Build Wealth

Budgeting shouldn’t be a limiting exercise designed to tell you how to spend your money. At its best budgeting is a tool for organizing your financial resources toward your great life, both now and in the future.

Also Covered:

• A Better Version of Budgeting

• Opportunity Cost

• Changing Costs

• Changing Priorities

Severance packages are considered compensation by the IRS and are taxed the same as other income from a job, but this means not all of your severance is subject to taxation. Reviewing the terms of the agreement with your CPA or financial advisor can help you know exactly how it is taxed. If you are still negotiating your severance, you have an opportunity to lower your taxes by changing the terms of the package.

ALSO COVERED:

• The Severance Agreement

• Estimating Tax Withholdings

• Avoiding Taxation — healthcare & fringe benefits

The last couple weeks saw a stock market drop which has many spooked. Here are the 6 things you should do to keep the market downturn from ruining your financial plan.

Before worrying about strategies for saving and investing start by having a discussion about the goals you and your fiancé have for your life together; such as buying a home, having children, or even taking vacations. Then focus on how you can align your finances toward those goals. This discussion on your goals is the most important financial discussion you can have as it is the only one which directly connects to the life you want to build.

Also Covered:

• INVEST MORE AGGRESSIVELY

• OPEN A HEALTH SAVINGS ACCOUNT (HSA)

• SAVE UP FOR A DUPLEX/TRIPLEX

• SAVE UP TO START A BUSINESS

• BUY A HOUSE

Peer-to-peer lending (P2P lending) is a relatively new investment class and tends to carry with it high risk. As a result, I would not recommend P2P lending as a significant part of a person’s portfolio - definitely not more than 5% to 10% of their invested assets. This means you should build up a significant portfolio of more traditional investments before considering investing here.

Full Article Also Covers:

• Adding P2P Lending Isn’t Necessary to Diversify From Mutual Funds

• P2P Lending Actually Increases Risk to a Portfolio

• P2P Lending Scandals

You can invest in any type of investment account, including retirement accounts, through a brokerage company, a mutual fund company, or through Purposeful SP. At your age, and with over 30 years until you retire, you should consider investing heavily in a broadly diversified stock portfolio which includes both U.S. and international stocks. With three plus decades to go, you only need bonds in your portfolio to help you sleep at night and for rebalancing opportunities. In other words, after doing your research, choose a bond percentage which makes YOU feel comfortable that you have enough "safety" in your portfolio.

Article Also Covers:

• Beware Portfolio Advice From Books, Magazine, or the Internet

• Build an Emergency Fund Before Investing

• Three easy ways to get started with an investing account

Congratulations on giving yourself the foundation for financial freedom. If you were a client, I would respond to your "what's next?" question with asking you the same thing. What is next on your personal life agenda? Think about your major life goals you want to accomplish in your future. Retirement is obviously one of the major ones, but also think about whether you want to . . . .

It sounds like you have a good handle on your retirement savings based on your contributions to both the TSP and your workplace plan, assuming you are contributing at least 10% to 15% of your income. If so, begin investing outside your retirement accounts in a taxable investment account to fund other goals such as buying a home, starting a business, or taking a major vacation.

Yes, getting a paper divorce can help you financially but it can also be a financial negative depending on your personal situation. As with most things with Personal Finance, the answer is it will depend on a large number of factors related to your family's finances. Below are a few of the consideration that immediately spring to mind, which you will want to explore.

While the concerns over the slower bootstrap method are legitimate and should be considered, I still believe bootstrapping for as long as possible is the way to go for the vast majority of enterprises because of the significant potential downsides of VC and Angel funding. Ultimately the question you want to ask is if it is possible to build your business through bootstrapping considering the concerns you identified. If it is, then I recommend going with bootstrapping as long as you can. Here are potential challenges with getting funding:

Yes, there is potential for relief from the IRS, but ignorance of the rules and weakness in English are most likely going to get denied. At this point you will want to contact a financial advisor and a CPA to help you with this. The CPA will help you in dealing with the IRS and a good financial advisor . . . .

My answer: neither is the optimal strategy – but that the home loan is a less-bad strategy. Your financial planner is correct about it being worse to use your IRA money to pay the loans. When you take money out of the IRA you will have to pay the 10% penalty plus income taxes, which should be 22% based on your income. This means to pay off the $50,000 debt you would need to take out . . . .

Your analysis is actually correct, in that cash flow and growth rates are constantly changing, and generally they are changing for the better. As a result, future cash flow increases at a faster rate than previously expected and the stock price is adjusted up due to these increasing cash flows. Because no one can predict the future, as new facts become apparent they changes the expectations of future cash flows. This, of course, assumes . . . .

While most people argue against the use of an IRA for purchasing a home, I think it can be a good use of the funds if the situation is right. The fact you are currently contributing to a retirement plan is one of the factors I would want to see, although I'd like to be able to calculate what your current course to retirement would look like. If you are on track with your retirement without the $14,000 then using it for a house would likely be . . . .

You are correct, the rule of thumb advice doesn't really apply to you. If it is better you don't invest in the 401(k), the alternative to look at would be opening your own Individual Retirement Arrangement (IRA) account. To determine whether to invest in your 401(k) or to invest in your own IRA, ask yourself the following questions. . . .

It is definitely not too early and I commend you for taking advantage of the incredible returns you can get by starting an account at one year old. I am assuming your child will not need the money for at least 18 years so a stock-heavy portfolio would be appropriate. I would even be comfortable with a 100% stock portfolio assuming . . . .

You seem to be doing well with your overall financial plan. So, while the financial world is confusing, you seem to be doing a good job of conquering it. The next step would be to look at your other goals and begin to prioritize . . . .

Finding the right adviser is difficult but not impossible. You will want to research advisers and then set up appointments with at least three or four of them. An adviser should be a fiduciary, should not be a commissioned. . . .

Somehow missed this when it came out, but happy to be quoted in U.S. News & World Report and be able to help investors understand the uses of cap-weighted and equal-weighted funds.

While the specifics of your tax situation can't be determined without reviewing your tax returns, most likely you are just a victim of the marriage penalty. When two high-income people get married . . . .

I encourage the two of you not to consider this as an either/or situation, but instead use the money to provide for multiple goals. Focus on multiple goals to help you achieve both financial stability and a happier life . . . .

I think either of the two options would work well, since you would still be contributing at least 10% to your retirement account (you can count your contribution and your employer's contribution for this benchmark). At your . . . .

In order to stay within your "safest" criteria, you would want to stick with an FDIC or NCUA insured account. You can get slightly higher interest rates by shopping around for high-interest savings accounts from online banks and credit unions. Currently (November 2018), rates on savings accounts are….

Although I cannot identify a specific asset allocation without doing a lot more analysis and knowing what your current asset allocation is, my general comment are below. You seem to be positioned well for the future. In fact . . . .

The end of last week saw a stock market drop which has many spooked and supposed experts have been using words like ‘market crash’, ‘historic drop’, and ‘recession’. Here are the 5 things you should do to keep the market downturn from ruining your financial plan.

Despite what you might hear, there are some very good ‘pros’ in favor of annuities. But, there are also a lot of very big ‘cons’ with buying an annuity. Annuities provide a fixed income until you die, which is very attractive for retirees. With a fixed annuity, the fact the insurance company is taking. . . .