The big difference is that a financial coach usually works with a larger portion of the general public and is only paid for his advice not on any commission or fees for products that he or she sells.

Financial Coaches help with a myriad of financial issues not just investment advising. Financial coaches must be experts in personal financial matters, including, budgeting, cash flow planning, debt reduction strategies, student loan options, retirement planning, and much more.

Financial coaches, work as counselors and must help the client resolve their dysfunction with money. We all have some dysfunction when it comes to our relationship with money. Some of us don’t know how to get it, some of us don’t know how to keep it, some of us don’t know how to spend it and some of us don’t know how to make it work for us.

That is where a financial coach comes in. Financial coaches know more about financial programs and help that may exist for a client than the client could possibly know. This knowledge comes with time, studying, and experience. I gained a lot of that knowledge over 7 years as a bankruptcy attorney, I learned how to work with clients who had financial problems, I learned how to counsel, and help solve problems with my clients. I gained knowledge becoming an Enrolled Agent with the IRS and earning my financial licenses, and working as a financial advisor. I learned the life insurance world by working for one of the top life insurance companies in the country. I gained knowledge and experience as a Professor at ORU teaching courses on Personal Financial Planning. If you need help with your relationship with your finances please give me a call.

Are you struggling to pay your federal taxes?

If so, the IRS Fresh Start program for individual taxpayers and small businesses can help. The IRS began Fresh Start in 2011 to help struggling taxpayers. Now, to help a greater number of taxpayers, the IRS has expanded the program by adopting more flexible Offer-in-Compromise terms. This expansion will enable some of the most financially distressed taxpayers to clear up their tax problems, possibly more quickly than in the past.

What is an Offer in Compromise?

An OIC is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. Generally, the IRS does not accept an OIC if they believe the liability can be paid in full as a lump sum or through a payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination of the taxpayer’s reasonable collection potential. OICs are subject to acceptance on legal requirements.

Why is the IRS making this change?

The IRS recognizes that many taxpayers are still struggling to pay their bills so they have put in place common-sense changes to the OIC program that more closely reflect real-world situations. This expansion focuses on the financial analysis used to determine which taxpayers qualify for an OIC. These changes also enable some to resolve their tax problems in as little as two years compared to four or five years in the past.

How is the program changing?

In certain circumstances, the changes include:

• Revising the calculation for the taxpayer’s future income.
• Allowing taxpayers to repay their student loans.
• Allowing taxpayers to pay state and local delinquent taxes.
• Expanding the Allowable Living Expense allowance category and amount.Other changes to the program include narrowed parameters and clarification of when a dissipated asset will be included in the calculation of reasonable collection potential. In addition, equity in income producing assets generally will not be included in the calculation of reasonable collection potential for on-going businesses.How is collection potential now calculated?When the IRS calculates a taxpayer’s reasonable collection potential, it will now look at only one year of future income for offers paid in five or fewer months, down from four years; and two years of future income for offers paid in six to 24 months, down from five years. All offers must be fully paid within 24 months of the date the offer is accepted.How do I apply or get more information?Information about the OIC program, including applicant qualifications, how to apply and steps to complete the application process, Form 656-B, Offer in Compromise Booklet and Form 656, Offer in Compromise, is available on IRS.gov.

Selecting the right financial advisor can be a daunting task.  With so many so called “financial advisors” out there where do you even start.  

I think there are 3 factors you should look for when selecting a financial advisor.

1.) How is your advisor paid? 

Have they disclosed to you how much they are paid for their “financial advice?” If it is not clear and in writing how your advisor is paid you need to look elsewhere. Your advisors fees should be disclosed up front. 

Is the advisor paid a commission based on the products that they “sell” you? If so, they are not giving advice, but rather “selling” a product, and you need to keep looking.

You want to work with an advisor that charges a flat fee for managing your assets and doesn’t take a commission on the stocks or bonds they trade in and out of your portfolio.

2.) What kind of credentials does your advisor have? 

