Category: General

At different periods of time, the stock market appears to favor one of two stock types – value stocks or growth stocks. Since the 2008 market downturn, for example, the market has primarily favored growth stocks. But some big names are speculating that value stocks could be making a comeback due in part to big changes caused by the pandemic. These speculations, of course, do not guarantee performance.

As you watch what’s happening in the markets, it’s important to know what the difference is between value stocks and growth stocks.

What Is Value Investing?

The idea behind value investing is that investors are, essentially, bargain hunting. They’re looking for stocks that they believe are being undervalued by the market. If they consider a stock to be underpriced, it’s an opportunity to buy. If they consider it overpriced, it’s an opportunity to sell. Once they purchase a stock, value investors seek to ride the price upward as the security returns to its “fair market” price – selling it when this price objective is reached.

To determine a value investment, investors may examine the company’s balance sheet, financial statements and cash flow statements to get a clear picture of its assets, liabilities, revenues and expenses.

Risks of Value Investing

There’s no guarantee that a stock will appreciate in value as much as an investor expects it to. A stock an investor believes to be undervalued may remain undervalued, or even drop in value.

What Is Growth Investing?

Growth investing essentially uses today’s information to identify tomorrow’s strongest stocks. The idea is to look for “winners” – stocks of companies within industries that are expected to experience substantial growth.

Growth investors seek companies in a position to generate revenues or earnings greater than what the market expects. When growth investors find a promising stock, they buy it, even if it has already experienced rapid price appreciation, in the hope that its price will continue to rise as the company grows and attracts more investors.

Where value investors may use analysis, growth investors use criteria. Growth investors are more concerned about whether a company is exhibiting behavior that suggests it will be one of tomorrow’s leaders; they are less focused on the value of the underlying company.

For example, growth investors may favor companies with a sustainable competitive advantage that are expected to experience rapid revenue growth, that are effective at containing cost and that have an experienced management team in place.

Risks of Growth Investing

Growth investments may have an above-average price-to-earnings ratio (PE ratio), but they may in some cases be prone to higher volatility than value investments. These investments are typically bought at an already high price, and there’s always a risk that the price will fall or cease to rise any further.

Key Differences

Value investing and growth investing follow the same general purpose – to buy low and sell high. While they can often overlap in criteria, the key difference between these two guiding principles is this: value investments have generally already proven their worth, while growth investments show potential for future worth. In other words, both investment types are banking on the assumption that the value will rise, but for different reasons.

In regards to your own portfolio, you may find that a mix of value and growth investments could provide a healthy and diverse assortment. Work with your investment advisor before making any decisions regarding your portfolio.

You understand the importance of estate planning, but sometimes it’s a question of where to start. No matter your net worth, you need a plan set in place that can help your heirs understand your final wishes and distribute your estate properly. As you prepare to discuss with your financial advisor, here are a few tips and considerations to keep in mind.

Name an Executor

After your passing, you’ll want to have somebody in place who can execute your wishes. This person is aptly named an executor.  

Many people choose a spouse, sibling, child or close friend as executor. In most cases, the job is fairly straightforward. Still, you might give special consideration to someone who is well organized and capable of handling financial matters. Someone who is respected by your heirs and a good communicator also may help make the process run smoothly.

Above all, an executor should be someone trustworthy, since this person will have a legal responsibility to manage your money, pay your debts (including taxes) and distribute your assets to your beneficiaries as stated in your will.

If your estate is large or you anticipate a significant amount of court time for your executor, you might think of naming a bank, lawyer or financial professional. These individuals will typically charge a fee, which would be paid by the estate. In some families, singling out one child or sibling as executor could be construed as favoritism, so naming an outside party may be a good alternative.

Understand Estate Taxes

Tax planning should be an integral part of your estate planning strategy. You’ll want to work with a tax professional who can help you navigate state inheritance laws and federal estate taxes. The 2017 Tax Cuts and Jobs Act raised the federal estate tax significantly, making it easier for families to maintain their estate when transferring to loved ones. Estates with combined gross assets under $11,700,000 (for individuals) are not required to file an estate tax return.¹   

Prepare Your Health Care Documents

Healthcare documents spell out your wishes for health care if you become unable to make medical decisions for yourself. They also authorize a person to make decisions on your behalf if that should prove necessary.

These documents may include:

• Living will
• Power of attorney agreement
• Durable power of attorney agreement for healthcare

Assess Your Life Insurance Policy

When was the last time you assessed your life insurance coverage? Have you compared the life insurance benefit with your financial obligations? Keep in mind that several factors will affect the cost and availability of life insurance including age, health and the type and amount of insurance purchased.

Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

Write a Letter of Intent

A letter of intent is a non-legal document that outlines your wishes. A strong, well-written letter may save your heirs time, effort and expense as they administer your estate. It acts as a message from the deceased and can include an array of information from providing organization and outlining last wishes, to detailing information and sending personal messages. Consider including instructions for your funeral arrangements and other details that are important to you.

Organize Your Documents

After your passing, you’ll want your heirs and executor to be able to easily obtain and access important documents. 

