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Comprehensive Financial Planning

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Financial planning is an essential part of creating the life you want. Since failing to plan for the many inevitable financial challenges and problems that arise while living your day-to-day life is planning to fail.

To successfully face an uncertain financial realities and an uncertain retirement landscape requires careful planning. Unfortunately, far from planning with care, many Americans fail to make any plans at all — perhaps due to the complexity of calculating the money needed, the confusing array of information and resources, because they incorrectly anticipate that they will continue to work indefinitely, or simply due to fear.

A comprehensive financial plan must be customized to your long- and short-term life and financial goals. Financial planning is an essential part of creating the life you want today and in the future, protecting those you love and reaching your personal goals.

Today you might be concerned with:

  • Protecting your family from unforeseen issues arising from illness or disability
  • Funding a child’s education
  • Leaving a legacy for your family, a charitable cause or organization that is meaningful to you
  • Ensuring a stress-free and financially free retirement

Whether you’re focused on financial goals or need detailed wealth planning, a comprehensive financial plan should reflect your retirement savings and investing plan, specific needs like children’s education, as well as protection for your family in the event of death, disability or critical illness.

Why is a financial plan important?

You may have financial goals, but having a plan in place can help you prepare for life’s surprises and face them with confidence. A financial plan doesn’t need to be complicated. It simply needs to cover everything that’s important to you at this specific stage of your life, while balancing your risk tolerance with your time horizon.

Your financial plan serves as a guide allowing you to make necessary adjustments along the way.

Start your financial plan

A financial plan begins with an inventory of your finances, and determining your net worth and cash flow. You must first know where you are financially before creating a plan to guide you to your destination. Consider all of your assets (including property), your income and your expenses—both now and in the long term.

Next, define in writing and prioritize your financial goals. Are you concerned about saving and investing enough for retirement? Funding a child’s or grandchild’s education? Leaving a legacy—either for your family or a charitable organization? Saving for potential healthcare expenses and long-term care? Knowing your goals will help drive your plan.

You may also want to think about tax planning, estate planning and life insurance, and you may explore how a trust or an annuity could factor into your plan.

It’s vitally important to get started:

  • Begin saving now. The more you save, the better prepared you’ll be for life’s inevitable emergencies, retirement or other life goals.
  • Set a budget and live within your means. But as your salary increases, so should your savings and investing.
  • Contribute as much as you can to your employer’s 401k or other retirement programs.

Everyone has competing financial priorities and expenses, but making a budget may help you manage your expenses and find extra money to save and invest for your goals. Start with your income, essential expenses, and then add discretionary expenses.

Think about what would happen if you made no changes to your plan or your rate of savings. Is there a gap between where you are now financially and where you want to be? If so, you may need to reprioritize your budget to accommodate for more saving, or re-evaluate your goals.

Helping to protect the ones you love is the ultimate way to show you care.

Planning for retirement begins with your vision for the future. Thus, it’s important to picture the life you want to live when you retire. Think about how old you’ll be, what you plan to do and how you’ll live.

Ask yourself:

  • Do you plan to retire from full-time employment as soon as possible, or wait until you’re fully eligible for Social Security?
  • What’s it going to take to maintain the lifestyle you want in retirement?
  • Do you plan to travel more—whether that means dream vacations or extended visits to friends or family out of state?
  • What if your health takes a turn, since medical expenses increase as we age?

Anticipating whether you’ll have 20, 30 or 40 years of retirement will help you determine how much to save. It’s important to assess what you’ve saved, the rate at which you’re currently saving, and how much more you need to meet your goals.

Retirement savings options

For many of us, there are two primary retirement savings vehicles: Employer-provided plans and self-directed savings. Employer-provided plans often allow pretax savings for retirement, as do self-directed IRAs. Based on your goals, and the limitations of those types of plans, you may want to explore additional options.

Retirement saving is a long-term proposition. With the right diversification approach, you may be able to help protect your savings against market shifts while balancing risk to help your savings grow. Periodic reviews can help you see if you’re on track to achieve your goals.

