What Happens at XYPN Live, is Awesome!

This week’s blog post is more of an update on what I’ve been doing lately as opposed to a specific financial topic. Last week, I had the pleasure of attending XYPN Live 2018 in St. Louis, Missouri. XYPN Live is an international gathering of financial planners who are members of the XY Planning Network, whose members focus on fee-only planning. This year, we had attendees from nearly all US states, Canada, and our first colleagues from Australia!

Me at the opening night mixer.

The vast majority of XYPN members run their own firms as solopreneurs and are changing the way clients access financial advice. One huge advantage to being in XYPN is the fact that advisers openly share their knowledge, resources, experiences, and at times, client referrals! It’s an invigorating and fresh perspective in an industry viewed as being PMS – Pale, Male, and Stale.

XYPN Live gives attendees a chance to meet their fellow advisers who are all at various stages in their careers and share knowledge and experiences. We also meet in small groups called “Launchers” or “Mastermind” groups. Basically, when you join XYPN you are added to a small group based on where you are in your journey and your group meets once a week via Zoom to update and support one another. Upon arriving at the conference, you already have a small group of advisers that you know. It was like a reunion instead of first meeting! This approach accelerates networking and you feel as though you have always belonged.  

So what else makes XYPN Live different from other conferences? For one, we have an anti-harassment policy that made headlines in 2017 when it was introduced. Harassment in any form simply is not tolerated at XYPN events. We have more women at our events! The industry has struggled adding women and minority advisers and XYPN is changing that dynamic. Content is timely and delivery is intimate utilizing roundtables and one-on-one sessions with experts. I attended roundtables on improving client deliverables, cyber security, marketing yourself, writing content for blogs, books, and newsletters, and a special roundtable on equity awards in startups.

Another feature is a targeted vendor exhibit hall limited to one day. Gone is the dreaded vendor exhibit hall that runs the length of the conference with shotgun pitches. The vendor exhibits are primarily vendors that XYPN members are already using. One nice touch is the vendor Nerd Bar where you can meet and greet your vendors and thank them for their product, make recommendations for changes (that the vendors actually listen to), or learn more about the vendor’s product you are using in a personal consultation. That is a huge benefit!

Overall, XYPN Live 2018 was a lot of fun and very beneficial. It’s also very different from other financial services conferences. I am already looking forward to next year!

#talktometuesday #CFPPro #Hireaplanner #XYPNLive #conference #goals #education

Why You Should Hire a Financial Planner

We live in DIY world.  Whether for home repairs or financial planning most folks these days feel they can go it alone. When it comes to your finances and planning your future is that really the best choice? Sure, you can search the Internet and find a few retirement calculators and even articles on saving, investing and “Top 5” lists, but is that information relevant to your personal situation? How do you know if what you found fits into your financial life plan? What if you make a move only to learn later that your decision cannot be undone without costly consequences?

Hiring a financial planner can help you reap more than just potentially better investment returns. Financial planners can help you with a myriad of financial decisions and life changes such as retirement, debt management, marriage, divorce and the birth of a child. The help, guidance and advice of a financial planner is well worth the fees charged and studies by Vanguard and Russell Investments support this position. Vanguard claims working with a financial planner can add “about 3%” over time to your returns and that behavioral coaching is the most valuable benefit an investor receives. Russell Investments assess the value of a fiduciary adviser at around 4%.  However, these studies point out that a financial planner brings more to the relationship after fees than just a potentially better return. The studies reveal that in addition to a potentially better return, financial planners help clients with difficult decisions, free up clients’ time, explain complex transactions, and provide guidance and an on-going relationship.

When you do have a life change or follow-up question, a call to your planner can be a lot more comforting than going it alone. As an independent Certified Financial Planner™, I can help you create a plan, set goals and a timeline, and put that plan into action. I can also be there to talk you through market jitters and remind you of your goals and timeline. Let’s start planning today.

LINKS BREAK. FOR LOCATING THE REFERENCED STUDIES PLEASE SEARCH THE FOLLOWING IN YOUR SEARCH ENGINE:

Vanguard – The Added Value of Financial Advisors

Russell Investments – 2017 Value of a fiduciary adviser update: More than 4%

 #talktometuesday #CFPPro #Hireaplanner #retirement #socialsecurity #goals #savings #cash 

What’s All This Talk About IRAs?

Recently, my friend Esmeralda pointed out that I haven’t really written about or explained IRAs.  I looked back over my posts and realized she was right on the money. I often mention IRAs but I’ve never really done a Q&A about them or explained what they are.

So, what is an IRA? IRA stands for Individual Retirement Account. There are several types of IRAs, but this blog post will focus on the two most common: the traditional IRA and the Roth IRA. The IRA itself is not an investment, it’s an account and you make investments within the account. At their most basic, both IRAs share some common features; individuals can set aside personal savings from earned income ($5,500 per year as of 2018, over age 50 you are allowed an additional $1,000 called a catch-up contribution), both provide tax advantages in their own way, both allow for spousal IRAs for non-working spouses, and both may be protected from creditors in bankruptcy proceedings. But as with all things investing and governed by federal law and the US tax code, things aren’t always that simple.

Traditional IRA

With a traditional IRA, you make contributions which may be tax-deductible. I say ‘may’ because you might be in a situation where contributions to your traditional IRA are not tax deductible. More on that below.  Your contributions grow tax-deferred until you make a withdrawal – a distribution. Your distribution is taxed at ordinary income tax rates provided you are age 59 1/2 or older. If you are under age 59 1/2, your distribution may be subject to a 10% penalty in addition to ordinary income tax. This penalty can be avoided if the distribution is for qualified education expenses, first-time home purchase (up to $10,000), or unreimbursed medical expenses in excess of 10% of your AGI if you are under age 65 (7.5% if over age 65).

What are those tax-deductible limits mentioned above? Well, this depends on whether you or your spouse is covered by a retirement plan through your employer and your income level.

If you are married filing jointly and YOU are covered by a retirement plan, you can take a full deduction up to $101,000 AGI. Between $101,000 and $121,000 AGI a partial deduction. Over $121,000 AGI, no deduction.

If you are married filing jointly and YOUR spouse is covered by a retirement plan, you can take a full deduction up to $189,000 AGI. Between $189,000 and $199,000 AGI a partial deduction. Over $199,000 AGI, no deduction.

Single or Head of Household? You can take a full deduction up to $63,000 AGI. Between $63,000 and $73,000 AGI a partial deduction. Over $73,000 AGI, no deduction.

