Author Archives: Brian Poncelet

Deciding Between a Lump Sum or Monthly Pension Payments

Life expectancy is extremely important when determining if a lump sum makes sense for you. The reason life expectancy is so important is because the longer you live, the more monthly payments you will receive. For example, let’s say you are offered the choice of a guaranteed monthly payment of $3,000 or a one-time lump sum of $500,000. If you pass away in two years you will have received only 24 monthly payments or $72,000. Monthly payments did not work out so well. On the other hand, if you live 30 years you will have received $1,080,000—significantly more than the lump sum offered.

Risk tolerance is a person’s willingness to accept risk for the possibility of higher investment returns. A person who is risk averse is more likely to accept a lower rate of return for greater certainty of future outcomes. In other words, a risk averse person prefers safe and stable investments even if it means slow growth. A risk seeker, on the other hand, is somebody who is willing to accept uncertain returns (volatility) for the hopes of higher investment returns.

If you are in need of income right now, monthly payments may make sense for you. On the other hand, if you are not in need of income for several years, the lump sum may make sense for you. A big reason for this is the more time you have to let your money grow before you need to access it, the more risk you can take. As we discussed above, higher risk equals potentially higher returns.

It is very important to take the time to educate yourself on whether or not a lump sum payout is right for you, and you have already taken a big step toward making an informed decision.

The five pillars of tax planning

The Five Pillars of Tax Planning are these: Deducting, deferring, dividing, disguising and dodging to save tax. A couple of these sound illegal – but they’re not. Let me explain.

Deducting: This is the idea of claiming tax deductions or credits that you might not have fully or even partially claimed in the past. By making a few changes, you could create the opportunity to claim some of these deductions or credits.

Deferring: It may be possible for you to take a tax bill that might otherwise be owing this year, and push it off to a future year. While you might not eliminate the tax, paying it in the future is better than paying it today thanks to the time value of money. For example, if you can defer a $100 tax bill for 10 years, the true cost of that tax bill is just $68 (in today’s dollars), assuming you can earn 4 per cent annually, after taxes, on your money over those 10 years.

Dividing: You’ll save tax if you can move income from the hands of one family member who will pay tax at a higher rate to another who will pay tax at a lower rate. By dividing up the income differently – often called “income splitting” – you’ll be keeping more of your hard-earned income. In a perfect world, you and your spouse or other family member would structure your affairs so that you have equal incomes. This isn’t always possible, but you can move in that direction.

Disguising: I’m not talking about putting on some costume or getting plastic surgery so that the taxman won’t recognize you walking down the street. No, I’m talking about converting one type of income into another type that is subject to lower tax rates. Not all income is taxed equally.

Dodging: Don’t worry. I’m not talking about tax evasion here. “Dodging” to save tax is the idea of structuring your affairs so that some of the taxable amounts currently showing up on your tax return might not have to be reported on your tax return going forward. Moving from amounts that are taxable to non-taxable benefits or tax-free cash flow can leave you much better off

Stocks are at an all-time high. Is it too late to get in on the action?

The Dow Jones industrial average hit the 25,000 mark for the first time Thursday, and I confess it made me giddy. The feeling lasted about 15 minutes until my head cleared and I said to myself, “Sooner or later, this bull market will pass.”

But when will it pass? And is it too late to jump in and grab a ride while it’s still going up?

“I can relate this question to family discussions we just had at Christmastime,” said Suzann Pennington, chief investment officer at Foresters Asset Management. “I have a brother who is almost 60 and looking toward retirement in five to seven years. He asked me if he should dare to put more money into the market.”

“I said, ‘You have to.’ It goes back to the expression, ‘Make hay when the sun shines.’ The sun is shining. We have synchronized global growth for the first time since the Great Recession.”

Yes, equities have had an incredible, nearly nine-year run. The Dow was up about 25 percent last year and the Standard & Poor’s 500-stock index was up about 20 percent.

Pennington is one of a host of Wall Street wags who say worldwide fundamentals — interest rates, unemployment, economic growth — are so good that the stock market could keep climbing for a year or more.

Dive in, says super-bull Ivan Feinseth, chief investment officer at Tigress Financial Partners.

With A New Year, Do You Have New Financial Goals?

Make a list, and be specific.  Paying credit card debt or student loans is a great start, but putting a name to that loan or card, and a balance amount ticker can easily allow the momentum get one excited about seeing the amount get down to zero. As I have paid off one account, I can quickly get excited about paying off another, because I know it is doable.

Collect change.  Want an easy way to save towards a big purchase fund? Save the loose change.  I have adapted trying to use cash more than a check card, and because of this, I often have change.  We currently have a mason jar, that each one in our household adds the money to. Over a period of time, those coins become dollars, and it can help go towards something practical or fun.  This year it is spending money for Disneyland.

Education.  Yep, learning for the solid win again. Growing up I, unfortunately, did not have an accurate understanding of money.  I grew up in a household where credit was significant, savings were little.  My parents really did not talk about money with me, and getting a checkbook and keeping a register was something I learned in school. When I went off to college, I had to learn what the words “interest rate” and “overdraft” really meant.

Open Accounts.  Open Accounts can charge fees and you not even know it.  I had a bank account open from before I married my hero and I just thought I needed to keep it open.  Well, until I realized around year five of being married, that if I did not keep a certain amount in the account, then the bank would charge me a fee to keep it open. Where I loved having a connection back in my hometown, the recurring charge of ten dollars every month on the fifty dollars I may have in it, was not worth it.  Close accounts which may not offer you the best rates, and look into accounts which may earn you cash back, points for travel or perks for dollars spent within a time frame.

How to Make Money Flipping Houses

1. Identify the right markets

First and foremost, you need to identify the right markets. Maybe your local market isn’t the hot market right now. Maybe it’s a market in another county or state even. Search for the right market. The goal? Figure out where cash buyers are putting their money. That’s the key. While you don’t need a system to help you identify the right markets, it certainly helps.

2. Identify the right price

Not only do you need to find the right market, but you need to identify the right price. We’re talking about the price that not only you’re going to pay for the property. But also, the price that someone is going to be willing to pay to buy it from you. What’s the right price? There are proven algorithms in place that will help you identify and justify this. Clothier explains it like this.

3. Identify the right property

Now that you’ve identified that gap, you need to find the right property. Scour the MLS. Or, search online through retail channels. Look for distressed homes. Vacant homes. Possibly homes that are on the verge of falling into repossession or short sales. Going about this isn’t a simple task. Again, it’s easier to have a system to do this. But even without one, you can learn. You just have to start somewhere.

4. Identify the right buyers

You need to line up your buyers. Keep in mind, that when you secure a contract to purchase a home, you usually have about 30 days to close on it. You’ll need buyers lined up that you can flip those contracts to. Without cash buyers at the ready, you’ll need to do all the legwork once you’ve secured the contract, and that could turn into a major hassle for you. Clothier says you don’t want to be scrambling to find those buyers when it comes to crunch time.

5. Identify the right sellers

Clothier says that this is a bit more tricky. You have to identify the right sellers. Finding a vacant home isn’t always simple as 1-2-3. How do you go about doing this? What about homes that are near or close to entering into foreclosure? Clothier says that there are a few ways to do this.