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Category: Growth and Income investments

Downsizing your life – Part 1

We recently moved. Our house is slightly smaller.  I mean, it’s just 200 square feet smaller. But during the process, I tossed out and donated a bunch of stuff. I’ve never been one for having a ton of things, or so I thought. Over time, you collect stuff.  It happens.  It was very freeing to get rid of things. For some reason, having too much stuff was stressing me out.

I started with clothes. I went through all of my clothes. Have I worn it? Do I like it? It was amazing how much I was willing to let go, when I let myself. I know that sometimes we fall victim of the mental game of “it’s a perfectly good blah, blah, blah” or “I might need this down the road”. Well, if it’s perfectly good and you haven’t worn it, and know you won’t wear it, donate it. I donated at least 10 pairs of shoes and I don’t know how many shirts.

There are so many places that take clothing donations. Women’s shelters, the Humane Society, etc. Find a cause that you like and donate your clothes. It will make you feel good to be free of things you don’t use. It will make you feel good to help a worthy cause. It’s ok if you part with it. Honest.

 

Sharon L. Herman AAMS, ADPA is the CEO of Silver Key Wealth Management

The opinions expressed in this material do not necessarily reflect the views of LPL Financial.

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Independent Financial Partners. IFP is a registered investment advisor. IFP and Silver Key Wealth Management are separate entities from LPL financial.

Ms. Herman may only discuss and/or conduct transact securities business with residents of FL, MI, GA, NC, NJ, VA, TX. www.finra.org. www.sipc.org

 

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Why paying off your mortgage early might be a bad idea

As a financial advisor, I have many clients ask me if they should use extra money to pay down their mortgage or invest the money. Let’s take a closer look, my savvy LGBT friends, at the math to see what makes sense.

The following is a hypothetical, purely for demonstrative purposes:

If you have a $250,000 fixed rate, 30 year mortgage at 4.25% interest, your total amount that you will pay over 30 years will be $456,018.
If you add $200 a month to your payment to be used towards the principal, you will pay off the mortgage in 23 years. Your total amount that you have paid will be $399,455.
Pretty good, right? You’ve saved yourself $56,563 in interest payments. That’s some real money!

What happens if instead, you invest the $200 a month in a tax free vehicle, such as a ROTH IRA?
For this hypothetical, we are investing $200 a month, over the course of 23 years (the amount of time we would be paying extra on our mortgage) with a 7% annual return on your investment. Keep in mind, this isn’t picking or recommending a specific investment, this is a hypothetical return. Whew.

So… $200 a month/23 years/ 7% annual return will get you: $133,059.

Holy cow! That’s quite a bit of money. Much more than the $56,563 that you would save if you were to pay more on your mortgage.

In this situation, where you invest the money, you are $76,496 richer!

This difference is even greater if you take into consideration the interest rate tax deduction you get every year. When you file your taxes, you have a line that allows you to enter how much you’ve paid in real estate mortgage interest.

Part of the amount that you pay in mortgage interest gets deducted from your taxes on your return. In effect, because you may potentially lower your taxes because of this deduction, your real out of pocket costs on borrowing that money isn’t the 4.25% on our hypothetical loan. It can be less than that. It depends on a myriad of factors, such as your income, etc. However, lets’ assume for a hypothetical, that your REAL cost to borrow money after your tax deduction is only 3%…
$250,000 mortgage/3% interest/extra $200 month – You still pay off the mortgage in 23 years, but you only save $32,927 in interest. This widens the gap between paying down the mortgage/investing even more!
The invested money will get you $133,059. The mortgage pay down will save you $32,927. That’s $100,132 more in YOUR pocket after 23 years.
I don’t know about you, but I’d rather have the $100,132 extra.

Disclaimer time: These are hypotheticals. Tax deduction is a hypothetical amount. ROTH IRA’s are something to discuss with a financial advisor to see if they are a good fit for your needs. You get my drift. We are playing with numbers. Also, this information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Want to play with some numbers yourself? Check out these financial calculators
As always, speak to a financial advisor about the best course for you to take.
Sharon L. Herman AAMS, ADPA is the CEO of Silver Key Wealth Management
The opinions expressed in this material do not necessarily reflect the views of LPL Financial.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Independent Financial Partners. IFP is a registered investment advisor. IFP and Silver Key Wealth Management are separate entities from LPL financial.
Ms. Herman may only discuss and/or conduct transact securities business with residents of FL, MI, GA, NJ, VA, TX. www.finra.org. www.sipc.org

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The 6 steps for a Good Financial Plan

My LGBT friends – let’s not be willy nilly about how we establish financial plans! Let’s be savvy folks who strive to have financial freedom! My goal is to help the LGBT community have a step up when it comes to investing and retirement planning!
The first thing to do when wanting to gain financial freedom is to come up with a financial plan. Here are the six steps:

steps

Credit Hakan Dohlstrom flickr
Establish a Relationship
You’ll want to find a financial advisor. Someone that you get to know, like and trust. Go interview someone. They’ll be interviewing you, too, to see if both you and they are a good match. Find out how long they’ve been in business. What their philosophy is. Check their history on http://brokercheck.finra.org/Search/Search.aspx FINRA is the governing body over investment folks. You can see if your potential advisor has any disclosures (bankruptcies, complaints, etc.) I suggest using someone who is a broker and an investment advisor. They are fully licensed to dispense advice. Also, strongly think about using someone who is independent and doesn’t work at a firm that uses proprietary products. There isn’t a conflict of interest between the client and the firm when it comes to giving unbiased investment advice.
Gather Information
After you find the advisor, you’ll need to gather all of your financial information. Investment accounts, 401k info, pensions, tax return, social security information. Your advisor will need that at your appointment.
At this appointment, the advisor will talk to you about goals and expectation. What do you want to accomplish? When? These will be quantifiable goals. They will also discuss qualitative goals such as your health, do your children get along well, do you have parents you make have to take care of in the future.
Analyze the Data
Next, your advisor will analyze the data. This is where the advisor takes a look at your big picture and sees where you are currently. She will look at your trusts, wills, budget sheets, tax situation, savings, investments and see where your strengths and weaknesses lie.
Presenting the Financial Plan
After the data is analyzed, your advisor will present you with a financial plan. There will be recommendations on where you need to shore up your portfolio, your life documents (wills/trusts), insurance, etc. They will show you where you need to improve your plan , why it will help and how you can resolve the issue.
Implementing the Plan
Once the plan is presented , and both the client and the advisor are in agreement to move forward, the plan gets implemented. A plan is great, but it has to be implemented to work! There may need to be involvement from other parties, such as CPA’s and Estate Attorneys for plan fulfillment.
Monitor the Plan
Ongoing monitoring of the plan is of utmost importance. An annual review is necessary to ensure that any changes in the plan are made if needed. If you have a major life change in between visits (moving, marriage, change of job) make sure to discuss this with your advisor to keep them in the loop!
Do you have a financial plan?
An ADPA (Accredited Domestic Partner Advisor) designated Financial Advisor can assist you with your choices if you need help from professional.
Sharon L. Herman AAMS, ADPA is the CEO of Silver Key Wealth Management, and affiliated with LPL Financial. www.silverkeywealth.com
The opinions expressed in this material do not necessarily reflect the views of LPL Financial.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Silver Key Wealth Management, a registered investment advisor and separate entity from LPL financial.
Ms. Herman may only discuss and/or conduct transact securities business with residents of FL, MI, GA, VA, NJ, TX. www.finra.org. www.sipc.org

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