Married filing separately? Not a good situation. You can take a partial deduction if your AGI is less than $10,000 AGI and you get no deduction if your AGI is $10,000 or more.

You have to take a Required Minimum Distribution (RMD) after age 70 1/2 and you can no longer make contributions to your traditional IRA – even if you are still working!

Roth IRA

With a Roth IRA, you make post-tax contributions (i.e., no current tax deduction available). There is no RMD requirement at age 70 1/2 and you can continue saving in your Roth IRA if you have earned income. Three are, however, income limits on who can contribute.

If your tax filing status is single, you can contribute up to $5,500 if you earn less than $120,000 MAGI. You can make a partial contribution between $120,000 and $134,999 MAGI. If you earn $135,000 MAGI or more, you are ineligible. You may, however, be able to make a Backdoor Roth IRA contribution.

For married filing joint, you can contribute up to $5,500 if you earn less than $189,000 MAGI. You can make a partial contribution between $189,000 and $198,999 MAGI. If you earn $199,000 MAGI or more, you are ineligible. You may, however, be able to make a Backdoor Roth IRA contribution. Notably, you can contribute even if you or your spouse are covered by an employer retirement plan.

Your Roth IRA contributions grow tax free and if your distribution is a qualified distribution, it is tax free! If you happen to take a distribution prior to age 59 1/2 and have owned your Roth IRA less than five years you’ll owe taxes and a 10% penalty on your earnings portion of the distribution.  Like the traditional IRA, this penalty can be avoided if the distribution is for qualified education expenses, first-time home purchase (up to $10,000), or unreimbursed medical expenses in excess of 10% of your AGI if you are under age 65 (7.5% if over age 65). There are a few other exceptions as well so be sure to check with your tax preparer.

If you happen to take a withdrawal prior to age 59 1/2 and have owned your Roth IRA for at least five years or more, you can avoid the income taxes and 10% penalty on your earnings portion of the distribution if you meet one of the following exceptions: first-time home purchase (up to $10,000), disability, or the distribution is paid to a beneficiary of your estate after your death.

If you are over 59 1/2 and have owned your Roth IRA for less than five years, you’ll owe income tax but no 10% penalty on your earnings.

If you are over 59 1/2 and have owned your Roth IRA for five years or more, there is no income tax or 10% penalty on your earnings.

Q&A

Q. Can I have an IRA for my child?

A. Generally, yes. However, your child has to have earned income.

Q. When can I open and make my IRA contribution?

A. You can open and contribute to your IRA at any time. You do have the ability to open and contribute to an IRA for the previous year up until tax filing in April. Just make sure to open and fund your IRA prior to submitting your finalized tax return. For example, let’s say you want to fund an IRA for 2018, you may open and fund the IRA as late as your tax filing date in April 2019. For a Roth IRA in particular, this sets the five-year clock (for avoiding potential tax on distributions) starting at January 1, 2018.

Q. I had $4,300 in earned income. Can I contribute $5,500 to an IRA?

A. You can only contribute up to $4,300 (your maximum earned income).

Q. Can I contribute and have both types of IRAs (a traditional and a Roth)?

A. Yes, but your maximum combined contribution cannot exceed $5,550 (or your maximum earned income). For example, you could contribute $2,750 to each if you are otherwise eligible.

Know that all investing involves risk, and you should always seek help if you are not sure about what you are doing. As an independent Certified Financial Planner™, I can help you. No matter where you are in life, a CFP® professional can help you create a financial plan for today and tomorrow. #LetsMakeAPlan #CFPPro #talktometuesday #Hireaplanner #RothIRA #fees #IRA

Avoid HOT Stock Tips Like the Plague

For new investors, the allure of a hot stock tip can be too much to ignore. This is a common desire on the part of new investors. They want to hit a homerun with little investment the first time up to bat. The truth, is sadly different. Too many investors fall prey to the hot stock tip and end up with an investment that is not in line with their risk tolerance, doesn’t fit into their investment plan, or worse, costs them money they couldn’t afford to lose in the first place.

Being a financial planner, I often encounter people who tell me they have a tip on a hot stock that is a guaranteed winner. Poppycock! No stock is ever a guaranteed winner and we all need to keep that in mind. Furthermore, as a Certified Financial Planner™ I’m not a broker or day trader who buys and sells equities daily. Financial planning is much more than buying and selling shares of stock.

As a new investor, you should first determine your personal risk tolerance. A financial planner can help, and there are available online tools as well that gauge your tolerance for risk (think possible loss) of your investment. Knowing your risk tolerance will help you determine the amount and types of investments you will be comfortable making. Next, determine how much you can afford to invest and work with a financial planner to setup a diversified portfolio that matches your risk tolerance, timeline, and your goal.

Buying a single company’s stock based on a tip you heard on the street is not sound investing and could lead to losses you cannot afford. If you do not already have an investment portfolio, risking money you have to start investing on a single stock is not a sound move. Chances are, if you are hearing the hot tip on the street or from a friend, the investing firms on Wall Street heard it long ago and the stock may be at or near it’s high. Worse, other traders may already be preparing to short the stock.

Investing is emotional and no one likes to lose money, but losses can and do occur. As a new investor, or even an investor with some experience, keep the following in mind.

1. Don’t chase returns. How the stock performed last month or last year may not continue.

2. Don’t chase news. Chasing news and trying to time your investment is a losing proposition. If you’re reading or watching the news, it’s likely too late. Again, professionals have beaten you to the punch.

3. Don’t invest money you can’t afford to lose. This is tough for a lot of people. They have a little money and want more and see buying a single, hot stock as a quick route to riches. Keep in mind that any money you invest stands a chance of being lost. If you can’t afford to lose it, don’t invest it.

4. Don’t buy based on a tip or hot stock recommendation. Period!

There may come a day when properly analyzed individual stocks fit the bill for your investing plan. By that time, you will have more experience and better understand that investing is not just buying a stock. Until then, know your risk, put a plan in place, and don’t rush to invest more than you can afford to lose.

Know that all investing involves risk, and you should always seek help if you are not sure about what you are doing. As an independent Certified Financial Planner™, I can help you. No matter where you are in life, a CFP® professional can help you create a financial plan for today and tomorrow. #LetsMakeAPlan #CFPPro #talktometuesday #Hireaplanner #mutualfund #fees #hottip #stock

A Few Key Items to Look for in a Mutual Fund Prospectus

These days, an overload of data is just a few keystrokes away. This is especially true when researching financial instruments. Let’s take a look at a few key items that you should focus on when researching a mutual fund that you may be interested in purchasing.