Staying the course with saving

Life is full of surprises that will impact your financial situation—from welcoming a new baby, to saving for a child’s education, to losing a job or facing an unexpected illness. These life events can all create disruptions in your savings that force you to reevaluate your plan, your goals and expenses.

Keep focused on the amount you want to save for retirement, and try not to be distracted by potential purchases that you may see as financial opportunities. Buying a new car that’s on sale now may seem like a good idea, but it could mean you’re compromising your goals – causing you to wait longer and save less.

Conduct an annual review of your comprehensive financial plan to monitor situations that may impact your retirement savings, such as market risk and taxes. You’ll also need to be attuned to inflation, healthcare costs and longevity, which can impact your post-retirement income.

Work with a financial advisor, if necessary. Competing priorities can be challenging. A financial advisor can provide an objective voice that can help you stay focused on your goals, while providing insight that may help you determine if you’ll want to fine-tune your plan.

And as your circumstances change, your financial advisor can help you assess your plan and financial situation, allowing you to confidently take charge of your financial future.

Life never stands still and as a result, planning is vitally important. In your comprehensive financial planning, you must try to strike the right balance between achieving your financial goals today, with an eye out for living the stress-free and financially free retirement you always envisioned.

References:

  1. https://www.lfg.com/public/individual/planyourfinancialfuture/createafinancialplan
  2. https://cdn1-originals.webdamdb.com/13193_123040807
  3. https://www.lfg.com/public/individual/planyourfinancialfuture/createafinancialplan/saveforretirement
  4. https://longevity.stanford.edu/failing-to-plan/

Investors are advised to consider the investment objectives, risks, and charges and expenses of any asset carefully before investing.

Life on the Edge

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“As you get older, the days go by quicker and you need to make the time count.” Mary Peachin, Octogenarian

As you age, it becomes more important to “live each day right to the limit”, states octogenarian Mary Peachin, in Costco Connection magazine, September 2021, Members Connection. Peachin has “walk the talk” and lived her life as a self proclaim world-traveling, deep sea diving adrenaline junkie. “If your body aches, you ignore it and keep on trucking”, she preaches.

When it comes to going after what you love in life, do not take no for an answer. You should expect and intend to live a life well lived and always believe the best is yet to come

“Life is too short not to enjoy it.”

Make your life happen and take action today. Be amongst the few who dared to live their dreams. Live your life in such a way that there is no regret.

Time is short; live every day for a higher purpose. Let’s invest the limited time we have on your life’s purpose and mission. Do not focus on your problems and challenges; instead focus on purpose and destination.

Life is brief and it passes quickly. The average American male lives to be 70 years 4 months. The average American female lives 70 years 4 months. To live life to its fullest, it is not the quantity of your life, but the quality.

Time is running out for all of us.

“Your job will not take care of you when your elderly and sick, your friends and family will.”

  1. Select a few friends to be close to in your life and communicate and strengthen your relationship with them
  2. Get over those who disappoint you and refuse to let those people steal your joy
  3. Lift up and encourage those who are recovering from failure. Treat people with Grace.
  4. Ignore your critics. Decide to see the good in the experience and growth, the lessons you learned and the relationships you made.
  5. Stay fully focused on your Lord and Savior Jesus Christ. Believe the best! Christ teaches us to believe the best…faith, hope and love. Remember to rejoice and be glad. If God is for us, who can be against us!

The most effective way to live life on the edge is to “find an edge and Live there”, states Peachin. And, you can start to “find an edge” by writing down your dreams and priorities in life, and then focusing on fulfilling those written dreams and priorities. It starts with knowing what you want, and it ends with getting what you wanted. It’s often that simple.

Save for and invest in the things that matter most!

In every positive or negative situation, there are always options. Remember you are the one pulling the strings, and when things look hopeless, it’s because you’re choosing not look at the things that truly matter. You’re choosing to see the the bad stuff, and they have little to do with your ability to change your circumstances. The trick is that you have to see the ocean of opportunity, not that little bucket of water (problems) that you tripped over.