These documents may include:

• Your will
• Trust documents
• Life insurance policies
• Deeds to any real estate, and certificates for stocks, bonds, annuities
• Information on your financial accounts and safe deposit boxes
• Information on your retirement plans
• Information on any debts you have: credit cards, mortgages and loans

Talk to Your Family

Do you have stepchildren and ex-spouses? Have you been caring for any foster children? Have you been caring for a grandchild, niece or nephew? With the help of a financial planner and an attorney, you can structure a will or trust that accounts for everyone you wish to provide for. The more clear and specific you can be the better, as you will reduce the amount of confusion among your family. Otherwise, everyone who thinks they deserve something from your estate may try to extract it in probate.

There are many factors to consider when creating a will or trust. Before diving into the estate planning process, you should consult with a seasoned financial professional and estate planning lawyer. They will help you make sure you’ve covered all the bases when working to plan for your passing.

1. https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

Whether you’re selling your business, purchasing another or somewhere in between, a business valuation is the first step to determining the value of a business. Preparing for a business valuation isn’t complicated, but the calculations to determine the value of a business can be.

This guide will help you prepare for a business valuation by exploring valuation options and the additional steps required to receive an accurate price. Let’s start by looking at the different evaluation methods.

Choosing An Evaluation Method

There are five business valuation methods available to small business owners. These methods include:¹

• Adjusted net asset
• Capitalization of cash flow
• Discounted cash flow
• Market-based valuation
• Seller’s discretionary earnings

Adjusted Net Asset 

The adjusted net asset is determined by subtracting liabilities from assets while using industry knowledge to adjust both metrics for current value. For example, an asset or liability may be priced lower than its original value due to market fluctuations, therefore adjusting the overall value of the business. 

Capitalization of Cash Flow 

This is determined by dividing your cash flow from your business’s rate of return. Cash flow is an amount of money that entered and exited your business within a given time.² Your rate of return, or capitalization rate, is the earnings a buyer can expect to receive.

Discounted Cash Flow 

Discounted cash flow refers to a complex process used to calculate the value of a business based on its potential growth. 

Market-Based Valuation

Using this method, similar businesses that have been recently sold are examined to determine the value of your business. 

Seller’s Discretionary Earnings

This valuation method is typically only performed on small businesses. It is calculated by subtracting long-term business costs from pre-tax and pre-interest earnings to determine how much money a business makes.

Establishing a Valuation Plan

Whether you know which valuation method you want to use or not, determining a plan can make the process smoother. Some valuations can be performed on your own. However, for business owners seeking more complex methods, professional assistance may be required. 

Consider contacting an advisor, appraiser or another financial professional to help guide the process and make sure your business is given an appropriate value. 

Organizing Your Documents

Valuation methods draw on a business’s documentation to calculate its final value. Collect the documents necessary for your chosen method, as well as any additional forms, contracts, vendors, etc. Each record will help determine the overall value of your business.

Calculating Intangible Assets 

Up to this point, certain documents and assets could be considered tangible, or physical, assets.³ For example, an office could be considered a tangible asset. We often think of tangible assets first when considering business value, though intangible assets should not be forgotten. 

According to the Corporate Finance Institute, intangible assets are non-monetary, identifiable and abstract benefits.⁴ As an example, an email list could be considered an intangible asset. It is beneficial because it contains the contact information for current and potential clients, possibly leading to more revenue. But, it’s not a physical object and does not hold a determined price. 

Other intangible assets could include employee satisfaction or high SEO rankings; think of these assets as unquantifiable benefits.¹

Whether you are selling your business, purchasing a new one or somewhere in between, consult this list to help plan your valuation process. And, when you are ready, contact a financial advisor or other financial professional to determine your plan of action.

1. https://www.nav.com/blog/small-business-valuation-methods-how-to-value-a-small-business-474215/
2. https://online.hbs.edu/blog/post/how-to-read-a-cash-flow-statement
3. https://corporatefinanceinstitute.com/resources/knowledge/accounting/what-are-tangible-assets/
4. https://corporatefinanceinstitute.com/resources/knowledge/accounting/intangible-assets/

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

Preparing a strategy that is both advantageous and tax-efficient might feel daunting at first. Thankfully, there are some things you can do now to keep from overpaying this tax season.

Build Your Team of Professionals

You might build a team for any number of pursuits, from organizing a baseball team to putting together people to run a business. Any team is not only an organization of people, it’s also an amalgamation of talents. 

Building a financial team to tackle your taxes may often mean talking to more than one person. Your trusted financial professional can speak to a wide range of financial issues, but they may want to consult others who have specialized training.

Ask your financial professional if they have worked with a CPA who would be helpful in this situation. It’s possible that they know someone who fits your needs.

Tax-Focused Investment Strategies

Once you have the right team of financial professionals who understand your financial situation, there are some investment strategies you may consider using this year.

Backdoor Roth IRA

If you are a high earner with an income above the IRS’s income limit for Roth IRA accounts, you still have the option to create a backdoor Roth IRA. Just as it sounds, this option allows high earners to bypass the income limits and still utilize the tax advantages of a Roth IRA account.