This fund indicates it is a domestic stock fund with a $10,000 minimum (initial) investment and expense ratio of 0.04%.

In the fund’s prospectus, or disclosure pages online, you want to look for sections with titles such as Fund Facts, and Price & Performance, and Fees & Minimums. These areas will give you some vital information about the fund in which you may be interested in investing. Keep in mind that language and layout will vary from provider to provider. Key items to focus on are the fund’s asset class (it should fit into your portfolio goal), risk ranking (align with your personal risk tolerance), and fees (know what it costs you).

Let’s take Fund Facts for instance. Here you should find a quick breakdown of the fund and its general makeup. For example, you should find key details such as the fund’s asset class defining in what and where it invests, such as domestic or international, stock or bond. Look in this section for the fund’s ticker symbol or fund number. This area may also include the fund’s risk rating usually expressed as a number; less risk potentially less reward, or higher risk with potentially higher reward. You may also find in this section who manages or advises the fund.

In this example, risk potential is indicated on a scale with 1 being lower risk and 5 higher.

This chart reflects fund performance over the past 10 years.

In the Price & Performance area of fund disclosure, the information is pretty much what it seems. Here you can find historical price information and historical returns for the fund. Many providers include a graph or chart to show you a representative performance of say $1,000 or $10,000 had you invested at a particular time in the past. In this section you may also find the fund’s current price and its historical returns for 1-year, 5-year, 10-year, or even since inception. This performance is usually compared to the fund’s benchmark (the ideal against which the fund is measured).

To find out what it will cost you to start investing, and how much it will cost you thereafter, look in the Fees & Minimums section of the disclosure. Here you can find out what the minimum investment is to invest in the fund. Some funds have no minimums; others require a larger amount of say $2,500 or $3,000 or even $10,000. No two funds are the same. You should also look in this area for the fund’s expense ratio (sometimes expressed as ER). These days, the expense ratio should be fairly low, under say 1.5% or possibly lower. You also want to look to see if the fund charges 12b-1 fees (annual marketing or distribution fees), redemption fees (for selling your fund), purchase fees, or account maintenance fees. Funds may charge these fees and it is not an indicator that the fund is good or bad, just be aware of what you are paying for and how much. Generally, you should consider funds with low-to-no fees in these areas so you keep more of your returns over the time you own the fund.

Even with all of the disclosure available regarding a mutual fund these days, keep in mind the old adage that past performance is no indicator of future performance. Know that all investing involves risk, and you should always seek help if you are not sure about what you are doing. What’s your plan? As an independent Certified Financial Planner™, I can help you. No matter where you are in life, a CFP® professional can help you create a financial plan for today and tomorrow. #LetsMakeAPlan #CFPPro #talktometuesday #Hireaplanner #mutualfund #fees

Is Your Adviser a Fiduciary?

You may have heard a lot in the press lately about financial advisers and whether they act as a fiduciary. So, what does it mean? Basically, it means your adviser is required to act in your best interest, and not their own. That’s it! Seems simple, right?

Ask your adviser if he or she is a fiduciary.

Not so. For starters, not all advisors are fiduciaries nor are they required to be a fiduciary. There are financial professionals who are only required to act under a suitability standard. This means, the adviser need only have adequate reason to believe a recommendation is suitable for their client. In this situation, it is possible a conflict of interest may exist. That is, when deciding between investment options, if one choice pays the adviser a better commission, the adviser may select that option believing it suitable for their client. It doesn’t mean that the adviser (or the investment) is necessarily bad, it just means a conflict exists. In dollars and cents, it means you as the client may end up paying more for your advice and investment.

Under a fiduciary standard, an adviser uses a well thought out and prudent process. Conflicts of interest must be disclosed. They will also discuss their choices with you in detail to be certain you understand the recommendation, the rationale behind it, and provide you ample opportunity to ask questions. This way there is no misunderstanding about the choices being made or the logic behind those choices. A fiduciary adviser looks beyond short-term commission and puts the client’s best interest first. Keep in mind that the Securities and Exchange Commission also regulates registered investment advisers that claim to be fiduciaries.

When seeking financial advice, do your homework and know that there are two types of advisers out there. Be direct and ask your adviser if he or she is a fiduciary. The answer should be a simple yes or no. If you do pick an adviser that is not a fiduciary, just understand upfront what the costs and conflicts may be.  Again, it’s not a ‘bad guy’ vs. ‘good guy’ but knowing who and what you are paying for in advance. This will help avoid conflict, maybe save some money, and reduce stress from the beginning.

If you are looking for an independent CERTIFIED FINANCIAL PLANNER™, I can help you. Contact me and let’s get started. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #CFPPro #savemoney #retirement #fiduciary #suitability

How to Improve Your Credit Score

It’s interesting to hear folks talk about their FICO score and it’s even more interesting to hear some of the myths people believe will affect their FICO score. Most are not even sure what FICO means. It’s the names of the founders who started a data analytics company to score credit usage back in 1956.  The company was founded in San Jose, CA and FICO comes from Fair, Isaac and Company with Fair being Bill Fair and Isaac being Earl Isaac. If you are concerned about your FICO score, here are three tips that will help you improve your score.

1. Check Your Credit Report

Consumers are entitled to a free credit report every twelve months.  You can contact Experian, TransUnion, or Equifax and ask for a copy of your credit report. Consider getting your report from each of the agencies to compare. If you find errors, start working to rid your report of the error. Removing errors can take time, so don’t put this off. To stay abreast of your credit score, consider signing up for a free credit reporting service such as Credit Karma, Credit Sesame, or possibly through your credit card. For disclosure, Engage Advising has no professional relationship with any company mentioned. Choose the one that works best for you.

2. Pay Your Bill

Much has been misconstrued about your credit utilization rate (the amount of credit you use). For example, if you have a card with a $1,000 limit and you charge and carry a $500 balance without paying it off, you are utilizing 50% of your credit. Don’t focus on carrying a balance to build credit; focus on paying your bill each month. If you do start to carry a balance, consider making micropayments during the month before your due date to reduce your balance. This will help pay down your balance and it will generally be reported monthly by your card issuer, lower your utilization rate, and improve your score. 