We must decide to see the good and not dwell on the failure, but instead focus on the positives from the experience. Limits do not exist. You have weaknesses of course and we all do, but focus on your strengths. Remember if you’re feeling scared and fearful, it means you’re trying something new.

People don’t run marathons because it feels good.

When you feel bad about your situation, you’re thinking about the mistakes of yesterday, and not the opportunity of right now and the hope for tomorrow. You’re thinking about what has and what can go wrong, and not what can go right.

When you’re feeling defeated and discouraged, ascertain what you’re really focusing on. It important to focus on how far you’ve come, the opportunities that lie ahead, and the resources available you have to go forward.

“What you focus on expands, and when you focus on the goodness in your life, you create more of it.” Oprah Winfrey

Always think bigger and focus on your purpose. Build the world as you want it to be.

References:

  1. Costco Connection, September 2021, Vol. 36, No. 9, pg. 119
  2. https://personalexcellence.co/blog/101-ways-to-live-your-life-to-the-fullest/

“Those who are the happiest are not necessarily those for whom life has been easiest. Emotional stability results from an attitude. It is refusing to yield to depression and fear, even when black clouds float overhead. It is improving that which can be improved and accepting that which is inevitable.” ― James C. Dobson, Life on the Edge: The Next Generation’s Guide to a Meaningful Future

Intrinsic Value of a Company

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“Intrinsic value is an all-important concept that offers the only logical approach to evaluating the relative attractiveness of investments and businesses. Intrinsic value can be defined simply: It is the discounted value of the cash that can be taken out of a business during its remaining life.”  Warren Buffett

Intrinsic value is an important concept to evaluate the relative attractiveness of investments and businesses.

Intrinsic value can be defined as the discounted value of the cash that can be taken out of a business during its remaining life, explains investing guru Warren Buffett, Chairman and CEO, Berkshire Hathaway. It measures the value of an investment based on its current and future cash flows. Where market value tells you the current price per share other investors are willing to pay for an asset, intrinsic value shows you the asset’s value based on an analysis of its future cash flows and its actual financial performance.

Essentially, valuing a company intrinsically allows you to look analytically at a business and determine how much cash that business will generate over time, and then you discount the cash flows back to the present day.

Book value vs intrinsic value

In most cases, a company’s book value tends to understate its intrinsic value because many businesses are worth much more than their ‘carrying value’. The ‘carrying value’ is the original cost of an asset as reflected in a company’s books or balance sheet, minus the accumulated depreciation of the asset.

As a result, a company’s intrinsic value often exceed its book value, a result that proves capital was wisely deployed. In many cases, book value is not a reliable indicator of intrinsic value or a true representation of an asset’s fair value or market value. Thus, a company’s book value alone is somewhat meaningless as an indicator of its intrinsic value.

However, intrinsic value tend to be only effective on stocks that are stable and less volatile so that you can reliably valuate. If you see the book value growth and dividends all over the place, your estimates would be very uncertain.

You need 3 factors to determine a company’s intrinsic value:

  • Current free cash flow or owner’s earnings
  • Free cash flow growth rate over an eight to ten year period. Determine free cash flow growth rates by looking at past 5 year and 10 year growth rate.
  • Discount rate to discount future free cash flow to present day.

Discounted future cash flows

Cash taken out of a business in the future is not worth the same as it is today. If you had the money today you could invest it today. Money in the future is partly eaten up by inflation, but more importantly more uncertain if it is there at all.

The calculation of intrinsic value is not so simple. Intrinsic value is an estimate rather than a precise figure, and it is additionally an estimate that must be changed if interest rates move or forecasts of future cash flows are revised.

To calculate owner earnings, or another way to look and to calculate free cash flow, one adds things back in such as depreciation, changes in working capital and such. Buffett feels that “owner’s earnings” more accurately reflects the actual cash flow that an owner receives.