To create a backdoor Roth IRA, you’ll need to:

1. Open and contribute to a traditional IRA.
2. Convert your traditional IRA to a Roth IRA account (your account administrator will provide the necessary paperwork and instructions to do this).
3. Once tax season rolls around, pay taxes on the contributions (essentially you’re paying back the tax deduction you received when initially contributing to your traditional IRA). 
4. Pay taxes on any additional gains your traditional IRA account may have made over time.

A backdoor Roth IRA may be beneficial for those whose income level is above the ceiling limit set by the IRS. Additionally, it’s important to remember that Roth IRAs do not have required minimum withdrawals, only traditional IRAs do.

When considering a backdoor IRA, evaluate the tax obligations you might pay today versus the tax benefits you may realize toward retirement.

Tax-Focused Gifting

Smart moves can help you manage your taxable income and taxable estate. For instance, if you’re making a charitable gift, giving appreciated securities that you have held for at least a year is one choice to consider. In addition to a potential tax deduction for the fair market value of the asset in the year of the donation, the charity may be able to sell the stock later without triggering capital gains. 

This discussion of tax-focused giving is for informational purposes only and is not a replacement for real-life advice, so make sure to consult your financial, tax, and legal professionals before modifying your gifting strategy. 

The annual gift tax exclusion gives you a way to remove assets from your taxable estate. You may give up to $15,000 ($30,000 if you are married) to as many individuals as you wish without paying federal gift tax, so long as your total gifts keep you within the lifetime estate and gift tax exemption of $11.7 million for 2021.¹ Managing through the annual gift tax exclusion can involve a complex set of tax rules and regulations. Before adjusting your strategy, consider working with a professional who is familiar with the rules and regulations.

Tax-Loss Harvesting

Tax-loss harvesting refers to the practice of taking capital losses (you sell securities worth less than what you first paid for them) to help offset the capital gains you may have recognized. Keep in mind that the return and principal value of securities will fluctuate as market conditions change and past performance is no guarantee of future returns. While this doesn’t get rid of your losses, it can be an approach to manage your tax liability.

Up to $3,000 of capital losses in excess of capital gains can be deducted annually, and any remaining capital losses above that can be carried forward to, potentially, offset capital gains next year.² But remember, tax rules are constantly changing, and there is no guarantee that the treatment of capital gains and losses will remain the same in the coming years.

By taking losses this year and carrying over the excess losses into the next, you can potentially offset some (or maybe all) of your capital gains next year. Before moving ahead with a trade, it’s important to understand the role each investment plays in your portfolio.

If you’re looking into this strategy, familiarize yourself with the IRS’s “wash-sale rule.” This rule indicates that investors can’t claim a loss on a security if you buy the same or a “substantially identical” security within 30 days before or after the sale.²

With these strategies in mind, there are things you may be able to do now to address both your current tax obligation and those you may be required to address further down the road.

1. https://www.policygenius.com/taxes/guide-to-gift-tax/
2. https://www.investopedia.com/articles/taxes/08/tax-loss-harvesting.asp

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

The Rockefellers, the Vanderbilts, the Gettys – all famous families known for their success in building and maintaining generational wealth. And while they’ve successfully passed down millions and billions of dollars to loved ones, the idea of successfully maintaining generational wealth is still considered hard to achieve today. Why? It may be due, in part, to the fact that there are assumptions people make about family wealth, some of which are not always true.

Below we’re breaking down common myths regarding family wealth and the truth about generational wealth planning that every family should hear.

Myth #1: Wealth Lasts Many Generations

It can be easy to assume that a wealthy family has always been wealthy and will always be wealthy. But the truth is, around 70 percent of wealthy families lose their wealth by the second generation. Moreso, around 90 percent of families lose wealth by the third generation.¹ 

There are many reasons why wealthy families are likely to lose their wealth over time. Parents may not wish to discuss money with their kids, second- or third-generation heirs don’t understand the value of money or families may neglect to set a plan for preserving their wealth in place. Whatever the case may be, it’s important to understand that having family wealth and preserving family wealth are two very different things, and the latter often requires careful and considerate planning.    

Myth #2: All Family Members Are Smart About Money

Inheriting or obtaining a large amount of wealth does not mean one suddenly gains total financial literacy. What it does mean, however, is that a lack of financial knowledge can lead to decisions with a greater impact. This myth can be a dangerous one, as it may make some family members feel embarrassed or reluctant to admit their lack of financial knowledge.

And for those who are not financially savvy, the burden of caring for and protecting the family wealth can be a great source of stress. For those who find themselves in this position, working with a trusted financial professional should be a top priority. Your financial advisor isn’t there to judge or scoff at your lack of financial knowledge. Instead, he or she is there to educate, guide and strategize on your behalf.

Myth #3: Parents Talk to Their Kids About Money

While communication has increased in recent years, it’s likely some parents or grandparents are uncomfortable talking about money with their children or grandchildren. But with wealthy families, it’s easy to assume money and wealth is a common topic of conversation. In reality, it’s possible children may receive an inheritance with very little understanding of how much they have or what to do with it.