3. More is Not Better

You don’t need to open an account with every credit card or store account for which you can qualify.  Keep it simple! It’s better to have fewer credit accounts that are paid on time, over a longer period of time in a responsible manner than it is to have as many open accounts as you can qualify for. Consider putting some of your regular bills that you pay each month in an autopay program that is automatically charged to your credit card every month (think cable, cell phone, streaming service, etc.) and be sure to pay your balance. The other benefit is that you will not forget to pay that bill.  This use of credit and managing it well over time is much more important than having multiple credit lines. Think about having a Visa or MasterCard and/or an American Express card. That will give you some flexibility in the event a vendor does not accept your preferred card. An entire post could be written on which card to select, so do your homework and select the ones that work for you. For disclosure, Engage Advising has no professional relationship with any company mentioned.

Overall, keep an eye on your credit report, pay your bill each month, and don’t open more credit accounts than you really need. There’s no need to have a department store card when you can pay be Visa, American Express, or MasterCard. As an independent Certified Financial Planner™, I can help you prepare a debt payment strategy and clean up your credit profile.  Contact me and let’s get started! #talktometuesday #education #Hireaplanner #stressfree #FICO #FICOscore #savings #debt

Back to School and the ABCs of Talking Money with Kids

Back to school is a great time to teach your kids the ABCs of money. With lots of back to school shopping you have many opportunities. Don’t worry; tackle the easy topics first but keep the dialogue going. Whether you have children in grammar school, junior high, or high school, this is a great time to start talking with your kids about earning, saving, and investing money.

A – Address the Topic

The first hurdle is to address the topic with your child. Address the topic of money directly but keep it casual and assess where your child is with their understanding of money. A good starter is to simply ask if they understand where money comes from. If they reply ‘you,’ it’s time to let your kids know more about how your family earns its living. Keep the topic fun, casual, and light. Don’t make this first step too complicated.

For the youngest child, introduce the concept of money and show them examples. Ask them if they know what it is, where it comes from, and what it is used for. It’s important to show them some physical money because many of today’s transactions are digital. For a junior high child, now is a great time to introduce them to earning money. Start with a simple example such as earning $10 per hour and talk to them about taxation. Show them how much they would truly receive of the $10 if their tax rate was, for example, 20%.  For high school kids a little math is good so take this exercise a step further. Have them pick an item they would like to buy and calculate how many work hours it would take to earn enough money to pay for the item after tax.

B – Beyond the Basics

For this step, you are going to take your child beyond the basics of understanding what money is, how it’s earned, and what it takes to earn enough to buy an item. Now is the time to instill good savings habits in your child. For your youngest, start by teaching them to save at least 15% of money they earn, even from their allowance. Withhold 15% of their allowance, gift money, birthday money, etc., and teach them it is for savings. Don’t cheat your child; put this aside to grow in a savings account and gift it to them as a surprise in the future.

For your child that is in junior high or high school, they may already be earning money from a part-time job. If so, sit down with them and go over their pay stub and explain to them the taxes (and possibly benefit deductions) that are being withheld. If your junior high child only has an allowance, have them save 15% in a savings, money market, or CD account. For your working high school child, ask that they set aside at least 15% in savings; more if you can get them to do it. As long as your child has earned income, now is a good time to introduce them to a Roth IRA in addition to savings, money market, and CD accounts. A child with earned income is allowed to contribute to a Roth IRA. To inspire them, use an online Roth IRA calculator to show them how much their investment could grow by the time they reach certain ages.

C – Confirm, Check in, and Continue

Over time, confirm with your child that they understand the concept and value of money. You can also take this time to teach them that although money is important, it’s not more important than people or doing something they love in life. Confirm that they are saving and check in with them about how they feel about what they are doing. It’s also good to check in with your child as they save and learn about their goals. Get them to set a goal and continue saving and investing. Finally, when they reach the goal – celebrate!

The takeaway from the ABCs of money is to start a dialogue with your child and address the topic of money. Move beyond basics and help them to start investing and understand why they are doing so to instill good money habits for life. Get them used to saving at least 15% of everything they earn over their lifetime. Confirm that they are understanding the concepts of money and saving, check in with them about how they are doing, and encourage them to continue saving and investing for life.

If you need help or would like to know how to start, give me a call. As an independent CERTIFIED FINANCIAL PLANNER™, I can help you start a dialogue with your child about money and make this a profitable back to school year. Contact me and let’s get started. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #summervacation #vacation #CFPPro #savemoney #retirement #backtoschool #childrenandmoney #saving

3 Savvy Tips for Teachers at Back to School Time

It’s back to school time in many parts of America. Whether you are a new teacher entering the field, or you have been in the field for a long time, this is the perfect time to assess your financial situation. Here are some savvy financial tips to consider.

Tip 1 – Check on Retirement Plans

It may sound crazy, especially for new, young teachers just entering the field, but now is the perfect time to learn what retirement plan options are available to you from your employer. For some teachers, their employer may be a unified school district, for others it may be a private corporation. Either way, be aware of what retirement plan options are available to you. You most likely have one or more of the following options: a traditional pension plan, 401(k), 403(b), or other plan type. All teachers should know your plan type and know how much you are contributing. You also need to know how it is invested. Are you diversified enough? What’s your personal level of risk?

Tip 2 – Know Your Cash Flow

Teachers get paid on a variety of schedules. Some opt for payment only during the school year, others have their pay pro-rated over twelve months, and some are only paid while on contract. Regardless, it’s good to have an annual reminder to review your budget, your goals, and how much you are investing, saving, and spending.  A new school year is a great the time of year to sit down and make sure you are paying yourself first, saving enough for retirement, and not allowing “lifestyle creep” to take a bigger bite out of your income. Lifestyle creep is when your spending slowly increases over time without you being aware. You must know your cash flow.

Tip 3 – Learn from a Pro

As a teacher, you are a professional in your field. However, personal finance may not be your thing. If it’s not, hire a pro. Seek out a financial adviser to help you and consider a fee-only planner that works hourly. Make sure you like the person and keep in mind that it is a good idea to have an annual financial check-up just like you have an annual doctor’s visit, or dental check-up. An hourly, fee-only planner can work with you over time to help keep your goals front and center and help keep you on target for reaching those goals, and for reaching retirement.

As an independent CERTIFIED FINANCIAL PLANNER™, I can help you make financial decisions for your new school year. Contact me and let’s get started. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #summervacation #vacation #CFPPro #savemoney #retirement #backtoschool

Five Keys to Financial Freedom: Key 5

Week 5 – Rinse and Repeat

The final key to financial independence is to take the previous keys and rinse and repeat. That is, you need to stay vigilant and monitor your success. In week one, you decided to be financially independent, week two you learned the key to stop living paycheck-to-paycheck and get out of debt, week three the key was to rightsize your lifestyle, and week four the key was to start amassing wealth for your future. Each of these keys takes time, patience, vigilance and determination.

