Saturday, September 29, 2018

FinCon Conference Highlights

This week’s post is late because I attended two conferences as a presenter and for professional development. Below are take-away insights from FinCon 2018, a conference for personal finance content communicators:

¨     Every time you fail, you learn what not to do the next time so it is not really a true failure.


¨     Children are like “little recording devices;” they assume that what they see related to money is true.


¨     Fear is a big motivator of financial decisions: fear of missing out (FOMO) and fear of not belonging.


¨     Financial mindfulness involves putting a pause between a stimulus and a response (e.g., spending). For example, putting off a major purchase off for a day to think about it.


¨     When people are focused on a major problem (e.g., debt), they have less brainpower to make decisions.


¨     The FIRE (Financial Independence, Retire Early) movement encourages people achieve financial independence to live the life they want at a much younger age than 65. FIRE is an individual journey.


¨     No one will ever see, hear, or share your ideas if they never leave your head.


¨     Focus your efforts on improvement, not perfection. Do not use someone else’s measurement of success.

Wednesday, September 19, 2018

Tax Planning for 2018: Tips from a FPA-NJ Seminar

The Financial Planning Association of New Jersey (FPA-NJ) recently held a seminar on the Tax Cuts and Jobs Act of 2017 (TCJA) and associated tax planning strategies. Below are some highlights:
  • Not everyone with a high income, even in a high-cost state like NJ, will pay more taxes under the TCJA. The alternative minimum tax (AMT) is basically going away for the great majority of taxpayers (exception: people with valuable incentive stock options) and people who formerly paid the AMT weren’t getting now-limited tax deductions anyway. Those most likely to pay more tax under the TCJA have incomes between $100,000 and $200,000, formerly itemized deductions, and did not formerly pay the AMT.
  • People have three months left to adjust their tax withholding or final estimated tax payment (if self-employed). CPAs have software to make 2018 tax projections and many are performing free or low cost projections for their clients. Bring your latest pay stub for this review. Some tax experts believe that tax withholding is too low for many taxpayers and that these taxpayers will get smaller refunds or owe taxes and/or under-withholding penalties next April.
  • Required minimum distribution (RMD) distributions from an IRA to a qualified charity by a person age 70½ and older should be done as a direct transfer to the charity. Allow enough time for the IRA custodian to process the paperwork and keep records (in the event of an audit) that provide proof that the IRA withdrawal went to a charity.
  • It is probably too late to file for a divorce under the pre-TCJA rules where alimony was deductible (payor) and taxable (recipient). Divorces filed now will not get through the courts in time.
Below are five specific tax planning strategies that were mentioned at the seminar:

  • Track what you do with the proceeds of a home equity loan. Many people did not previously keep records for this and will need to retrace their past transactions. Home equity loan interest is only deductible if the loan was used to purchase or improve a home.
  • Assess where you are income-wise for 2018 before taking capital gains and losses. Capital gains tax rates are now tied to income ranges rather than marginal tax brackets.
  • Consider using a donor advised fund (DAF) to “lump” charitable contributions to get over the standard deduction amount and benefit from itemizing deductions. Two other strategies to benefit tax-wise from charitable contributions are to transfer appreciated securities to a DAF or directly to a charity and, for taxpayers over age 70½, make qualified distributions with withdrawals from an IRA.
  • Schedule elective surgery in 2018 before the tax deduction threshold for medical expenses increases from 7.5% of adjusted gross income (AGI) to 10% of AGI.
  • Consider a Roth IRA conversion if you are in your 60s and will have a higher marginal tax rate after age 70½ when RMD withdrawals must begin and current tax rates rise when the TCJA sunsets after 2025.

Thursday, September 13, 2018

Planning Ahead for a Hurricane

In 2012, it was SuperStorm Sandy in New Jersey, last year it was Hurricanes Harvey, Irma, and Maria, and today it is Hurricane Florence in several southeastern states. Each year at this time, hurricanes occur. It is just a question of how many, where, and when. Those who get through this experience with the least amount of financial stress often plan ahead. Unlike tornadoes, hurricanes generally come with up to a week of advance notice. Below are five tips to prepare to evacuate and cope with resulting losses:


¨     Prepare a Grab and Go Box- Include insurance policies and provider contacts, contact information for family and friends, a cell phone charger, plastic bags (to protect wallet, phone, etc.), toiletries, several days of clothes, snack foods, and bottled water. For a complete list of what to include in a “Grab and Go” box, see


¨     Document Your Possessions- Take photos or videos of your most expensive possessions and make a list of these items with make and model numbers and serial numbers. Store this information remotely on a flash drive at a remote location or on a cloud server platform such as Dropbox, iCloud, or OneDrive.


¨     Move Things to Higher Ground- Examples include moving a car parked in an area where flooding is predicted and moving personal possessions in the basement or first floor of a house to a higher level.


¨     Get Gas and Cash- In the event that debit and credit card networks go down, have small denomination bills available to make purchases. Fill the gas tank for your car and a generator before supplies run low.


¨     Find Local Resources- Reach out to the Red Cross for emergency shelter, if needed. If your house is fine but you will have no power for several days, find a place to go during the day for heat, food, and internet access. Examples include libraries and restaurants with wifi (if open) or hospital cafeterias.

Thursday, September 6, 2018

Coping With Unemployment- Part 2

Coping With Unemployment- Part 2

This post continues last week’s discussion of action steps to take as a result of unemployment. Below are four recommendations to consider:

¨      Negotiate With an Employer- Find out if a soon-to-be-ex-employer provides severance pay, which is money paid to employees who are dismissed for reasons beyond their control (e,g., as the result of company downsizing).  Set aside about 30 percent of severance pay for estimated income tax payments. Another option to discuss might be remote telecommuting. Many jobs today can be done anywhere in the world.


¨      Contact Your Creditors- Explain your job loss and request reduced payments or an extension of time to pay bills if you anticipate difficulty paying debts and/or household expenses. If you own a home, you may be able to arrange a forbearance agreement with your mortgage lender that enables you to pay nothing, or make partial payments, for a set period of time.  A forbearance gives homeowners time to get “back on their feet” financially and bring their mortgage current.


¨      Contact a Credit Counselor- Reach out to a non-profit credit counseling agency that can provide budget counseling and negotiate with creditors on your behalf for concessions such as waived fees or reduced interest rates. Many of these counseling agencies are affiliated with the National Foundation for Credit Counseling (NFCC), which has an “agency locator” search function on its web site.


¨      Keep Retirement Savings Tax-Deferred- Try not to cash in tax-deferred retirement plan assets to pay living expenses while you are unemployed. A job loss is usually a temporary situation while retirement can last for decades. If you must tap this money, repay it within 60 days to avoid income taxes and the 10 percent penalty on premature withdrawals before age 59 ½. In addition, withdraw only what is truly needed.


The NC State Extension Publication What to Do If You Lose Your Job has additional information about coping with unemployment.

Loud Budgeting: A Financial Discipline Strategy

  Have you heard the term “loud budgeting?” It started gaining traction earlier this year on TikTok (where else?) and has been covered by fi...