Budgeting finance

Is a Financial Advisor Worth the Cost?

A family having a financial advisor has had a strong correlation to familial and personal wealth. But people from less fortunate walks of life often believe they don’t need, or simply can’t afford the services of a financial advisor.

The high cost of financial services, the barriers to saving, and a lack of affordable insurance may be a leading cause of poverty in the country. When people live paycheck to paycheck, it leaves them vulnerable to emergencies and the financial constraints that come with it. This is due to a lack of insurance that would cover these life events and a lack of savings. The people that would be most exposed to these problems also find they can’t invest in human capital to better themselves or even purchase a home. This leads to a cycle of poverty and financial restraints.

The way we spend our money often makes little to no sense to an outside observer, the reason being we all have different wants, tastes, and needs. But we have to have a basic understanding of how we behave to understand economies and people’s spending habits.

We originally held the idea that every person from every walk of life had similar thought processes. However, we’re finally starting to understand that people living in poverty have different thought processes, the reason being that financial constraints put more pressure on these people, leading to risk-taking as a way out. But financial services are seen as not important enough, not having enough urgently realized benefits, or too expensive to take part in.

Behavioral economists tend to focus more on the rationales and what the limits of our rationalities are. This is where the “culture of poverty” theories stem from. The idea is that the poor harbor certain personality traits, those being social deviance, laziness, and impatience.

These personality traits may affect the attitudes toward risk-taking, savings, and insurance, leading the poor to view financial services as only available to the rich. The personality traits labeled on the poor may stem from apathy toward their situation and no way out of the cycle of poverty.

Making financial services either more affordable or showing the industry in a different light may lead to opening up these services to new, needy markets. This is a tactic that could benefit both those in the industry and those who desperately need the help of advisors to help them plan for the future.

What are your thoughts on the correlation between wealth and having a financial advisor? Can trustworthy advisors help people escape the cycle of poverty?


This post is not intended to constitute financial advice. For specific information regarding your financial situation, please consult your local financial advisor.


Did Your Paycheck Just Grow Thanks to the Tax Cuts?

There’s a lot of big stuff happening now in the wake of tax reform. Many companies have named wage hikes, bonuses, and other increased compensations for their workers in the wake of a new, 21% flat tax rate for corporations.

This is different than the old marginal tax rate structure that extended all the way to 35%. That’s a lot of money to pay, even for a big, greedy corporation! Considering most people in America work for corporations, perhaps cutting down on the tax may lead to bigger paychecks which will hopefully lead to economic growth.

But of course, you’re going to want to know how this change is going to affect you now, because there’s been a lot of changes on the individual side also.

So, Did My Paycheck Just Get Bigger?

Hopefully you’re working for one of the companies that generously announced big bonuses.

But if you’re not, no, you likely have not seen the change from the new tax reform hit your paycheck yet. And the reason for that is because the IRS is changing the withholding tax tables and the change is going to be taking effect February 15th.

Now, it may end up taking longer for your employer to play catch up, so you may want to give it a little while longer just to make sure.

My Paychecks Are Growing? But That Means I’m Going to Owe Tax at the End of the Year!

Not necessarily! The reason that the IRS is changing around the tax tables is because you’re expected to keep more of your money thanks to the Tax Cuts and Jobs Act and owe less in taxes.

To compensate for this, instead of just giving you more money back at the end of the year in the form of a refund, the IRS is just going to let you have more each pay period.


Disclaimer: The information on this page is not meant to constitute financial advice. For specific information regarding your situation, consult your local financial advisor.



What Is A Fee-Based Financial Planner?

A few different developments have been occurring in the financial advice and services field, and one of those developments is the rise of the fee-based advisor, as opposed to the older style of commission-based sales.

The rise of fee-based and fee-only advisors is caused by the backlash of consumers and people seeking the help of financial professionals, who in the past have been known to sell products that they were getting commission on, potentially causing a conflict of interest. These financial products were not always the best investments for the clients, however they were giving a healthy commission to the advisor recommending them.