This week’s key to financial independence can best be described as living the life you envisioned in week one. With that comes tenacity to stick to your decision to make the changes in your life that were covered over the previous four weeks and keep at it. Here are a few keys to reach those goals:

- Visualize your success. If you need to, create an image board.

- Calendar your steps. Change cannot happen overnight, so calendar these goals. Mark your decision to be financially independent so one day you can look back and acknowledge that decision. Mark a date by which you want to know your cash flow and start gathering the info you need. Do this for the additional steps in each of our keys.

- Talk finances with your partner and make sure they are on board. Your new ship is sailing, be sure that you are both along for the journey.

- Start small, and build. Remember, change on this level is a marathon, not a sprint.

- Celebrate your victories! Small, or big, remember to record your accomplishments and celebrate.

- Set reminders. At first, set monthly reminders. Next, go to quarterly, then half-yearly. You need to keep your goals in mind and stay focused.

- Track your progress. It’s good to see actual achievements that you can point to.

- Get help. Seriously, get professional help. Hire a fee-only planner on an hourly, as needed basis to help you. It will be time and money well spent.

As the saying goes, keep your eyes on the prize. Implementing these keys takes time, patience, and dedication but the results are well worth it. If you embrace these keys and implement them into your life, you’ll be well on your way to your own financial independence!

As an independent Certified Financial Planner™, I can help stay on-track and meet those goals. Contact me and let’s celebrate your financial independence! #talktometuesday #Hireaplanner #income #cash #CFPPro #FinancialIndependence #FiveKeysToFinancialFreedom

Five Keys to Financial Freedom: Key 4

Week 4 – Start Building Your Wealth!

Want to know a secret? By conquering your debt and living within your means, your wealth building has already started. Now those steps need to become more concrete. This is week four and we’ll cover the keys needed to take your wealth building to the next level. To start investing, start with yourself. By now you made the decision to change your life (week one), and you are getting debt under control and paying yourself first (from week two), and rightsizing your life (week three), and that extra cash should go into your savings account. Your first investing goal is to build up an emergency fund of three months of fixed expenses and then up to six months of fixed expenses. Your first investment is and always will be YOU!

Beyond that emergency fund cash cushion, it’s time to utilize other wealth builders. The main candidate is your retirement plan through your employer. Be sure that you are contributing at least to the maximum match amount provided by your employer. Once you are at the match amount, up your contributions by at least an additional 1% each year. If your plan has an automatic increase feature, enroll in or turn this feature on. Over the years your contributions will increase on schedule and you likely won’t even notice the pay difference.

If you do not have a retirement plan at work, open an IRA. Depending on your age, income and other factors you’ll need to decide between a traditional IRA that may provide you with some immediate tax savings, or a Roth IRA that you contribute to post-tax. If you are self-employed, you may be a good candidate for a SEP IRA or a solo 401(k). If you are maxing out these options it may be time to consider a taxable investing account.  A consultation with a fee-only financial planner will help you sort out what options are best in your personal situation.

As an independent Certified Financial Planner™, I can help you narrow your choices and find savings and investments that best fit your situation. Contact me and let’s get started! #talktometuesday #Hireaplanner #income #cash #CFPPro #IRA #RothIRA #Roth #401k #emergencyfund #wealth #FiveKeysToFinancialFreedom #FinancialIndependence

Five Keys to Financial Freedom: Key 3

Week 3 – Rightsize Your Life.

It’s week three of our financial independence month and this week’s key is lifestyle. You can read week one, and week two to get caught up.  Time to tackle rightsizing your life and living within your means. Living within your means does not equate to living like a pauper. It’s not about that. It’s about matching your monthly cash flow to your basic needs and to your goals. Obviously, food, clothing, and shelter are your top priorities otherwise you will not be able to earn a living. There also has to be some room in your cash flow for the non-necessities, those discretionary items that make life fun and worth living. 

Here in the San Francisco Bay Area, housing consumes a tremendous amount of our incomes. The mild weather, lots of high-paying jobs, culture, and the natural beauty of the area seem to be a draw that keeps people coming here to strike it rich. Housing is usually the costliest item. So, how do you rightsize your life?

No matter where you live, start with the big-ticket items; housing and transportation. Do you really need the size of home you are renting or buying? Yes, extra space is nice for guests and it always feels good to live in the best part of town, with a nice home and all the toys. But this is where you need to be brutally honest with yourself and ask, are you living above your means? It doesn’t mean that you need to sell everything and move, but you should make some adjustments.

- Start with immediate home and family. Tell adult children living at home they must start paying a portion of the utilities and even rent.

- Have more space than you need? Time to consider monetizing that space. Nothing wrong with considering a roommate as an adult or even renting out part of your home. It’s a means to an end and does not have to be permanent.

- Consider a smaller, more affordable home or apartment.

- Transportation: compare the cost of a year’s rideshare expense versus owning your own car. If you still need to own, consider buying a car that is 12 – 24 months old. New cars depreciate immediately so you can save yourself a lot of cash by researching a recently owned model that may still be under warranty. Look for low mileage, good resale value, and a model that has been dealer serviced and never wrecked or had a major repair.

- Survey all paid services: entertainment, meal prep/delivery, media, club memberships, etc.  Cut those expenses and redirect that money to yourself! Chances are you are paying monthly for things you rarely, if ever, use. 

- Get an app to help you track spending. If you find that you are eating out five nights per week and hitting the local café three times per day, you’ve just identified a spending problem and a savings opportunity.

Sell your stuff! Seriously, take a look around and see what items you no longer need. Sell off your old sports equipment, antiques you no longer like, collectibles that are not gaining value, tools, books, art, anything you can live without and that you were never really attached to can go! It’s a good way to raise some quick cash for your emergency fund.

Again, you don’t have to be a pauper but really think about how much you are spending on things you don’t need. Think about the items and services you actually need and that bring you joy. Match your cash flow to these items and let the rest go. You’ll be glad you did.

As an independent Certified Financial Planner™, I can help you decide how to rightsize your life. Contact me and let’s get started! #talktometuesday  #rightsize #Hireaplanner #bonus #income #cash #CFPPro #housing #FiveKeysToFinancialFreedom #FinancialIndependence

Five Keys to Financial Freedom: Key 2

Week 2 –  Pay Your Debts Correctly and Pay Yourself!