Net present value for the ten years and your discounted terminal value for the 10th year we can calculate the intrinsic value.

When investing in a company, you first must determine the value of the company according to your estimates of discounted cash flow. You want the biggest difference between its intrinsic value (high as possible) and its market price which is the current price of the stock that is traded on the exchange (low as possible). Over time, you should expect the market value to intersect its intrinsic value.

When you arrive at an intrinsic value it will not necessarily match the current market value or price of the stock. In most cases you will find that there is a vast difference. You have potentially found a great company at a bargain and with a margin of safety. If the market price is much higher than the intrinsic value, it is also great. You can avoid the common mistake made by many retail investors of overpaying for a stock.

Knowing the value of a stock is perhaps the most desired skill. And in summary, intrinsic value is simply the discounted value of the cash that can be taken out of a business during its remaining life, according to Warren Buffett.

References:

  1. https://einvestingforbeginners.com/intrinsic-value-warren-buffett-aher/
  2. https://acquirersmultiple.com/2017/02/warren-buffett-how-to-calculate-intrinsic-value/
  3. https://corporatefinanceinstitute.com/resources/knowledge/accounting/carrying-amount/
  4. https://www.buffettsbooks.com/how-to-invest-in-stocks/intermediate-course/lesson-21/

Protect yourself from identity theft

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Nearly 45 billion dollars were stolen from identity theft victims in 2020. LifeLock

Identity theft is one of the fastest growing financial crimes in America. Each year, millions of Americans discover that a criminal has fraudulently used their personal information to obtain goods and services and that they have become victims of identity theft.

A wide range of sensitive personal information can be used to commit identity theft, including a person’s name, address, date of birth, Social Security number (SSN), driver’s license number, credit card and bank account numbers, and phone numbers.

Once identity thieves have your personal information, they can drain your bank account, run up charges on your credit cards, open new utility accounts, or get medical treatment on your health insurance. An identity thief can file a tax refund in your name and get your refund. In some extreme cases, a thief might even give your name to the police during an arrest.

The most common form of identity theft involves the fraudulent use of a victim’s personal information for financial gain. According to the Federal Trade Commission’s Guide for Assisting Identity Theft Victims, there are two main types of financial frauds:

Using the victim’s existing credit, bank, or other accounts

  • A victim of existing account misuse often can resolve problems directly with the financial institution, which will consider the victim’s prior relationship with the institution and the victim’s typical spending and payment patterns.

Opening new accounts in the victim’s name

  • A victim of new account identity theft usually has no preexisting relationship with the creditor to help prove she is not responsible for the debts.
  • The new account usually is reported to one or more credit reporting agencies (CRA), where it then appears on the victim’s credit report. Since the thief does not pay the bills, the account goes to collections and appears as a bad debt on the victim’s credit report. Often, the victim does not discover the existence of the account until it is in collection.
  • The victim must prove to the creditor that she is not responsible for the account and clear the bad debt information from her credit report.

The primary tool for preventing criminals from opening additional new accounts in your name are to implement a fraud alert and credit freeze. In most cases, you should place an initial fraud alert on your credit report as quickly as possible after discovering that you have become an identity theft victim, or you realize that your sensitive personal information has been stolen. Once you implemented a fraud alert, you will have some time to consider whether to place an extended fraud alert or a credit freeze on your credit report. You also will be able to obtain a free credit report and review the report to see if it shows that there has been additional fraud by the criminal.

https://twitter.com/ebrownl33/status/146436870204497510

To prevent identity theft, it is critical to keep your personal information safe:

  • Shred financial documents and paperwork with personal information before you discard them.
  • Protect your Social Security number. Don’t carry your Social Security card in your wallet or write your Social Security number on a check. Provide it only when absolutely necessary. You may always ask to use another identifier.
  • Don’t provide personal information over the phone, through the mail, or over the Internet unless the party is known and reputable.
  • Never click on links sent in unsolicited e-mail messages.
  • Use firewalls, anti-spyware, and anti-virus software to protect your personal computer. Keep the protections up-to-date. Visit OnGuardOnline.gov for more information.
  • Don’t use an obvious password like your birth date, your mother’s maiden name, the last four digits of your Social Security number, or your phone number.
  • Keep all personal information in a secure place at home, especially if you have roommates or employ outside help.