This, in turn, can cause a lack of financial knowledge (which we discussed above) and lead to poor spending habits or loss of wealth over time. This is why a crucial component of preserving family wealth is open communication and transparency between family members.

Myth #4: Kids Are Lazy & Don’t Work

We’ve all seen rich, young socialites on television, which may bring a few choice words to mind – arrogant, lazy, privileged, etc.

And while some wealthy second- or third-generation heirs may choose to spend away their inheritance, others will choose to continue working hard throughout their lifetime. Those who work may understand the importance of preserving wealth, typically because these values have been discussed at length already. They know that while several millions of dollars sounds like a lot, it can slip away fast when serving as one’s only source of income.

Myth #5: Most Millionaires Inherited Their Wealth

Remember, only about 30 percent of wealthy families maintain their wealth beyond two generations and only 10 percent beyond three generations.¹ That means that the majority of millionaires today didn’t actually inherit their wealth at all – or may have only inherited a modest amount. Instead, they followed a plan, invested wisely and worked hard to accumulate their wealth.

You don’t have to be a Rockefeller to make a generational wealth plan. If you have a sizeable amount of assets you wish to preserve for generations to come, you’re in need of a generational wealth plan. If you aren’t already, consider working with a trusted financial professional who can help you make a plan, educate family members and see your plan through after your passing.

1. https://www.nasdaq.com/articles/generational-wealth%3A-why-do-70-of-families-lose-their-wealth-in-the-2nd-generation-2018-10

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

The Fourth of July is an exciting holiday that marks the independence of our nation with the signing of the Declaration of Independence. As you celebrate with hot dogs, fireworks and pool parties this year, consider this: 2021 could be your year to start finding financial freedom of your own.

Achieving financial independence is a goal that almost everyone has. It brings you the personal freedom to do what you want. For most Americans, however, debt is a significant roadblock. In fact, the average adult has around $90,460 in debt.¹ This includes all types of consumer debt such as credit cards, personal loans, student loans, mortgages and auto loans. 

The good news is, there are strategies to pay down debt and work toward financial independence. How can you do this? Here are five actionable ways to start working towards more financial freedom this year. 

Way #1: Make a Budget and Stick to It

If you want to be certain that your bills will be paid and savings goals are on track, then you need to set a monthly budget and do your best to stick to it. If you’re used to spending and saving as you please, sticking to a strict budget will feel hard at first. But over time, consistency in your spending habits will make following a budget easy and natural. Holding yourself accountable can help deter impulse buys, splurges and make your savings goals a bigger priority.

Way #2: Pay off Your Credit Cards in Full

Credit cards have high-interest rates that can grow your debt every month they aren’t paid off. If you’re able, pay off your credit card balance in full each month. Additionally, pay them on time to help you build good credit. If possible, it’s best to treat your credit card like a debit card, meaning you don’t spend more than you have. Once you have high-interest debt like this paid down, you can focus on low-interest debts like mortgages, auto loans and student debt. 

Way #3: Opt for Automatic Savings

One of the most effective ways to save more money is to automate the process. Determine how much you’re able to contribute to your savings account each month and set up an automatic transfer with your bank. Soon, you’ll forget this is even happening.

If your company offers a retirement savings plan like a 401(k), you may have the option to automatically defer funds from your paycheck to the account. Again, this is something that will happen without action from you, making it an easy and convenient way to build retirement savings.

Way #4: Look For Opportunities to Increase Your Income

Increasing your income is easier said than done, but it’s not impossible. If you’ve been at your job for a while and taken on added responsibilities, now may be an opportune time to speak to your boss about a pay adjustment. Or, searching for opportunities elsewhere could result in a bump in salary.

If you have a hobby you’re passionate about, look for opportunities to make some money with it. Put your art up for sale online, offer classes (cooking, dancing, gardening, etc.) through your local rec center or find odd jobs you can do on the weekend.

If you do find yourself able to increase your income, be sure to revisit your budget and determine how that additional money should be used. If it’s being spent frivolously, it’s not helping you work toward greater independence.

Way #5: Begin Building Your Portfolio

Once you have control over your debt, you’ll want to focus on building passive income – which can be done through investments. Start off simple by contributing to a retirement account, like a 401(k) or IRA. Even small contributions now can grow significantly toward retirement through the power of compound interest.

If you’re looking to expand, consider utilizing a robo-advisor or working with an investment advisor. A robo-advisor allows investors to take a DIY approach to managing their portfolio, while an investment advisor can provide tailored, complex investment strategies.

As you involve yourself in investments further, you may find other opportunities to invest as well, such as real estate, collectibles or other alternative investment classes.

Achieving financial independence isn’t something that happens overnight. If you plan and save, however, it really can pay off for you in the long run. Not only does it help you to build savings, but it starts strong habits for the future. If you’re unsure where to start, an experienced financial professional can help address your concerns and develop tailored strategies going forward.