This second week of July kicks-off with week two and our second key to our financial independence quest. If you missed week one, read that here. Now that you’ve decided you want this, and you seriously want this, it’s time for rubber to meet the road. This week, learn how to correctly pay your debts and get started paying yourself first!

Many people out there make a classic mistake: paying their debts wrong. What I mean is that they are “hamster wheeling” – paying about the same amount every month and never making any real progress in debt reduction. Usually, people do this by slightly topping up what is paid on every debt. For example, they will round up all their minimum payments a few extra dollars or just to make the payment even across all of their accounts (i.e., $43 becomes $45, or they pay $100 on a $90 payment). This is a waste of time and money. You have two choices that will yield much better results: snowball or avalanche.

If time is most important to you, i.e., how soon you can pay off a debt, use the snowball method. This is where you pay off the smallest balances owed first. Thereby knocking out low-balance accounts over shorter time frames and you get a sense of progress.

Mathematically, the avalanche method saves you the most cash over time. Using avalanche, you pay the debt with the highest interest rate first. So, if the amount of money saved and the amount of money you actually pay back over time is most important, use the avalanche method.

For either method, stop topping up all of your minimum payments. Take the total amount of additional money over and above your minimums that you have been paying on each account and add it to either the smallest balance account (snowball), or to the highest interest rate account (avalanche), in addition to that account’s minimum payment.  Be sure that you do not miss a payment or not pay the minimum due on each account. When one account is paid off, take that account’s minimum payment, the total amount of additional money from all the top up payments, and add it to the next target debt.

If you need a visual on how this works, how much you can save, or how long it will take to pay off your debts, become a client. I can show you how to structure your debts to save the most time or the most money depending upon what’s most important to you.

Finally, you need to take to heart that YOU are your most important creditor. Always pay yourself first! This can be challenging in the beginning, but you have to learn to do this and actually do it. If you are really tight on money, start with a small amount. Even if that amount is $5 per week. The key is that you pay yourself first and as your debt picture improves you will naturally increase what you pay yourself. The point is that you do it, do it regularly, and make it the first thing you do when you earn money. Pay yourself first!  Always!

Not sure how to start or what to do first. Call me. As an independent Certified Financial Planner™, I can help you with a savings goal, debt reduction, setting a timeline and evaluating resources. #talktometuesday #education #Hireaplanner #savings #savemore #payyourselffirst #FiveKeysToFinancialFreedom #FinancialIndependence

Five Keys to Financial Freedom: Key 1

Week 1 – Decide to be financially independent.

Welcome to July! This month we celebrate our Independence Day as a nation. Every July 4th. we gather to celebrate our country’s independence, spend time with family and friends, eat some really good food and take time to acknowledge our freedom and independence. It’s time for you to do the same with your financial life. It’s time to add financial freedom to your adulting skills. You can do it. It won’t be easy and there is no quick fix but you can do it. This is a great time to get started, so no more excuses. Your future financial independence day celebration starts now.

Every Tuesday in July get a key to your financial independence. This week, we start with what may be the toughest of all – making the key decision to be financially independent. It’s not that your goal is to amass a fortune, but that wouldn’t be a bad thing. Rather, your goal of financial independence is to decide to be financially independent, stop living paycheck-to-paycheck and get out of debt, rightsize your lifestyle, and finally to start amassing wealth for your future.

It may sound odd, but this is the hardest step to being financially independent. It’s also your new goal – no, it’s your new mantra! Speak it aloud, write it down, post it to the fridge, your laptop, in your car, in your electronic day timer or wherever and however you need to be reminded. Do it! Identify where you are in your own financial life. Do a serious assessment of what you owe, what you own, and what cash flow you have every month. Find statements for your credit cards, mortgage, consumer charge accounts, any money owed and learn the balance, the interest rate, the minimum payment and plot this out. Do not ‘guesstimate’, know thy self. Use Word or Excel if you have to but learn where you are financially. Be sure to list income, savings balances, and equity in your home; you’re building your own personal balance sheet.  You can also start for free using my planning software.

In each week’s key to financial freedom, you’ll notice there will be intermediate goals or steps to work on. You have your marching orders for week one, so spend a few days and get yourself organized and get real about what you own and what you owe. This will be an eye-opener in many ways. Just deciding to be financially independent and taking assessment of your current economic situation is a huge step forward.

As an independent Certified Financial Planner™, I can help you plan for financial independence and be on top of your goals.  Contact me and let’s get started on a cash flow plan! #talktometuesday #education #Hireaplanner #tax #cashflow #stressfree #newplan #savings #FiveKeysToFinancialFreedom #FinancialIndependence

529 Plan Awareness Low in the United States

I’ve covered saving in 529 plans in previous blog posts. What recently caught me by surprise were the results of a survey by the firm Edward Jones. For disclosure, I have no association, or affiliation with, Edward Jones, but I do thank them for bringing this to our attention.

For starters, the main point of the survey revealed that only 29% of Americans know what a 529 plan is, and what it’s used for. Let’s help with that point by defining a 529 plan. Basically, a 529 plan is a tax-advantaged savings plan used to pay qualified education expenses such as tuition, required books, and other qualified education expenses. The 529 plan technically speaking, is a “qualified tuition plan” and is designed to encourage saving to pay for qualified education expenses.

Historically, the plans were only available for higher education. With changes to the TCJA 2017, the funds in a 529 plan can now be used for K through 12 qualified education expenses (up to $10,000), including at private schools. The key point of a 529 plan is that you can contribute funds and your earnings grow tax-free over time. Some states even offer a state benefit for your contributions. Currently, California does not offer a tax benefit for contributions. As long as withdrawals are used to pay qualified education expenses, there are no taxes. However, if withdrawals are not used for qualified education expenses, state and federal income tax applies, along with a 10% penalty, to the earnings portion.  

Other key findings from the survey revealed that awareness of 529 plans was higher among the Gen-X demographic followed by those in the Millennial demographic. Not surprisingly, there was a huge disparity between those who earn $100,000 or more and those households who earned less than $35,000 per year. Fifty-two percent of those in the higher earning household knew the 529 plan compared to about 17% of those in households earning less than $35,000 per year.

Whether you should save in a 529 plan depends on your individual situation. Factors to consider are your current earnings situation, retirement savings, timeline, tax status, and whether your child may inherit money for school or even need money for school. The 529 plan works best if your funds have ample time to grow. That said, depending on your state’s tax benefit, it may make sense to contribute and pay for qualified education expenses for K through 12 as well.