Monitor your financial information regularly and request a free copy of your credit report annually. Review various financial accounts and statements, checking for the following:

  • Purchases that were not made by you
  • Bills that do not arrive as expected
  • Unexpected credit cards or account statements
  • Denials of credit for no apparent reason
  • Calls or letters about purchases you did not make

If identity theft is suspected, act quickly!

Identity theft victims have the right to block the reporting of information that resulted from identity theft. Credit reporting agencies (CRAs) are responsible for blocking fraudulent information from appearing in victims’ credit reports, but also to notify furnishers (creditors, debt collectors, and other companies that reported the information).

As the victim, you must provide the CRAs with the following information in writing:

  • a copy of an Identity Theft Report (filed with law enforcement). The Identity Theft Report is the primary tool for removing inaccurate identity theft-related information from your credit report.
  • a letter explaining what information is fraudulent as a result of identity theft
  • the letter should state that the information does not relate to any transaction that the consumer made or authorized
  • proof of identity, which may include the consumer’s Social Security number, name, address, and other personal information requested by the CRA

In summary, identity theft happens when someone steals your personal information to commit fraud. The criminals may use your information to apply for credit, file taxes, or get medical services. These acts can damage your credit status, and cost you time and money to restore your good name.

To Prevent Identity Theft

According to USA.gov, you should keep these tips in mind to protect yourself from identity theft:

  • Secure your Social Security number (SSN). Don’t carry your Social Security card in your wallet. Only give out your SSN when necessary.
  • Don’t share personal information (birthdate, Social Security number, or bank account number) because someone asks for it.
  • Collect mail every day. Place a hold on your mail when you are away from home for several days.
  • Pay attention to your billing cycles. If bills or financial statements are late, contact the sender.
  • Use the security features that can help protect the device and the information on it from threats and vulnerabilities on your mobile phone.
  • Update sharing and firewall settings that analyzes and blocks or allows information traveling between the internet and your computer based on a defined set of security rules.
  • Use a virtual private network (VPN) if you use a public wi-fi network A Virtual Private Network (VPN): a private network that connects your computer or mobile device to the internet and encrypts (codes) your information to protect your internet activity from monitoring or spying.
  • Review your credit card and bank account statements. Compare receipts with account statements. Watch for unauthorized transactions.
  • Shred receipts, credit offers, account statements, and expired credit cards. This can prevent “dumpster divers” from getting your personal information.
  • Store personal information in a safe and secure place.
  • Install firewalls and virus-detection software to prevent, detect, and remove malicious programs that have been placed on your computer to spy on you or to do damage to your computer.
  • Create complex passwords that identity thieves cannot guess. Change your passwords if a company that you do business with has a breach of its databases
  • Review your credit reports will show your bill payment history, current debt, and other financial information once a year. Be certain that they don’t include accounts that you have not opened. You can order it for free from Annualcreditreport.com.
  • Freeze your credit files with Equifax, Experian, Innovis, TransUnion, and the National Consumer Telecommunications and Utilities Exchange for free. Credit freezes prevent someone from applying for and getting approval for a credit account or utility services in your name.

You have limited liability for fraudulent debts caused by identity theft.

  • Under most state laws, you’re not responsible for any debt incurred on fraudulent new accounts opened in your name without your permission.
  • Under federal law, the amount you have to pay for unauthorized use of your credit card is limited to $50. If you report the loss to the credit card company before your credit card is used by a thief, you aren’t responsible for any unauthorized charges.
  • If your ATM or debit card is lost or stolen, you can limit your liability by reporting the loss immediately to your bank or credit union.
  • If someone makes unauthorized debits to your bank or credit union account using your debit card number (not your card), you aren’t responsible – if you report the problem within 60 days after they send your account statement showing the unauthorized debits.
  • Most state laws limit your liability for fraudulent checks issued on your bank or credit union account if you notify the bank or credit union promptly.