You want to work with an advisor that has credentials. Too many “advisors” don’t have the knowledge or the skill to be advising. But sometimes it can seem like just an alphabet soup of letters behind many advisor’s names. Do they actually mean anything?  It seems like daily I come across new letters behind advisor’s names that I have to go look up what they stand for and who the organization is that is awarding these designations.  Here is a list of some of the most recognizable and relevant designations for financial advisors and planners:

CFP – Certified Financial Planner

CFA – Chartered Financial Analyst (Experts at portfolio design and management)

CPA – Certified Public Accountant (Great at financial reporting, analysis and sometimes taxes)

EA – Enrolled Agent (Tax experts, this credential is awarded by the IRS, requires passing 3 exams)

JD – Juris Doctor – (Legal expert, Attorney if they have passed their state bar exam – not exactly a credential, but a powerful asset for an advisor to have).

3.) Is the advisor a good fit for you?

Every advisor, whether they know it or not, has a niche. You want to make sure that you fit their firm’s profile. For example: If you are a young business owner, but the advisor you are visiting with mainly works with retirees who have 401(k)s that advisor is not going to serve you well. You are too far out of their comfort zone. They would need to learn a whole new skill set to services you well. 

Beyond fitting their niche, do you get along with the advisor? Do you have a good report? Are you going to want to meet with this person regularly? Do you trust them and feel comfortable sharing intimate details of your life?  If you answered no to any of those questions the advisor isn’t a good fit and you need to keep looking.

Those 3 things are just a starting point to finding the right advisor.  Here are 7 questions you should ask each financial advisor you meet with to find the right advisor for you!

Let’s talk about credit scores.  I know people think credit scores are important. I personally think there is too much focus placed on credit scores. As we make the right financial choices in life credit scores tend to take care of themselves.  Credit scores matter the most to those that are young and to those that are poor; aka those who need credit. As we get older and have accumulated more wealth and savings, a credit score doesn’t matter as much.

But let’s talk about what makes up your credit score and also some tips and tricks to help your score.  

First, there are three credit bureaus: Experian, Equifax, and TransUnion. Not all of your accounts report to every credit bureau because each creditor has to have a contract with each credit bureau. So many of your creditors may only have a contract with one bureau because it is cost prohibitive to pay to report to all three.  The credit bureaus do not give you a credit score.  They compile credit reports about your loan history, collections, legal judgements, payment history, length of credit, etc…

Your credit score is created by the Fair Issac Corporation AKA FICO. Which is where we get the term FICO score.  FICO pulls information from the credit bureaus and other sources and compiles it through their algorithm and creates a score.

Did you know that car insurance rates are even influenced by your FICO score?

Here are the factors that effect your credit score, and how you can help your score. 

1.) Credit usage: This is a measure of current credit usage divided by total credit limits. Keep this ratio less than 30%. The lower the better.

2.) Shrinking or expanding credit card debt: This is a measure of the direction of your credit card debt, an expanding amount of credit card debt is going to negatively impact your credit score and as you pay down credit card debt your score will positively reflect that progress.

3.)Payment history: This is pretty self explanatory. Making payments on time is going to help your credit score. While missing payments or defaulting is going to have a negative impact on your score.

4.) Collections: If you have accounts in collections, this can negatively impact your credit score. If you disagree with a collections account that is reporting to the credit bureaus you can dispute the account with the credit bureau and they give the creditor 30 days to respond and prove the validity of the disputed account. If they fail to do so or they can’t then the negative report is removed.

5.) Credit History length:  The longer your credit history the better.  If you are thinking about cancelling credit cards you don’t use anymore, you may want to think again. Keep your oldest accounts open even if you don’t use them anymore.  It’s okay to close newer accounts, and in some cases it can be beneficial to close newer accounts because part of this calculation is avg. age of accounts.

6.) Debt-to-income ratio: FICO has become smarter over time and is constantly mining information on you from your buying habits, to where you live, where you work, and even what you search for online.  Through the gathering of that information they guess what your income is and create a debt-to-income ratio for you. Obviously the lower your debt to income ratio the better credit risk you are.

I hope this helps demystify the credit score process for you. 

Health Savings Accounts (HSAs) are one of the most underrated and least discussed savings vehicles on the market today. And also one of my favorites!Many people confuse HSAs with FSA. But unlike the Flexible Savings Account, the amount you contribute to an HSA is yours forever.Here are some benefits to HSA’s.

1.) Contributions to HSAs are tax deferred meaning they function similarly to an IRA or 401(k). The money you contribute is not taxable up to the contribution limits

2.) Withdrawls for medical expenses, or long term care are tax free, meaning that upon withdrawal for medical purposes they function like a Roth.

