Several years ago, I asked a client, “If your wife died today, can you afford someone to help you take care of your three kids?”
He told me that yes, he could afford to pay a nanny, but it would leave a sizable dent in his finances. The client was very well off. He had a c-suite level job, but the death of his wife would still impact his financial future.
Less in 90 days later he called and asked, “How did you know I would be faced with this? She has breast cancer and I am scared to death.”
Fortunately, his wife is alive and well today. But, the question of “what if it had gone another way” remains. Five years later, after being cancer free, they purchased a life insurance policy for her and eliminated that potential disaster from their financial plan.
You and everyone you know will leave this world eventually. The question is when. Most people ignore this important question. But for some that will not be an option. The death of a spouse is devastating. The death of a son or daughter is devastating. The death of a sibling is devastating. Some people can bounce back, but a lot can’t and don’t. You won’t know until it happens. I know this from experience. My sister died of cancer on December 26, 2014.
The loss of a loved one can be emotionally devastating, but it doesn’t have to be financially disastrous as well. Contact me for a free risk analysis and together we can make sure you and your family are prepared, no matter what the future holds.
The hardest thing about being a parent is that time flies by so fast when raising children. One minute you can hold them in your arms and the next minute they’re graduating high school. Once they have graduated from high school, typically college or trade school education is next. Individuals with a college degree make substantially more than those who don’t. As a parent we want the best for our children. In a lot of cases we want their lives to be better than ours.
College education costs in the United States has gone through the roof. Each day we read about how college graduates are graduating with 5 to 6 figures in education debt. This has become a major problem making it harder to build for a solid financial future. Saving early on for your child’s education, so that they have a better financial footing, is becoming more and more important. The following are three college savings plans that you can implement today to bridge the financial gap to college.
- UGMA – Uniform to Minors Act. This type of account is in the child’s name and a parent’s name. Until the age of 18, the parent is the owner/controller of the account. All money in the account needs to be spent for the benefit of the child. Once the child turns 18, legal adult age, the account goes into the child’s name alone thus removing the parent’s control over the money. The risk of this type of account is the money that was intended for the child’s education, actually ends up going to “other things”. I rarely see UGMA accounts used for education purposes only.
- State sponsored education plans. Most states have a plan that you pay into for a period of time, the sooner you start the lower the monthly payment. Once the plan is paid up, the child can go to any state school for little to nothing out of pocket. If your child is going in-state, this can be a great plan to purchase. The risk is if your child goes out-of-state. What you paid into the plan may not be enough for out-of-state tuition. Typically, tuition costs for students with residency in a different state can be double what in-state tuition would have been. I like state sponsored plans as long as the state sponsoring them is financially sound and as long as the child is going to go to college in-state.
- 529 plans. 529 plans are the most flexible education plans between these three education examples. A 529 plan is an investment account that is solely for the purpose of the child’s education. Each parent can contribute up to $14,000 per child each year. You can typically invest that money based on the child’s age which will determine the risk tolerance of the investment portfolio. As the child gets older, the risk of the underlying portfolio will decrease. The risks with a 529 plan is the money is invested into the stock market. The underlying portfolio value can fluctuate. The benefit of this type of education savings plan is that the assets can increase in value beyond inflation. This potentially reduces the amount that you will have to put into the plan to meet the child’s financial obligations while in college. Ginger and I have set up two 529 plans for our children. We chose the 529 plan because of its flexibility, it’s potential growth due to stock market performance and because if one of our children don’t go to school or if there’s money left over after their college education, I can change the beneficiary of the 529 plan to another family member. I also like the 529 plan because grandparents and relatives can contribute to the child’s education.
The key to any successful education goal or financial goal for that matter is time, consistency of contributions and management of risk. If you would like to know more about college savings plans or other financial matters, contact me email@example.com. Let me know if this was helpful. If you have any suggestion on subjects you would like me to write about, please email me.