References:

  1. https://www.identitytheft.gov/#/
  2. https://www.consumer.ftc.gov/articles/pdf-0119-guide-assisting-id-theft-victims.pdf
  3. https://www.usa.gov/identity-theft

Planning for Financial Freedom

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Planning for financial freedom is the key to getting there. 

Your financial plan has to consider both the future and the present. For the present, you need enough cash available to cover your current expenses. Your long-term financial plan should prepare you for retirement, your kids’ college education or a big dream purchase. Putting money every month toward your current budget and your long-term goals is the goals.

For most investors, the biggest challenge has been staying the course and focusing on long-term goals in the face of market fluctuations. And, it’s important for investors to avoid getting discouraged since saving and investing are a long-term journey.

Working toward your goals:

  • Create a plan. Figure out how much you’ll need and set a target date to have that amount saved up, so you can create a savings plan with a specific monthly goal.
  • Automate your savings and investing. Include your monthly savings and investing goals in your budget to hold yourself accountable today for the future you want tomorrow.
  • Manage or eliminate your debt. Keeping your debt-to-income ratio low can help you get a better interest rate on both the home you have today and the home of your dreams. Furthermore, eliminating your debt gives you increased flexibility with your income to Dave and invest.

Another key to that financial freedom is building an emergency fund that can more than cover your expenses for 3–6 months if you needed it for life’s unexpected surprises like unforeseen major car repairs and medical bills that can derail your personal finances if you haven’t built up a buffer to cover them. 

Essentially, you should:

  • Build an emergency fund. Create and track your emergency fund in a separate account that you can access easily in case you need it.
  • Make a budget. Create a budget that includes a monthly savings goal, and track your savings contributions to build that emergency fund quickly.
  • Track your expenses. Watch your spending to make sure you’re staying within your budget, and check in on that budget regularly to find new places to save.
  • Track your debt. Create a comprehensive list of all your loans and credit card accounts so you can see everything together. Free yourself from debt by paying your minimums and attacking one debt at a time with extra monthly payments.
  • Include all your loan information. Keep track of the interest rate and monthly payment for each loan to help you create a solid debt-reduction plan.
  • Plan and schedule your extra payments. Pay extra on the loan with the highest interest rate until that one is paid off, then roll those payments into the next loan to pay that off even faster. 

A financial free retirement is one in which you can do the things you enjoy in life without worrying about money. For long-term goals like retirement, it is imperative to stay on track with your saving and investing no matter what comes your way.

Planning for a financially free retirement includes:

  • Track your net worth and cash flow. Tracking your net worth and cash flow can help you stay focused on your long-term objectives, reducing stress by giving you the information you need along with concrete goals to strive for. “Net worth is what’s yours, really yours. First, add up the value of everything you own, then subtract the total amount of any debts that you have. What’s left is your net worth”, explains Investment adviser Robert LeFevre Jr., a certified public accountant and certified financial planner
  • Consider your options. As you face decisions along the way, experiment with various scenarios to see how those decisions could affect your retirement.
  • Make managing and tracking your finances a habit. By reviewing regularly your long-term financial plan, you’ll have the information you need to keep on track with your financial goals—no guessing needed.

Financial freedom means that you get to make life decisions without being overly stressed about the financial impact because you are prepared. You control your finances instead of being controlled by them.

References:

  1. https://www.quicken.com/blog/claim-financial-freedom

Fintech (Financial Technology) Investing

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  • “Ignoring technological change in a financial system based upon technology is like a mouse starving to death because someone moved their cheese.”  Chris Skinner
  • The integration of technology with financial services is today’s new and present reality. These technologies not only improve the efficiency and productivity of financial services but also enhance the customer experience.
    • Fintech is a hybrid industry of two nearly opposing parts—finance and technology
    • Fintech’s disruptions may transform not only the way we transact money but the definition of money itself
    • Financial technology is a rapidly growing industry.