1. https://www.cnbc.com/select/average-american-debt-by-age/

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

The outstanding student loan debt in America sits at a staggering $1.48 trillion as of August 2019.¹ With so many students graduating with debt, even if you don’t personally have any debt, the chances of finding a life partner with some student debt of their own are high. Whether it’s a couple thousand or six figures, student loan debt can be a life-altering obligation that affects individuals and couples for decades after graduation. In a recent survey, 12 percent of individuals with student loan debt even delayed getting married because of it.²

Whether you’re one of those people who have considered putting off your nuptials or you’re soon marrying into debt, below are a few facts you should know before saying “I do.”

Fact #1: Your Marriage Status Can Affect Your Monthly Payments

If you’re paying back federal student loans using an income-driven student loan repayment plan, how you file your taxes (jointly or separately) could have a major impact on how much you’re obligated to pay back monthly.

There are four types of income-driven federal repayment plans:

• Revised Pay As You Earn Repayment Plan (REPAYE Plan)
• Pay As You Earn Repayment Plan (PAYE Plan)
• Income-Based Repayment Plan (IBR Plan)
• Income-Contingent Repayment Plan (ICR Plan)³

Depending on the type of repayment plan you’ve opted for, your tax filing status could determine how much you’ll be paying per month. For example, some repayment plans look at the combined adjusted gross income (AGI) of both you and your spouse only if you are filing jointly, while others may look at your combined AGI whether you file jointly or separately. With a combined AGI, your payments could be higher than when you were filing as a single individual. 

For some plans, filing separately could mean your repayment plan is only looking at your individual income, not a combined AGI of you and your spouse. This would mean your monthly payments would be lower. Alternatively, if you and your spouse both have student loan debt and file together, in some cases your monthly payments would be lower to accommodate the additional debt. 

When it comes to deciding the most efficient filing option for you, your spouse and your student loan debt, you may want to consider working with a tax professional. In some cases, the tax credits or deductions you may miss out on by choosing to file separately could have outweighed the higher monthly debt payments. 

Fact #2: You May Not Be Legally Liable For Your Spouses Debt

While there’s nothing romantic about it, it’s important to understand your legal obligation and responsibility toward your partner’s student loan debt. If your partner took out federal student loans before you were married, you, as the spouse, are (in most cases) not responsible for those loans. If your partner took out private loans, it could depend on the policies of the loan provider. 

However, if you co-signed for the loan before you were married, you likely will be held responsible for those loans should your partner default. In addition, if your partner took out the loans after you were married, in some states you could be liable as these are considered jointly owned community property. These states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.⁴ The law can be complicated when it comes to who’s responsible for what, especially if a divorce is involved. Should you need to look further into your obligation as a spouse, you may want to seek professional legal counsel or speak with a financial advisor. 

Fact #3: You & Your Spouse Cannot Consolidate Your Student Loan Debt Jointly

From 1993 until 2006, the Department of Education granted joint consolidation loans to married couples, allowing these couples to combine their student loan debt into one joint loan, making both parties liable for the amount – even in the event of a divorce.⁵ While there was some benefit to the ability to organize both spouses student loan debt into one tidy sum, it was found to have multiple downsides such as:

• Leaving a spouse responsible for the other’s debt in the case of a divorce or separation
• Spouses losing the ability to defer payments (such as in the event of unemployment) unless both spouses qualified 
• One partner is unresponsive or unwilling to pay, leaving the other responsible 
• Limiting eligibility for utilizing income-driven repayment plans

While as of November 2019 it has yet to be passed, a bill was introduced on May 14, 2019 called the “Joint Consolidation Loan Separation Act,” which proposes the ability for couples who had previously consolidated their loan debt to once again legally separate their debt.⁶  

Getting married is an exciting milestone for all families, and it’s one that should bring about joy and celebration. But as you transition into married life with your partner, the debt you’re bringing into the marriage shouldn’t be ignored. Be honest with your partner about how much student loan debt you’re facing, and research your options together to build a plan of action moving forward.

1. https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/hhdc_2019q2.pdf
2. https://www.consumerreports.org/student-loan-debt-crisis/degrees-of-debt-and-regret/
3. https://studentaid.ed.gov/sa/repay-loans/understand/plans/income-driven
4. https://www.irs.gov/publications/p555
5. https://price.house.gov/newsroom/press-releases/price-byrne-and-stevens-introduce-bipartisan-bicameral-legislation-provide
6. https://www.congress.gov/bill/116th-congress/house-bill/2728

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

Lifestyle creep is something that’s simple to define, easy to see, yet hard to avoid. Especially prevalent amongst young professionals, lifestyle creep is a hurdle many face in saving for their short- and long-term goals, like retirement. Below we’ll discuss what exactly lifestyle creep is and four ways you can work to avoid it.

What Is Lifestyle Creep?

Lifestyle creep is the idea that as your income rises, so does your spending. It’s often a naturally occurring financial issue, typically taking place gradually over long periods of time. 

For example, if someone’s yearly salary rises from $40,000 to $50,000, they may be inclined to eat out more, take an extra vacation, update their wardrobe, move to a new apartment, etc. The problem with lifestyle creep is the lack of putting that extra income toward retirement and spending it all instead. That means that while someone is earning more, they’re not saving more.