The fees, expenses, and features of 529 plans can vary from state to state. 529 plans involve investment risk, including the possible loss of funds. There is no guarantee that a college-funding goal will be met. In order to be federally tax-free, earnings must be used to pay for qualified higher education expenses. The earnings portion of a nonqualified withdrawal will be subject to ordinary income tax at the recipient’s marginal rate and subject to a 10-percent penalty. By investing in a plan outside your state of residence, you may lose any state tax benefits. 529 plans are subject to enrollment, maintenance, and administration/management fees and expenses
It’s so common. I always ask the question to our prospects who are realtors, ‘”How do you receive your commissions?” Most come back to me with a simple , “I receive them in my checking account.” And most pay ordinary income tax on their earnings.
Here is a secret…you’re a business, so structure your “Business” as a business, not a sole proprietorship. The following should be confirmed by your CPA.
- Set up an LLC that files as a S-corp. Ever heard of Warren Buffet? He once said that he paid, percentage wise, less taxes than his secretary. How is that possible? It’s all in how receives his income. How do you receive your income?
- Deductions. Depending how your “business” is structured, deductions can be a big savings. Mileage, advertising, entertainment.
- Set up a retirement plan. As a small business, you have the opportunity to set up a 401(k), SEP or a Simple IRA. Great way to save for the future.
With 2015 tax’s due this month, begin to plan for 2016 tax season now. For more information on this and other financial planning strategies, contact me, Trent Grinkmeyer, at 205-266-7509 or email me at firstname.lastname@example.org
OH BOY!! Stuff is on SALE!!!
You come home and find new “stuff” laid out over the kitchen table or maybe your friend tells you how they got such a GREAT deal on new “STUFF”. ‘It was such a great sale!!!’
Would you buy something you wanted for 5% off? 10% off? 15% off!?!? You probably would, so let me point you to a GREAT SALE that could make you more bank.
The Stock Market – On SALE!!!
Know an opportunity when you see one.
Last I checked…bass boats and shoes didn’t appreciate in value.
Investments are subject to risk, including the loss of principal. Because investment return and principal value fluctuate, shares may be worth more or less than their original value. Some investments are not suitable for all investors, and there is no guarantee that any investing goal will be met. Past performance is no guarantee of future results. Talk to your financial advisor before making any investing decisions
Get a GRIP…know the facts…
Over the last three months I have heard more panic, fear and giving up on investing. The crazy part about these people is that their facts are WAY OFF!
I came across this article about oil and the effects it’s having on our economy. Checkout the link below. Knowledge is power…hearsay is throwing darts in the dark.
You have read someone else’s opinion…now what are you going to do with that info?
I recently received the article I am attaching to this post. I read it and asked myself the question, “What are you going to do with this information?; Does this change your plan of attack?; Do you scrap your company’s business plan?; Or do you continue on?”
Information can be beneficial or it can be the death of all you created. Building a plan, executing on that plan and believing in that plan can only bring you success. Flip-flopping back and forth on outside information will eventually kill your chances of success.
I would like to hear your opinion of the article. Does it change your plan?
Five things that can get you on the road to building more wealth in 2016.
Easy tasks that will get you moving toward financial health and growth:
- Track all of your expenses and income. There are plenty of programs that are free and easy to use. The key is to update the program once a week. Pick a day each week and take 20 minutes to update expenses and to see where you are spending your money.
- Get real about your debt. Write down all of your debt on a tracking sheet. Update it each week with your expense tracker. List your debt from least to largest. You’re going start paying of the smallest amount first by doubling, at a minimum, the minimum payment. Once you have paid the first one off, take the amount you paid to the first debt will now go to the next debt and so on.
- Once you have paid down your debt, take the amount you were spending on debt and put the money away in a savings account until you have three months’ worth of income saved. Yes, it may take while, but just do it. The security you will feel from this will be worth the wait.
- When you have your three months’ worth of income saved, start educating yourself on investing. Seek out mentors, financial consultants that are unbiased and knowledgeable on investing.
- Never stop being aware of where you are at. This is a process. Once you have the process down and are repeating it, you will see repeated results.
There it is. 2016 is your start to a path of stronger personal finances and building more personal wealth. Get on it…commit to it…Let’s do it!!
Trent A. Grinkmeyer, AIF®, CRPC® / Financial Consultant