    We’re on the precipice of a major evolution in the domestic and global financial services industry. How we send, receive, store, spend, and invest money may undergo a few radical changes.

    Fintech—“financial technology”—is an emerging hybrid industry that brings together legacy financial services and technological innovation. With this combination, the Fintech industry is likely to compete with and disrupt traditional financial services, especially banking.

    Financial technology is the driving force behind the rapid digitization of the world. Fusing the concept of financial services with new technology, fintech companies aim to improve traditional methods of moving money around by offering lower costs, time efficiency and improved access for businesses and consumers to manage their finances.

    The term fintech can describe many processes, such as online money transfers, mobile payments, loan management, or investments, all done digitally without the need for intermediary.

    There are countless examples of how Fintech is reshaping the world of money, commerce and financial services, but they all fall into three primary categories:

    • New tech (such as apps) that allow for monetary transactions online,
    • Digital money which is a blockchain technology-based alternative to cash and
    • The Internet of things (IoT)-enabled credit and loan services (which are replacing and digitizing traditional banking services).

    Naturally, fintech is often described as a disruptor of the finance world. The financial services once recognized as the domains of banks, brokerage houses and desktop computers are now available on mobile phones.

    It’s one thing to invest in a financial asset for the long term. It’s another thing to invest in the very source and infrastructure that may give all financial assets their substance, mobility, and meaning.

    Fintech’s growth is driven by three primary factors:

    1. Cryptocurrencies: Fintech’s fortunes are closely connected to the skyrocketing popularity of cryptocurrencies, such as bitcoin, and blockchain technologies that provide a safe, decentralized platform for them.
    2. Mobile devices: Smartphones, tablets and laptops are used for nearly everything these days, and it’s almost hard to imagine how we lived without them. None of these devices would have been able to thrive without the rise of mobile apps and related technology.
    3. Millennials: This generation is the most tech-savvy in U.S. history. Millennials are the first people to grow up with the internet and smartphones, and they’re on track to become the biggest wage earners, buyers and money managers since baby boomers.

    To invest in this rapidly evolving industry, you might consider paying attention to all the moving parts that feed into the engines of financial progress and disruption. In a way, the current areas of only scratch the proverbial surface of Fintech’s potential.

    1. https://tickertape.tdameritrade.com/investing/what-is-fintech-financial-technology-industry-15946
    2. https://paulmampillyguru.com/america-2-0/fintech-companies/
    3. https://finance.yahoo.com/news/top-10-best-fintech-companies-144738653.html

    BNPL – Buy Now, Pay Later

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    According to Worldpay’s 2020 Global Payments report,“buy now pay later” is the fastest growing e-commerce payment method.

    The idea of buying a product now that is beyond your budget and that to pay for that product later in many ways sounds too good to be true.   However, this is possible by an innovative digital online payment option called Buy Now Pay Later (BNPL).

    BNPL is a form of short-term financing the helps consumers make purchases with a small down payment and wait to pay for the rest of the balance at a later date.

    Buy now, pay later is becoming an increasingly popular way for people to shop, particularly online, since oftentimes these plans don’t charge interest and are much easier for consumers to get approved for than traditional loan methods.

    Customer gets the flexibility to choose suitable installment payment options, which will spread over a certain span of time. Absence of any interest cost and strict approval requirements makes BNPL a sought-after, convenient payment option, especially for millennials .

    In North America, “buy now pay later” market share is expected to triple to 3% of the e-commerce payments market by 2023.

    In other regions, such as Europe, the Middle East and Africa (EMEA), “buy now pay later” already accounts for almost 6% of the e-commerce payment market and is projected to reach nearly 10% by 2023.