The trend has been happening rapidly over the past few years, with the amount of financial advisors adhering to the fee-based or fee-only structure expecting to rise by about 60% from 2015 to 2019.

The reason for the trend is the growing distrust toward financial professionals due to the recent stock market crashes, concerning practices, and the general view of financial industries. There is a lack of trust toward professionals that handle money, and a large amount of that distrust is caused by dishonest financial advisors that would give in to the urge to sell products that were not right for the client.

The fee-only and fee-based model of financial advice eliminates these problems in that the fee paid by the consumers eliminates the need for a commission on pushing products, therefore allowing the financial advisor to give a holistic view of the client and recommend products that are best for the client, and not necessarily for the commission for the advisor.

Because of the backlash by consumers seeking financial help, the government has recently stepped in and passed a fiduciary rule forcing advisors to act as a fiduciary to their clients. What this means is that the advisor would be forced to act in a client’s best interest, not in the best interest of the advisor. This would essentially force all advisors to follow the fee-based or fee-only revenue model.

It is worth noting that just because an advisor relies on commission does not mean that advisor is untrustworthy or that he or she won’t recommend the best product for your situation. But in many cases, it’s also best for the advisor for them to act as a fee-based fiduciary so the client will not suspect them of doing something that is not in their interest.

Becoming a fee-based advisor can help break down the barrier between advisor and client and help them to build a better relationship.

What’s your opinion of advisors that rely on commission and those that work on fee-only advice? Let us know in the comments.


Disclaimer: The content of this page is not meant to be financial advice. For specific information regarding your situation, consult your local financial advisor.


What is Happening to the Standard Deduction in 2018?

A lot is changing this year (meaning next filing season) in regards to taxes, how they’re computed, and a lot of us in the industry are going to be playing catch-up when the dust finally settles.

But most people care about one thing when they hear the tax landscape is going to be completely different: How does this affect me?

I’m not going to tell you whether you’ll be paying more or less in taxes or getting a bigger refund (although best estimates puts it at about 75% of filers will see sizable reductions in their tax bill).

That’s not bad.

We’re not going to be talking about that, though. We’re only going to discuss one aspect of the bill, and that’s the standard deduction and what’s happening to it.

What is the Standard Deduction?

The standard deduction is one option you have if you do not itemize your deductions. Every year the amount changes because it is indexed for inflation.

However, it makes it so the first $X of the money you make is tax free. In the 2017 filing season, the standard deduction for most filers was $6300, but the amount changes based on your circumstances.

I Heard The Standard Deduction Was Going Away

A lot of things are going away next filing season, but the standard deduction is not one of them. In fact, the GOP wants to nearly double the standard deduction to $12,000. This means the first $12,000 of a single filer’s ($24,000 for married couples filing jointly) will be completely tax free.

And that is how most Americans will be getting that sizable tax cut this coming year.

But this is certainly a little ways away, and for now our concern is the current tax filing season and our current tax code.


Disclaimer: This information does not constitute financial advice. For specific information concerning your financial situation, please consult your local financial advisor.

short term disability

Short Term Disability: Policy Provisions

Every insurance policy is going to dictate different terms and conditions. Luckily, the potential insured has at least a small choice on which policies work for them and can pick and choose a lot of provisions in an insurance policy.

Sometimes, however, the potential insured has to either go along with what the insurance policy states or simply go without insurance.

And in the case of short-term disability insurance, there are static provisions and terms in the policy just like this.

So What Provisions Should I Look Out For?

Because short-term disability insurance is primarily concerned with covering workplace injuries, a lot of policies are concerned with making sure that the employee is a fully-fledged member of the staff.

This means making sure that the employee is working enough hours to be considered full time (usually at least 30 hours a week).

Another policy provision to look out for is one stating that the employee must have been working for the employer for a set of amount of time before a claim can be filed and coverage takes effect.

What About Other Provisions?