Four Ways to Avoid Lifestyle Creep 

If you’ve fallen victim to lifestyle creep, you’re not alone. And there are ways in which you can work to combat this financial phenomenon year-after-year.

Way #1: Compare Your Personal Inflation Rate to the CPI

An effective way to figure out if you’ve succumbed to lifestyle creep is to figure out your personal inflation rate and compare it to the Consumer Price Index (CPI), which is the inflation rate set by the government.

Take a look at your spending from last year. Say, for example, that you spent around $60,000 last year, and this year you spent around $65,000. Your personal inflation rate from last year would be 8.2 percent. If the inflation rate from last September to this September was 1.5 percent, we can easily see your spending is well beyond simple inflation adjustments. That’s a pretty big sign that you’ve experienced lifestyle creep.

Way #2: Make a Budget

The big thing to understand about lifestyle creep is that it’s different for everyone because it’s all relative to how much you make versus how much you keep. If you’re increasing your spending significantly but still putting a sufficient amount away towards your savings and retirement, then you aren’t outspending your earnings. A good way to do this and avoid lifestyle creep is to make a budget. Building a budget and tracking your spending is an eye-opening way to see where all the money is going and how easily small purchases can turn into significant spending.

Way #3: Plan For Your Next Promotion

Seeing your paycheck increase significantly after a promotion or salary increase is exciting and exhilarating. But if you go into a significant salary increase without a plan, that extra cash could start burning a hole in your bank account. Before temptation strikes, come up with a game plan for your new earnings. Decide what percentage of your increase you’ll be putting directly into savings and how much you’ll be leaving as new discretionary income. Move forward with your plan as soon as the increase goes into effect, making the transfer into savings automatic if possible. This way, you won’t even have to decide month after month whether to save or spend.

Way #4: Don’t Forget to Enjoy Your Earnings

You work hard for promotions and salary increases, and you should get to reap the reward of your efforts. Don’t try to deprive yourself completely when you receive a pay increase, especially when you’re creating a new budget that’s adjusted for your new salary. Give yourself a little wiggle room to spend, and practice spending with intention. For example, instead of making a couple of impulse purchases here and there, save that extra money to spend on a weekend trip with your loved one.

Lifestyle creep can occur so effortlessly that you don’t even know you’ve experienced it until you look back and assess your previous spending. And while receiving more money month-after-month is exciting, the key is to focus on saving what you need to for retirement and other large financial goals before spending your extra earnings.

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

Have you filled out your child or grandchild’s Free Application for Federal Student Aid (FAFSA) yet? The FAFSA not only determines their eligibility for federal student aid, but many schools use the FAFSA to determine eligibility for scholarships, grants and additional loans.

As a reminder, the FAFSA deadline is June 30, 2021, at 11:59 p.m. Central Standard Time (CST). The deadline to make any corrections to your FAFSA is September 11, 2021, at 11:59 p.m. Central Standard Time (CST).

If you haven’t submitted a FAFSA for the 2020-2021 school year, you still have some time. But the sooner you submit your FAFSA, the better. Students who file their FAFSA between October and December tend to receive more funding than people who file later, simply because federal, state and college-offered grants are often awarded on a first-come, first-serve basis.¹

Whether you’re filling out your FAFSA for the first time or simply confirming your information from last year, there are a few things you can do ahead of time to help make the process easier. You can do everything online, from either your desktop computer or from their mobile app.

Use the steps below to walk through filling out your child’s FAFSA, it should take about 20-30 minutes to complete.

Step #1: Creating Your FSA ID

Creating a Federal Student Aid (FSA) ID isn’t required, but it can be a useful place to start. Having an FSA ID allows you to electronically sign your FAFSA letter and any loan documents you may receive. If your child will end up filling out the FAFSA at any time in the future, they will need their own FSA ID.

If you already started your FAFSA, you can set up your FSA along the way, but creating it ahead of time can make the process easier.

Step #2: Gather All Needed Documents

The FAFSA will determine financial aid eligibility based on your personal financial situation. You’ll need a few documents to prove your identity (your Social Security number and driver’s license number) as well as any supporting financial documents. Remember, if you plan on mailing in the FAFSA, do not send any of these documents in with your application.

You may need some (or all) of the following, depending on your situation:

• Federal tax information or tax returns including IRS W-2 information for you and your spouse
• IRS 1040
• Records of your untaxed income
• Asset information including things like cash, savings and checking account balances, investments and business and farm assets

Step #3: Selecting Colleges or Career Schools

To complete your FAFSA, at least one school must be selected. While the order doesn’t matter for federal aid, some states have different requirements to receive state funding. You can check online through the Department of Education to see if your state has this particular requirement.

Step #4: Transferring Your Tax Information

When filling out your FAFSA online, the IRS offers a Data Retrieval Tool (IRS DRT). Using the IRS DRT saves you the hassle of having to locate your tax records and instead connects you with the IRS database.

