Budgeting finance

To Rent or to Buy?

To buy or not to buy?

That is the question.

To clarify, we’ll solely be discussing the benefits and drawbacks of renting and buying of houses, however some information may pertain to other purchases, such as cars.

So to start, we’ll tackle the obvious benefits of buying a house, the one everyone loves to say when in the discussion of renting or buying: You build equity!

And you do. But the drawback that no one likes to mention is that in order to build equity, you have to take on a massive, massive liability. In accountant speak, you are now financed more by liabilities, and not equity. Your balance sheet doesn’t look very attractive immediately after taking out the mortgage, and it won’t look very good for quite a few years thereafter.

It takes years to pay off much of the principal (the portion of the mortgage that builds equity for you once it’s paid). For the first few years, all you’re doing is paying off a huge amount of interest expense. Essentially, the only actual equity in your house is the down payment and the small principal that you pay on the principal every month.

But You Don’t Build Any Equity At All When You Rent!

True, and that’s why we won’t be talking about that. Just because renting property doesn’t build you equity, doesn’t mean it doesn’t have any benefits.

And just to be clear, we feel that owning a home should be the end goal for anyone and everyone. But sometimes in the short term, some benefits of renting may outweigh the fact that you won’t build equity.

When renting, much of the repairs and maintenance of your apartment or rented property are handled by your landlord. The tradeoff for not being able to build equity is the ability to save on expenses. In essence, you are shifting the liability of ownership as well as the expense of maintenance and repairs onto the actual owner.

What we’re trying to say is, depending on where you are in life, renting or buying may be the best choice for you.

So Who is Renting For and Who is Buying For?

Just because a college kid’s parents are pressuring him or her to buy their first house and not “waste” the money on renting, that doesn’t mean it’s the best choice for them.

If you’re fresh out of college or trade school and starting a new career, you’ll likely have to put in a lot of hours working. Those hours may restrict you from having to put in the time and energy for regular maintenance of your home and you may lack the ability to pay for the expense of having someone else take care of the maintenance, such as a lawn care service.

If you’re young, lack the time for the maintenance, or lack the money for a down payment of a house, renting may be the best option in order to build up your bank account. The hidden costs of home ownership may outweigh the mostly upfront fees of renting a space.

But what do you think? What are your personal experiences with renting and how do you feel about a young couple trying to buy a house? More importantly, what tips would you like to give to them?


This article does not constitute financial advice. For information regarding your specific situation, please consult your local financial advisor.


Will Robo Financial Advisors Replace Humans?

The day may come when robots take every job from every human.

Unfortunately for us, that day is a long way off, and that means we’ll be spending the next few decades working.

And that’s no different for financial advisors.


You see, with the rate of change and innovation in automation, it’s hard to predict anything about when a job will be replaced completely by robots. But there are a lot of factors we can look at to help determine when at least parts of a job will be taken over.

And a huge part of this is looking at how much of a job needs a human touch. For example, the more client-facing a job is, the more necessary it is to have a human touch and the more immune that job is from automation.

Even though many aspects of a financial advisor’s job are reviewing portfolios and checking a client’s financial health, a lot of it is also searching for solutions to client problems. And it is possible for a robo-advisor to do much of this, but it’s also possible for Amazon to recommend products to me.

But reading a review from an unbiased user or hearing an enticing pitch from a consultant is more likely to persuade me to use a product or service. So much of a client relationship manager’s job is done off the computer and is geared toward building that personal relationship.

And a financial advisor’s main concerns rest with helping their clients with complicated situations. Many computer software solutions can give advice also, but there’s so many nuanced aspects of a client’s financial life that a human can assess that a computer can’t.

However, there is a massive prospect for human advisors to adopt their autonomous counterparts as co-workers. Humans eventually need rest, but a robo-advisor can help answer a client’s questions online at any time, even when the advisor is off the clock or sleeping.

As long as a financial advisor’s job consists primarily of helping clients solve real problems with real money, it should be safe to say that your local financial advisor should have job security.

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

finance Taxes

Can I Claim Dependents in 2020?