Most of the provisions in a short-term disability policy are, luckily, customizable to the potential insured. These include the most important aspects, such as benefit period, benefit amount, and waiting period.

Other things to look for are what the policy defines as a disability. Somethings the policy must define as a disability by law, and others the insurance companies may have more leeway with.

The provisions listed above are not meant to be exhaustive or representative of all potential policy provisions and terms. They were only meant to make you aware of the static terms that the potential insured is incapable of changing and must take extra care to review them.

Disclaimer: This information does not constitute financial advice. For specific information concerning your financial situation, please consult your local financial advisor.

Equity Securities

What is Treasury Stock?

When a company decides it needs to raise more money, it has a few ways of doing so. Aside from just increasing its profits, the company can either take on debt or issue more stock to new or existing shareholders to meet its cash flow needs.

But what happens when a corporation decides it doesn’t want more shareholders? What happens when a corporation decides it wants less shareholders?

When a corporation decides it wants less shareholders, for any reason, it can buy back stock from existing shareholders. The stock that the corporation buys is held in its treasury, therefore denoting it the name Treasury Stock.

What Rights, if any, Does Treasury Stock Have?

Because it is owned by the corporation and it no longer is in the hands of the shareholders, treasury stock loses a lot of the privileges and rights that it was granted when it was common stock. It no longer has voting rights and does not pay a dividend.

The reason being is, if it did pay a dividend, it would just be the corporation paying money back to itself.

What Happens to Treasury Stock?

The stock that a corporation buys back can be held, retired, or resold.

The reasons for buying back stock are endless. It may be that the corporation wanted to reduce the number of shareholders to take the company private, or perhaps the price of the stock dropped to a sufficient level that the company thought it would be a good move to buy the stock now for cheap and then attempt to resell it later when the prices rise again.

It’s always important to note when treasury stock is listed on a company’s financial statements, as it may indicate the corporation is readying itself for a strategic move, or is perhaps indicating its intentions.


Disclaimer: This information does not constitute financial advice. For specific information concerning your financial situation, please consult your local financial advisor.

Debt Securities

What Are U.S. Bonds?


When talking debt securities, there’s a few options for the investor. Some of those options are corporate and government debt, and those can further be divided into smaller categories, such as bills, notes, and bonds.

We’re going to be looking exclusively at U.S. government bonds here.

What is a government bond?

A government bond is issued by the specific government, and is backed by the “full faith and credit” of that government. In other words, the government pays you a stated interest rate semiannually, or twice a year, for each bond that you hold.

The bond itself is debt, meaning you are loaning the government money in return for their interest payments to you and, at the end of the maturity term, the government pays you back the face amount stated on the bond.

These U.S. government bonds are called Treasury bonds, because they’re managed by the U.S. Treasury.

Is there risk associated with Government Bonds?

Despite the U.S. government consistently pushing past its debt ceilings and issuing more debt to the U.S. citizens, the government maintains the highest credit rating available (AAA), because the government has a special power– printing an endless supply of money mixed with limitless potential taxing power– when it comes to paying off its debt.

If the U.S. government were to ever default on the interest payments due from the loans, its credit rating would be severely hurt and the faith of the American people in the government’s ability to repay debt in the future would likewise be hurt.

While it is unlikely for the U.S. government to default on its debt, it is always possible, just as has happened to other countries, noticeably during the worldwide recession of 2008, meaning there is still risk associated with any investment.


Disclaimer: This information does not constitute financial advice. For specific information concerning your financial situation, please consult your local financial advisor.

Equity Securities

Common Stock: What Are Preemptive Rights?


When buying a security or option, it is important to look at what features the purchase will entail. Many times what may be included are preemptive rights, which may go by many different names, such as an “anti-dilutive” covenant or privilege.

For many investors– especially larger ones with a greater share of equity in a business– this is a very attractive feature.

Why Do Investors Care How Many Other Investors There Are?