To find out what’s best for you, talk with your financial planner. As an independent Certified Financial Planner™, I can help you sort out your education needs and if needed, help you establish a 529 plan.  Contact me and let’s get started. #talktometuesday #education #Hireaplanner #stressfree #savings #taxchanges #2017TCJA #529plan #college #highereducation

Stay Focused on the Steak; Not the Sizzle!

Undoubtedly, you’ve heard the old marketing adage taught to salespeople: sell the sizzle, not the steak.  That’s great if you’re the salesperson, but not so great if you’re the customer. Why? It basically means the salesperson is selling you on the benefits, not the features. This may cause you to overspend on an item. I’m here to tell you that as a customer, you should stay focused on the steak.

Generally, we already love the perceived benefits of what we are buying. It’s one way we justify shelling out our cash to make a purchase. However, there are few key things to consider when shopping and you encounter this situation.

Don’t overbuy. Many times, people get talked into buying more than they had intended. You did your research (online most likely) and you know what you actually need. Stand strong and don’t be coerced into overbuying more than you need. Maybe you saw an awesome grill online and you know it will fit perfectly into your budget and your backyard space. Once you arrive at the store however, the salesperson talks you into the newer, bigger, splashier model with SmartPhone technology, infrared grilling, mood lighting, rugged off-road wheels, and Internet capability! Wow!! Are you really going to use all of that stuff? Most likely not. Stick with the original features you were interested in and save yourself some money.

Beware of add-ons such as insurance, an extended warranty, annual maintenance service, etc.  You may already have insurance on the item through your homeowner’s policy so why pay more? The basic warranty may be more than you’ll need, and the annual service will most likely lead to a future upsell. In the words of an infamous former First Lady, ‘just say, no’ to these add-ons.  

Photo by Raymond Perez on Unsplash

But wait, there’s more! How many times have you heard that phrase on late night television? This invariably means you are going to walk out with twice as much “stuff” as you had intended to buy. Be wary of these special two-for-one offers unless you really need twice the items or you can gift one of the items. Why the caution? Because this sales pitch usually includes an additional charge for the second item! It’s not quite as much as the original item, but you are going to pay more.

Unless you like overspending and being sold more product than you need, try to be aware of this sales technique and stay focused on your original purchase. In the long run, you’ll still be able to buy what you want and stay on budget. And finally, don’t berate the salesperson for using this technique. After all, they are only doing their job, and doing it well.

Let’s shop! As an independent Certified Financial Planner™, I can help you assess a major purchase such as a car, home, boat, or RV. Contact me and let’s get started! #talktometuesday #Hireaplanner #income #cash #CFPPro #shop #shopping #online #steak #sales #budget

Financial Planning Tips for Dad this Father’s Day

We posted tips for Mother’s Day, now here we are at the week leading up to Father’s Day. We often see articles that included tips learned from dad, but what about financial planning tips for dad?  

My stepdad looking smart in his fireman's uniform. 

Just as with mom, you should discuss topics with your father such as retirement savings, Social Security plans, insurance needs, retirement activity goals, and even estate planning and end of life decisions. This is especially true if your father happens to live on his own at this stage of life. You don’t need to personally understand all of these areas yourself but have a frank conversation to get a better understanding of where your father stands financially and what he is planning for his golden years. We often assume that dad being dad, has all the answers and that’s not a good assumption.  It’s better to be upfront and clear and discuss these issues.

My father and stepsister celebrating her birthday.

An important documents binder is also a good gift for dad. It can come in handy in emergencies. Let your dad customize this binder and have him put all of his important documents inside such as his Will, insurance contracts, Durable Power of Attorney, Social Security statement, titles to vehicles, mortgage, and even a farewell letter to family and friends. It’s his binder so let him personalize it all he wants, but make sure it contains all of his vital documents. You can read more about what to put into his binder at my blog post Do You Have a Special Emergency Binder.

Again, you don’t have to understand all of these areas but you do need to understand your dad’s goals and plans. Discussing these points should be done open and honestly. Topics that you and your dad do not understand should be noted and both of you should make a plan to get answers and follow through. As an independent Certified Financial Planner™, I can help you with the unfamiliar areas, set a timeline and put that plan into action to help dad get ready for retirement and beyond.

 #talktometuesday #CFPPro #Hireaplanner #retirement #socialsecurity #goals #savings #cash #fathersday #dad #binder #emergencybinder #father #dad

Three Key Things to Consider When Selecting a Bank

I was struggling with a topic for this week’s blog and then it hit me like a bolt of lightning. A friend had asked, what’s the best online bank? For me, that’s a loaded question. Like when you are at a wine tasting and someone comes to the pouring table and asks, which one is the best? or, which one do you like? My personal choice is irrelevant. The bank I use or the type of wine I like is not important if it doesn’t work for you personally.

It turns out, banking is a little like wine and the answer to all of these questions is the same – it depends. It depends on the level of service you are looking for, what type of service you need and whether your bank needs to be a local brick-and-mortar institution or if you can utilize the services of an online bank.

Your primary focus in picking a bank is security of funds. Whether you go online, or brick-and-mortar, be absolutely sure to select a bank that is FDIC (Federal Deposit Insurance Corporation) insured or has NCUA (National Credit Union Association) for credit unions. Fair disclosure, I happen to be a huge fan of my online bank and my local credit union. I use them for different services.

Next, consider level of service. Do you need to see a teller in person on a regular basis? Are you always in need of counter services? If so, an online bank is likely not going to meet your needs. Check out the local credit unions and local banks available to you. Visit the lobby, talk to customer service and just get a feel for how the staff reacts to you seeking information about opening an account. Conversely, if you are only looking for a free account to make an occasional mobile deposit with your Smartphone, an online bank may be perfect. If selecting an online bank, make sure your funds (and transactions) are secure. The key point is to match your service needs with the institution that offers the best overall solutions for you.

Fees! I have to mention fees. Whatever you decide, make sure you pay attention to and understand all of the service fees that are tied to your account. Focus on whether the account is truly free, or only free if a certain number of transactions per month are performed or a minimum balance is maintained.  Look for other fees such as ATM fees. Make sure you are not paying more than absolutely necessary. For example, you wouldn’t want to open a deluxe, top-tier service account with high monthly fees if all you are looking for is basic savings account.

When it comes to selecting a bank, focus on security of funds, services, and fees to narrow your choice. And when it comes to wine, pick the one you like!  