2018 was the year of a lot of lasts in the tax world. It’s the end of a lot of allowable itemized deductions, many credits, and more importantly for our concerns it’s the end of exemptions.

So Can I Claim My Kids This Year?

If you’re reading this in 2018 and you’re preparing your 2017 federal income tax return, then yes, you can still claim your children and anyone else that qualifies as your dependent for an exemption.

But this is the last year for that.

In 2019, not only can you not claim your children or dependent family members, you won’t even be allowed to claim yourself to receive an exemption.

See, claiming someone gives you an exemption. This amounts to in 2018 $4050 off of your taxable income to help decrease the amount of tax you pay.

The new tax law taking effect in 2019 erases your ability to claim any exemptions, dependency or personal.

How Can They Do That? I Thought This Was a Tax Cut!

It’s meant to be a tax cut. But that doesn’t mean it will be for everyone. The original concern of the tax bill was tax simplification, not tax cuts.

They’ve removed the exemption amounts from claiming dependents and yourself.

This was offset by increasing the standard deduction to $12,000, almost doubling it.

So I Am Still Getting A Tax Cut?

Again, there’s winners and losers any time the tax law is changed. Those with 1 or 2 children will probably break even when all is said and done.

Those with significantly more than 2 children (say a single parent with 8 children will likely not like the look of his or her 2018 taxes due bill).

What do you think? Have you looked over how you will be affected by the new tax law changes and is it more or less favorable than before?

The information on this page is not meant to constitute financial advice. For information concerning your specific situation, please contact your local financial advisor.

Budgeting finance

How to Budget for Your Family

When it comes to our financial lives, nothing is easier or more difficult than planning. And our plans generally (or should I say, hopefully) take the form of a written, thought-out budget.

We must meticulously plan out every aspect of the budget; we have to think of every expense and every source of income that we will potentially incur.

But more important than the planning for the budget, of course, is the changing and required variability of the budget. The budget– and you, by extension– has to adapt accordingly to any change that is going to happen.

The budget might not change this month if a large, unexpected expense is to happen. But for the next month, that expense needs to be taken into consideration. And for every month thereafter until you’ve recovered. You have to reduce your other expenses (or possibly increase your sources of income) until everything is back to normal for your finances.

I get all the planning stuff. But how do I do the budget?!

Alright, so you’re going to have to be your own personal accountant. And myself, personally, I recommend Wave to track your expenses and income for free. It does the bookkeeping for you so after you’ve hooked up your bank accounts and credit or debit cards so you don’t have to do anything other than check the reports at the end of the month.

It categorizes your expenses so that you can easily see where your money is going and where you can afford to stop your money from going.

More importantly, after you see realistically where your money is going for a month and what it is being spent on– and also where your money is coming from and realistically how much you make in a month– you can create a budget in an Excel spreadsheet based on those numbers.

This is how businesses track their income and expenses. This is how businesses know when to increase their income and how to decrease their expenses. If it works for them, it will work for you.

But what do you think? How do you and your family track your income and expenses?

This page is not meant to constitute financial advice. For specific information concerning your financial situation, please contact your local financial advisor.


Should You Itemize or Take the Standard Deduction?

When it comes to preparing your taxes, your accountant or tax software is only as good as the information you provide. And when it comes to what kind of deduction you want to take to provide the most tax savings allowable, you will need to furnish the best information you can.

But First, What Is Itemizing Deductions?

Itemizing your deductions is done on Schedule A and is attached to the federal Form 1040.

Your itemized deductions are all of the expenses you incurred during the year that the IRS allows you to deduct from your gross income.

For people that had high amounts of allowable expenses, it can be more beneficial to do this. However, itemizing your expenses costs more, usually regardless of if you are during your taxes yourself through software or having a tax pro do them, and takes more time throughout the year for recordkeeping.

What About Taking the Standard Deduction?

Taking the standard deduction is as simple as subtracting an arbitrary number determined by Congress from your gross income. No recordkeeping and no squabbling with an accountant about what is an allowed expense.

However, the standard deduction is limited to an amount that is indexed for inflation. The standard deduction in 2017 for single filers is $6,350.

So When Is It Beneficial to Itemize Versus Taking the Standard Deduction?