If an investor holds a larger share of equity in a business, they usually hold certain privileges such as greater proportional voting power and they likely do not want to give that up. When more shares are issued, it dilutes their proportional percentage of equity.

Therefore, the power of a preemptive right allows an investor to buy the shares being offered from any new issuance of stock, preserving their proportional share of equity in the business. After the existing shareholders have the chance to buy into the additional shares, then the corporation is allowed to offer the new shares to potential new shareholders.

Are There Any Other Benefits To a Preemptive Right?

Before the new share offering, there is what is called a rights offering. Existing shareholders are given rights– the number of rights being based on their number of existing shares– to buy a certain number of new shares at a discount to the current market price of the security.

If the discount is substantial enough, this can be a great benefit for existing shareholders to increase or maintain their current equity in a corporation while potentially making greater returns on their investment.

This right can be a very powerful tool for a large investor to preserve their ownership and voting power in a business. The preemptive right essentially protects the risk of their share diluting. In a way, it’s like having insurance on your security purchase.


Disclaimer: This information does not constitute financial advice. For specific information concerning your financial situation, please consult your local financial advisor.


Budgeting: Getting Your Spouse Involved



When it comes to laying out a budget for yourself and your family, the most important aspect of making sure that the budget is followed is to make sure that every person involved is on board and agrees about every aspect of the budget. The first step in ensuring this is having everyone that will be affected by the budget involved in its making so that everyone understands every aspect of the budget.

It’s equally important to have open discussions regarding the budget and making sure that everyone knows that the budget is only a tool (albeit a very powerful one when used correctly), not something that will control the lives of those involved. It’s therefore good for no single person to solely control the budget. Spouses must have equal input in the budget, regardless of how many of them are actually bringing in an income.

Because both spouses are likely spending and using the money, who is bringing it in is not nearly as important as making sure that both partners are managing it carefully and responsibly.

There’s two sides of the budget equation: the outgoing and the incoming. Because those two sides are equally important and both sides can always be improved by each partner involved in the budgeting process, both partners must be involved in the making and planning of the budget. Each person involved must feel as though they have equal say in the budget, or else they will likely stray from the path you have outlined in the budget.

Remember, the budget is only the starting point to getting to a point that your family feels financially secure. It’s something that will need constant revisions, improvements, and open, honest discussions about. Both partners must always feel in control of their finances and work together in unison to find financial peace.


Disclaimer: This information does not constitute financial advice. For specific information concerning your financial situation, please consult your local financial advisor.

Equity Securities

Common Stock: What Are Voting Rights?


One of the most attractive features of common stock for a large investor in a corporation is the right to vote. Votings take place at the company’s annual meeting. The investors in the corporation vote on anything that will affect their “owner’s interest,” including important events like the vote for the new Board of Directors, otherwise known as the company’s top executives that manage the business.

What Other Things Can Owners Vote On?

Obviously, the owners of common stock are not limited to just voting on the executives of a corporation. The right to vote also entails voting on whether the corporation will issue convertible bonds or whether it will declare a stock split, since both of these affect the owners’ interest in the company and will dilute their proportional ownership.

How do the Common Stockholders Vote?

As mentioned, the actual vote takes place at the company’s annual meeting. As for how the votes are counted, there are a few different ways of implementation; however, the most popular ways are cumulative voting or statutory voting.

Cumulative voting generally benefits minority shareholders because it allows them to direct all of their attention to one choice, as opposed to how statutory voting operates, which forces the shareholders to spread their attention to all of the choices being voted on.

Why Do Common Stockholders Get to Vote?

Anyone who owns common stock is a part owner of a company, and just as a small business owner is responsible for deciding how things operate in their own business, shareholders must decide how things will operate in their business as well. And choosing effective managers is one of the most important parts of making sure that a business runs smoothly and profitably. And making sure that more shares being issued do not affect their ownership stake in the business is equally important to investors.


Disclaimer: This information does not constitute financial advice. For specific information concerning your financial situation, please consult your local financial advisor.