3.) Further funds withdrawn after 65 for any non medical reason are only subject to regular income tax and not penalized, effectively turning your HSA into a traditional IRA or 401(k).

4.) HSA Contributions are not subject to income limitations like some other retirement accounts.

5.) HSAs can be invested in the market like any other account.

6.) When used appropriately and for the right client an HSA can be used as an additional retirement account.

7.) HSA Medical Plans typically have lower premiums because the have higher deductible.

HSAs are not for everyone, but if you can carry the risk of a higher deductible medical plan and you are looking for an additional retirement account to fund, an HSA is a great solution.

Estate Planning Explained

Estate planning includes the growth, protection, and transfer of a person’s wealth through the creation and maintenance of an estate plan. The concept of estate planning is important and twofold: (1) to have a strategy that will maintain your financial security during your lifetime, and (2) to ensure that your intended transfer of property and assets occurs upon your death. Both of these issues are analyzed through the lens of the unique situation of the family and the possible expense of different methods used in the estate plan.

Benefits of Estate Planning

There are several benefits to having an estate plan. At a minimum, an estate plan provides clear written guidance to your loved ones on what to do with your assets when you are deceased. But perhaps the most important reason is to be in control of how your family is provided for in the event of your death or incapacity. Estate planning can address several issues including:

• Who will raise your minor children,
• Who will inherit your assets and how they will be distributed,
• Who will care for loved ones who are unable to care for themselves,
• Who will care for your pets, and
• Who will receive your life insurance and other insurance proceeds.

Finally, good estate planning can ease the time-consuming, administrative strain placed on your family during an already difficult time.

Estate Planning Statistics

According to studies^[1], 6 in 10 adults have not put a will in place. And, while many have likely heard that it is wise to avoid probate – the legal process by which the assets of a deceased are disposed of under court supervision – many do not understand why probate should be avoided. Three main issues with probate include: (1) the tying up of the decedent’s assets for months or even years while the probate is open, (2) the cost, sometimes as much as 5 percent of the estate’s value is spent on attorney and court fees alone, and (3) the loss of privacy in the probate process when it comes to the decedent’s financial information.

There are many financial and legal tools that may be used in the estate planning process. Contact us today to discuss your situation and learn about your specific options.

^[1]https://www.aarp.org/money/investing/info-2017/half-of-adults-do-not-have-wills.html

Things to Consider

Now is the best opportunity to make use of tax strategies to take advantage of tax-deferred growth opportunities, charitable-giving opportunities, as well as tax-advantaged investments among others. During this tax planning process, you will also want to make sure you maximize deductions and credits ahead of the busy tax season. As you consider your year-end options, make sure to sit down with your attorney or other advisors to review your investments to ensure they still align with your goals, the economic landscape, and the current tax law. This conversation can help you identify where adjustments may be necessary for the future.

What You Need

Know that the “traditional” year-end planning we’ve recommended for years still applies to your 2018 taxes. Make sure you are harvesting losses to offset your gains, are contributing the appropriate amount to your Individual Retirement Account (IRA) and/or Health Savings (HSA) accounts, and have taken the necessary required minimum distribution from your IRA (if this applies to you). Other things to consider is fully funding employer-sponsored retirement plan contributions such as 401(k, 403(b) or 457 plans before the end of the year. The same rings true for college savings plans, such as 529 plans. You may even want to consider converting a traditional IRA to a Roth IRA.

Beyond these important points, also make sure to start gathering the necessary documentation you may need for any deductions that you are claiming. These may include copies of statements or receipts regarding your property taxes, medical expenses, dental expenses, child care expenses, education expenses, moving expenses, and heating/cooling expenses. For business owners, the new 199A deduction for business income will have additional paperwork requirements. It’s best to work with your bookkeeper and accountant at gathering those records now, rather than waiting until the hectic tax season.

Seek Professional Advice

With changes to the U.S. tax code now in effect, it is especially important to make the right decisions when it comes to your year-end financial moves. A skilled tax attorney or financial advisor can help explain your options under the law and provide you with guidance so that you can make the best decisions for you, your family, and your future. If you have any questions, feel free to contact us.