Step #5: Signing & Submitting Your FAFSA

Once you’ve filled out your FAFSA, you’re ready to sign and submit it. While you can print off the documents to sign and submit them through the mail, your FAFSA will likely be processed quicker if you sign and submit it online. You’ll be able to sign and submit your FAFSA electronically using the FSA ID you created earlier. 

If you have other children in college, you can automatically transfer your information to another child’s FAFSA form if you filled the original FAFSA out online.

Remember, the FAFSA needs to be completed for every school year that your child attends. If you have questions about funding your child’s education, or need help with your FAFSA, reach out to your financial professional for guidance.

1. https://www.cnbc.com/2020/09/28/the-fafsa-opens-on-october-1and-its-more-important-than-ever-to-complete-it-asap.html

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

It’s common for people to want to leave money behind for their children and family members after death. After spending years working to earn a living, people are proud to leave behind a legacy and help their future generations to be better off. But there’s a common saying regarding generational wealth – “Shirtsleeves to shirtsleeves in three generations.” The idea is, by the third generation of wealth being passed down, it’s primarily gone. With that being said, there are things you can do now to proactively protect your wealth and your heirs. Developing a generational wealth plan, communicating with your loved ones and working with a team of professionals can give your wealth a better chance at lasting for generations to come. 

Here’s how you can approach estate planning in a way that will last for generations, otherwise known as generational wealth planning.

Creating a Generational Plan

The making of a generational plan consists of two parts. First, the legal documents. Second, you will need a detailed plan outlined in a way that clearly states how your beneficiaries should address your wealth after your passing. There are several steps you can take now to begin the planning process.

Think Ahead, Far Ahead

It’s important to remember that generational wealth planning is a bit different from designating gifts for your kids and grandkids through estate planning. When you start making a generational plan, you need to be considerate of future generations – even the ones you’ll never meet. It may be hard, but try to think of your family as people you haven’t even met you. The point of generational wealth planning is to pass your assets down to those who haven’t been born yet, but it can be hard to try to consider their needs alongside the family members you already know and love.

Have Conversations With Your Family

If you want your wealth to last for generations, it’s crucial that you communicate your desires with your family. Everyone must be on the same page when it comes to leaving a legacy for future generations.

You are your family’s best resource for wisdom and guidance when it comes to this, so don’t make the mistake of thinking that your money and values need to be kept secret. Take the time to educate your children and grandchildren, sharing your vision with them so that they aren’t left feeling confused and frustrated. This is an ideal opportunity to involve your financial advisor, as they can help you communicate your vision and answer any of the more technical questions your family may have.

Put It in Writing

Putting your plans in writing can rid future generations of potential doubt or confusion regarding your wishes. Your heirs are the ones who will truly be carrying out your generational wealth plan after you are gone.

Make sure you specifically identify how the money should be used, how it is accessed and how it is replenished. With proper planning, it’s possible that your money could be used to invest in higher education, starting a business or other things that will help your family grow their wealth for decades to come.

Create a Support System

Do you know what a sustainable withdrawal rate is for your assets? It’s possible you may not. And if you don’t know, it’s highly unlikely your heirs will know either. Understanding this, along with a number of other technical details, is an important part of maintaining wealth for decades to come. This is why working with the right system of financial professionals could be your greatest chance at successful generational wealth transfer. They will have the advantage of working one-on-one with you to determine your goals, develop a plan, educate your heirs and help them stay on track.

If you think you’re ready to start creating a generational wealth plan, remember to have a clear vision and share that vision with your family members. Put these wishes into legal documents, too. Your trusted financial professional can help you begin the planning process, speak to your family members and answer any questions you may have.

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

Nobody likes to think of their parents getting older and needing assistance, but it’s a reality many of us face. An important part of caring for your parents as they age is identifying and protecting them from elder financial abuse. Baby boomers and the Silent Generation are getting older and with their accumulated assets, they have a higher chance of being defrauded than those who are younger. According to one estimate, seniors collectively lose up to $30 billion a year to elder financial abuse.¹ This abuse can come from total strangers, or even friends and family members.

As a concerned child, how can help you combat this? Here are seven ways to spot financial abuse and six ways to protect your parents and their financial futures.

7 Signs of Elder Financial Abuse

Protecting your parents from scammers is crucial, especially as they get older and have a harder time managing their finances.

Warning signs may include:²

• Unusual activity in their bank accounts, such as large or unexplained withdrawals
• Withdrawals from an inactive account
• A newly opened joint account
• New credit card balances
• Bank and credit card statements sent somewhere other than your parents’ home
• Suspicious signatures
• Closing a Certificate of Deposit or savings accounts without worrying about penalties

Protecting Your Parents From Financial Abuse

Tip #1: Talk to Them About Money

Reach out to your parents and make sure that you are staying in touch with them regularly. Make sure they are paying their bills and, if applicable, find out who is doing it for them. Your parents may not want to share this information or admit that they need help, so you can ease them into it by asking them for advice or speaking about your own money worries. Once this becomes more comfortable, they may let you help with more as it becomes necessary. 