It’s only beneficial to itemize your deductions if they exceed the amount of the standard deduction. If they don’t, you’re likely wasting your time.

Now, the standard deduction is going to be getting an overhaul next tax season, rising to $12,000 for single filers in the 2018 filing season, meaning your deductions would have to exceed $12,000 for an itemized list of deductions to be beneficial.

It’s likely this will significantly reduce the amount of people that itemize, especially considering roughly only 30% of filers itemize currently.


This page is not meant to constitute financial advice. For specific information concerning your financial situation, please contact your local financial advisor.

finance Taxes

Are the Tax Cuts Really Going to the Rich?

Since when did we become so obsessed with everyone else’s bills?

Particularly, when did we start caring so much about what our neighbors owe in taxes compared to ourselves? What we pay to Uncle Sam has become such an arbitrary amount, something that accountants can effectively plan to reduce and even eliminate if done properly.

There’s been plenty of rhetoric lately about who’s benefiting from the new tax bill. And of course it is no surprise that any time there are changes to the Tax Code there are winners and there are losers in relation to what it was prior to the change.

And the system is designed to be as fair and understandable as possible. But when it comes to tax law, those two goals are conflicting. The more “fair” the law is, the more complex it becomes.

So how fair can the system be when the new tax cuts are going to the rich?

Sure, there are some things in the new tax law that directly benefit the rich, such as reforming the alternative minimum tax, making big changes to the estate tax, as well as reducing the top marginal tax rate from 39.6% to 37%.

But so what?

Big changes are coming to help the middle class as well. Doubling the standard deduction, doubling the child tax credit, and reducing the marginal tax rates for middle and low income earners.

The tax cuts were meant to be tax cuts across the board. And for the most part, they are. The media wants to make this story “us vs. them,” but it shouldn’t be. Paying less of what you make (i.e. what you earn through hard, hard work) into a wasteful government system doesn’t make you a bad person.

There’s a reason everyone– regardless of income level– either hires an accountant or pays for the best tax software they think is available to reduce their tax liability.

If someone wants to pay more money in taxes, that person is either very patriotic, or very dumb.

What do you think of the new Tax Cuts and Jobs Act? Do you think it fairly administers tax cuts across the board? What could it do differently to make the system more fair or better?


Disclaimer: This article is not meant to be financial advice. For specific consultation regarding your situation, please consult with your local financial advisor.

finance Taxes

Are My IRA Contributions Tax Deductible?

Most of the benefits of an IRA come into play during retirement, seeing as this is when you can start drawing money from the account. You can contribute to an IRA your entire working life but the key benefit of one only comes into play when you’re done working.

But that doesn’t mean there’s no benefits to contributing to an IRA when you are working.

So what are the benefits of contributing?

Those holding and contributing to a Traditional IRA can deduct their contributions to it from their taxable income. The person contributing can put in a maximum of $5,500 a year (indexed for inflation), and can deduct that amount from their taxable income.

Because you are deducting your contributions from your income, it means you are paying with before-tax dollars. This makes the growth more substantial in the account since you can put more into it without it being taxed in advance.

What if I have a Roth IRA?

Unfortunately for those contributing to a Roth IRA, you cannot deduct contributions from your income for tax. These contributions are made using after-tax dollars, meaning the growth in the account will be less substantial.

So why would I contribute to a Roth IRA?

Just because you can’t deduct the contributions to a Roth IRA from your income doesn’t mean this type of account doesn’t have any benefits.

Because you are paying into a Roth with after-tax dollars, you receive the distributions from the account tax free. This means that you pay tax to have the contribution entered into the account, but it grows completely tax free.

What you see in the account is completely yours, not the government’s.

So should I contribute to a Roth or Traditional IRA?

The answer to this question is going to come down to your income goals, your expectations of the growth in the underlying investments in the account, and whether you would rather save money on tax now or in the future.

A good alternative to choosing a Roth or a Traditional IRA is to choose both, which is something we will cover in a later post.


Disclaimer: The information on this page should not be construed to be financial advice. For advice regarding your specific situation, please contact your local financial advisor.