealth wealth takes a different mindset, but it is not impossible to achieve.

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

https://finance.yahoo.com/news/why-stealth-wealth-best-way-120024782.html?_fsig=6LkBa.nDz8XFigH1wSXJQA--%7EA

Top 3 Family Money Disputes — And How To Solve Them

Top 3 Family Money Disputes — And How To Solve Them

Heather Taylor   Wed, July 26, 2023

I’m a Will and Trust Attorney: These Are the Top 3 Family Money Disputes — And How To Solve Them

As the United States enters one of the greatest wealth transfers in history, it is not unusual to hear about families experiencing money disputes. Family members may let their emotions get the better of them and find themselves stuck in arguments, fights and disagreements regarding a wide range of financial issues. In worst-case scenarios, these disputes can lead to acts of physical violence or never reach a resolution.

GOBankingRates spoke to Mitch Mitchell, associate counsel, estate planning at Trust & Will, about the primary sources of contention that lead to money disagreements among family members. Here’s how families can solve these top money disputes.

Distribution of Inheritance

Money disputes often arise during the estate planning process, particularly with the distribution of an inheritance. If a loved one passes away and leaves behind assets, family members and siblings may disagree on how to divide an estate. And if there’s no clear will or estate plan, it only adds to the confusion and increases overall disputes among family members.

Another aspect to consider is the role of family dynamics. Mitchell said siblings might have different interpretations of their parents’ intentions, which can lead to disagreements and conflicts over how assets should be properly managed and distributed. Some parents also distribute their assets unequally among their children. Even if they have their own reasons for doing so, Mitchell said unequal distributions can create tension and animosity among family members.

Incapacitated Family Members

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

https://finance.yahoo.com/news/m-trust-attorney-top-3-184913381.html

CFPB Fines Bank of America What That Means For You

CFPB Fines Bank of America What That Means For You

Tue, July 25, 2023

The Consumer Financial Protection Bureau on July 11 fined Bank of America for three types of transgressions against its customers, each costing consumers money and time. We've seen similar transgressions at many other banks over the years, and we are likely to see more in the future.

Here are a few simple steps consumers can take to help them avoid being victimized by their banks.

Avoid NSF/Overdraft Fees

The first BofA transgression cited by the CFPB involved non-sufficient funds (NSF) fees. An NSF fee occurs when there's not enough in an account to cover a transaction. Banks will typically decline a transaction because of insufficient funds and charge the customer an NSF fee.

The problem with what BofA did wasn't that it charged an NSF fee, but that is charged multiple NSF fees for the same transaction. BofA's NSF fee was $35. When this charge was unfairly applied multiple times, the total fee amount quickly rose to a burdensome level.

NSF charges and overdraft charges — the fee applied when an account is overdrawn and the bank covers the transaction charge on the customer's behalf — are common fees at banks.

The good news is that many banks, including BofA, have made their NSF/overdraft fee policies more consumer friendly in the last few years. So if you make a mistake by not having enough in your account to cover a transaction, the fees shouldn't be as costly as what BofA customers experienced. Nevertheless, NSF/overdraft fees can still be costly, and it's important to avoid them.

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

https://finance.yahoo.com/news/cfpb-fines-bank-america-means-172224126.html