Tip #2: Automate Their Bills or Deposits

One way to go about helping them pay their bills is by automating the process. Automating your parents’ payments with direct debits from their account can help keep things organized while lessening the chance that they will become victim to a scam.

Similarly, you can automate transfers into their checking account, as they may have funds coming from various sources, such as social security, pensions, annuities, etc.

Tip #3: Have the Necessary Documents Ready

Are your parents’ legal documents in an accessible location?

This could include:

• Wills
• Healthcare Proxy
• A HIPAA Release Form
• Power of Attorney

Make sure your parents are careful when choosing a power of attorney, as this person will be responsible for managing finances once your family member is no longer able to do this. Having more than one is also a good idea, as this is a good way to be able to act together and consult each other.

Tip #4: Condense Your Parent’s Finances

Consolidate your parents’ finances when possible, as many older people have more than one account. Practice caution when consolidating and moving accounts to make sure that you don’t incur any penalties. Additionally, you need to respect beneficiary designations or you could face legal action. 

Tip #5: Encourage Credit Card Use Over Cash

If your parents sent cash to a scammer, then it would be much more difficult to trace than if they paid with a credit card.

If they were to make a purchase with a card, the credit card company can:

• Protect against identity theft
• Allow past transactions to be reviewed
• Reimburse any money that was stolen

Tip #6: Create a Trust

A trust is a great way to manage and protect your parents’ assets, however, they can still withdraw from this account, making it easy for them to fall prey to scammers. If you set up an irrevocable trust, they will not be able to withdraw money from this account without consulting the trustee, making it much more secure.

Many older people do not like giving up this type of control, but if you speak to them about the importance of their safety, they may be more open to it.

If you can establish a system of checks and balances by utilizing the above tips, your parents will be much more protected from fraud. Take a proactive approach so that you can get ahead of them before it becomes an issue rather than waiting until your parents become the victim of financial abuse.

1. https://dfi.wa.gov/financial-education/information/warning-signs-elder-financial-abuse
2. https://www.consumerreports.org/elder-fraud/ways-to-prevent-elder-financial-abuse/

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

Money is the second leading cause of stress amongst adults.¹ If you find yourself worried about your financial wellbeing, you’re not alone – and there are things you can do to make it better. Financial stress can stop even the most productive people in their tracks, causing sleepless nights, avoidance of debt and denial. While it’s best to talk to your financial professional about what’s on your mind, here are a few tips to start managing your stress on your own. 

Tip #1: Make a To-Do List

Sometimes the most effective techniques are the simplest. When it comes to overcoming your financial stress, start by putting your to-do list in writing. Creating a clear list of what’s ahead can help it feel more tangible and doable. If you can, start with the easiest tasks and slowly work through your list, checking things off one by one. With a to-do list in front of you, there’s no need to bear the burden of remembering everything in your head. Starting with a list of tasks can help you more effectively build a plan of action.

Tip #2: Try Talking to Someone 

While working with a financial advisor is recommended, it can still help to open up to a family member or friend in the meantime. Keeping everything bottled up and to yourself is only going to escalate your anxiety. If you’re able to, talk it out with someone you trust and be honest. Discussing your problems can ease the burden significantly. Your friend or family member may even have some advice to offer or a financial advisor to recommend. 

Tip #3: Review Your Spending Habits

Ignoring the situation may be tempting, but putting your financial obligations off will only make them worse. While some financial issues are more complicated than others, taking stock of your current situation can help build a better understanding of where you are today and what needs to happen. This often starts with adjusting your spending and saving habits. When it comes to addressing your current spending habits, there are a few things you can do right away:

• List out every income source you currently have
• Determine your debts (student loans, car payments, credit card debt, etc.)
• Keep track of all your spending manually or using a phone app
• Identify potential spending patterns or triggers (when you’re stressed, right after payday, etc.)
• Determine what changes you can make to your average spending to save more
• Avoid impulse spending

Tip #4: Make a Plan and Create a Monthly Budget

Creating and tracking a monthly budget is a great way to get in the habit of healthier spending – and healthier spending habits mean less financial stress. 

To get started on creating your monthly budget, start by: 

• Listing out recurring expenses such as gas, groceries, utilities, etc.
• Prioritize contributing to your emergency fund each month 
• Set up automatic payments to avoid late fees or interest
• Determine where you may be able to cut down on spending (entertainment, clothes, etc.) 

Tip #5: Establish a College Savings Plan

If you have a young one at home, paying for college is likely looming over your head. To ease this large financial burden, take the time now to establish or check up on your 529 plan. This tax-advantaged savings plan is designed to encourage saving for future education costs (such as tuition, room and board, etc.). You and other family members can contribute to the account, which will gain interest over time as you set aside funds to pay for a child or grandchild’s education.

Getting your finances in order is no easy feat. Identifying your main stressors and establishing a plan to address them can make a big difference in how you and your family feel about your finances. If you’re feeling lost, confused or overwhelmed, don’t forget to reach out to a trusted financial professional who can help make sense of your current financial situation.

1. https://www.apa.org/news/press/releases/stress/2017/state-nation.pdf

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.