As an independent Certified Financial Planner™, I can help you narrow your choices and find a bank that fits. Contact me and let’s get started! #talktometuesday #Hireaplanner #income #cash #CFPPro #bank #online #creditunion

How You Can Save Money on Travel

Randy and I visiting Sedona with our friend Sandi. 

The summer travel season is just kicking off and it can be a challenge to control your urge to splurge on a fabulous vacation. Memorial Day officially launches the summer travel season. June is rapidly approaching and is a very busy month with festivals, concerts, special events, weddings and many people taking time off while the kids are out of school.  A good summer vacation doesn’t have to break the bank and bust your budget.  Consider the following tips to save money.

Airfare is usually a major component of the summer travel budget. The airlines are masters at raising ticket prices close to departure dates so consider booking your ticket well in advance to take advantage of lower prices. Be sure to ask for senior discounts or auto club membership discounts. Also, consider not checking bags! I know, I am going to hear it on this one. Most carriers allow one roller bag and one carryon bag. If your children are ticketed passengers, that applies to them as well. You can save money on baggage fees and time by not going to baggage claim. Another option, consider using a combination of miles and money if you are a frequent flyer to reduce the ticket cost.

Cactus in bloom at Church on the Rock, Sedona, AZ.

You may not need a pricey hotel. We frequently use a private home rental agency to rent a large condo that sleeps eleven people in Mammoth Lakes, CA. By sharing our rental with other friends, we cut the cost per night per couple to much less than the local hotel rates per night. You don’t have to pack the rental with the maximum it will sleep, just find out how many other friends you need to share the cost and make it more affordable than the hotel rate. As a bonus, you’ll be more comfortable, can cook your own meals, and won’t have to deal with hotel room rates, resort charges, parking fees, etc., and everyone can come and go as they please.  Another great feature is that many private condo or home rentals also have Jacuzzis or pools!

Consider camping! If you’re the outdoorsy adventurous type, book a campsite well in advance. Camping is still very economical when compared to hotels, private residence rentals and even hostels in many cases.

Take vacations during the “shoulder season”. The shoulder season is that time of year between major seasons when many rentals, hotels, and campsites have lower prices due to lack of demand. You may find that you like shoulder season better than the prime travel season.

Avoid the most popular holiday weekends like 4th of July, Memorial Day and Labor Day. Pick weekends that are lower in popularity and enjoy more space to yourself. Nowadays, you can use Google to look up and research a destination or property and generally Google will tell you the peak times.

Sedona, AZ May 2018.

Set a budget and research destination activity costs and meal price averages. By knowing these costs in advance, you can set a target fund goal for your vacation. In many cases, if you reserve activities in advance and stick to your schedule you can save on the activity price.

Get creative! Rethink your travel dates, share accommodations with friends, and reconsider your approach to vacation. Many of these tips can save you money and if you combine the tips you can save a lot of cash and maybe some of your sanity.

As an independent CERTIFIED FINANCIAL PLANNER™, I can help you make financial decisions and budget for your summer getaway. Contact me and let’s get started. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #summervacation #vacation #CFPPro #savemoney

Do You Have One of These Four Basic Equity Awards from Your Employer?

Many of us are familiar with retirement plans like 401(k) or 403(b). Some of us even have a TSP (Thrift Savings Plan). However, when employers share a bigger slice of the pie and reward employees with equity, it can get a little more confusing.

Many companies, especially technology companies, give employees a chance to share in the growth and prosperity of the company. Companies do this by offering employees a variety of equity awards. These awards come in various types and have multiple acronyms. The awards also have very different rules when it comes to taxation and how the award can affect your bottom line. Let’s look at the very basics of just four of the most common awards.

ESPP – The Employee Stock Purchase Plan offers employees a chance to defer salary and then purchase company stock at a discounted price. An ESPP can either be a tax-qualified plan or a nonqualified plan. The employee contributes to the plan via payroll deductions for a defined period. At the end of the period, the accumulated payroll deductions are used to purchase shares of company stock at a discount. Every plan is different, but generally the discount can be up to 15%.  One added advantage if the plan is tax-qualified is called a “look back” feature. This means the plan may look back and select the lower share price either on the offering date or the purchase date thus giving the employee an even better benefit. Rules vary for each ESPP and taxation can be tricky whether you ultimately sell your shares in a qualifying disposition, or a disqualifying disposition.

Options – A Stock Option at its core is an agreement between two parties that gives the buyer (optionee) the right, but not the obligation, to buy stock at an agreed upon price within a specific time. Option agreements come in many forms but two common types are ISOs (Incentive Stock Options) and NSOs (Nonqualified Stock Options). One advantage to an ISO is that when exercised you can avoid ordinary income tax and may ultimately pay only capital gains tax. However, ISOs come with a host of requirements to be qualified and are not always the best choice for the optionee as they can generate Alternative Minimum Tax. An advantage to NSOs is that the company granting the option has greater flexibility in who they may select as an optionee, including granting to outside directors and contractors.  Options have their own lingo, unique rules and complex timing and taxation issues which go far beyond this basic explanation.

The next two award types are frequently confused by recipients; some even use the acronyms interchangeably. They are NOT the same and careful attention should be paid to the type of award you may have received.

RS – Restricted Stock is a grant of stock to executives that is nontransferable and becomes available to the executive pursuant to a graded vesting schedule. It is generally subject to insider trading regulations under SEC Rule 144. Although it can be risky, recipients of RS awards may be able to make a Section 83b election thus reporting the compensation value of the stock when received versus when it vests. This can result in substantial tax savings if the shares appreciate in value. If the shares do not increase in value, or worse, the grantee forfeits the shares, you’ve accelerated the tax payment without receiving a benefit.

RSU – Restricted Stock Units are conceptually similar to Restricted Stock. However, they are granted to employees and the employees must meet a set of underlying criteria outlined in the plan document to receive their actual shares. That is, the RSUs are granted as an unsecured promise until the employee meets the criteria according to the vesting schedule. Another key difference is that RSU recipients cannot make a Section 83b election (there is no actual stock issued at grant).

There are many types of equity awards that companies make available to employees, consultants and directors. Each plan or award type may have different variations. Each award type has its own set of rules to be either qualified or nonqualified and will have various complex tax regimes. If you have been granted an equity award, hold on to your plan documents and read the details very carefully.

Next, call me to strategize! As an independent Certified Financial Planner™, I can help you with a strategy to address taxation and what to do with the subsequent cash. Contact me and let’s get started! #talktometuesday #savings #equity #espp #sop #rs #rsu #CFPPro