    Win-Win Bid for all Parties

    BNPL is a win-win proposition for all the parties involved in a transaction, such as the consumer, merchant as well as the issuing bank:

    • The consumer gets the option to buy stuff that was his layaway target.
    • The merchant gains from more customers and better conversion, higher order value, rise in the repeat purchase rate and more benefits.
    • The issuing bank profits from elevated spending.

    The major BNPL players are U.S. PayPal, Canadian Affirm Holdings, Swedish Klarna, and Australian Afterpay.  Each of these companies already boasts a big customer base comprising millions of merchants and customer accounts.

    References:

    1. https://www.nasdaq.com/articles/buy-now-pay-later-solution-catching-up-fast%3A-3-stocks-to-gain-2021-05-20
    2. https://www.marketbeat.com/originals/add-these-buy-now-pay-later-stocks-to-your-shopping-list/

    Retirement Benefits

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    “Planning is the key to creating your best retirement.”

    Social Security is part of the retirement plan for almost every American worker. It provides replacement income for qualified retirees and their families. On average, retirement beneficiaries receive 40% of their pre-retirement income from Social Security. Thus, it’s important to understand when planning for income during retirement, Social Security was designed to replace only a percentage of your pre-retirement income based on your lifetime earnings.

    The amount of your average wages that Social Security retirement benefits replaces varies depending on your earnings and when you choose to start benefits. If you start receiving benefits at age 67 (full retirement age), this percentage ranges from as much as 75 percent for very low earners, to about 40 percent for medium earners, and about 27 percent for high earners. If you start benefits earlier than age 67, these percentages would be lower, and after age 67 they’d be higher.

    Most financial advisers state that you will need about 70 percent of pre-retirement income to live comfortably in retirement, including your Social Security benefits, investments, and other personal savings and sources of income.

    When you work and pay Social Security taxes, you earn “credits” toward Social Security benefits. The number of credits you need to get retirement benefits depends on when you were born. If you were born in 1929 or later, you need 40 credits (usually, this is 10 years of work).

    If you stop working before you have enough credits to qualify for benefits, the credits will remain on your Social Security record. If you return to work later, you can add more credits to qualify. Social Security Administration (SSA) can’t pay any retirement benefits until you have the required number of credits.

    When you work, you pay taxes into Social Security. SSA use the tax receipts to payout benefits to:

    • People who have already retired.
    • People who are disabled.
    • Survivors of workers who have died.
    • Dependents of beneficiaries.

    The money you pay in taxes isn’t held in a personal account for you to use when you get benefits. SSA uses your taxes to pay people who are currently getting benefits.

    Any unused money goes to the Social Security trust fund that pays monthly benefits to you and your family when you start receiving retirement benefits.

    Retirement benefit

    SSA will base your retirement benefit payment on how much you earned during your working career. Higher lifetime earnings result in higher benefits. If there were some years you didn’t work or had low earnings, your benefit amount may be lower than if you had worked steadily.

    The age at which you decide to retire will also affect your benefit. If you retire at age 62, the earliest possible Social Security retirement age, your benefit will be lower than if you wait.

    Full retirement age, or FRA, is the age when you are entitled to 100 percent of your Social Security benefits. If you were born between 1943 and 1954, your full retirement age was 66. If you were born in 1955, it is 66 and 2 months. For those born between 1956 and 1959, it gradually increases, and for those born in 1960 or later, it is 67.

    Those dates apply to the retirement benefits you earned from working and to spousal benefits, which your husband or wife can collect on your work record. Keep in mind:

    • Claiming benefits before full retirement age will lower your monthly payments; the earlier you file — you can start at age 62 — the greater the reduction in benefits.
    • You can increase your retirement benefits by waiting past your FRA to retire. Each month you put off filing up to age 70 earns you delayed retirement credits that boost your eventual benefit.

    Choosing when to start receiving retirement benefits is a personal decision. If you choose to retire and begin receiving benefits when you reach your full retirement age, you’ll receive your full benefit amount. SSA will reduce your benefit amount if you decide to start benefits before reaching full retirement age.

    References:

    1. https://www.ssa.gov/benefits/retirement/learn.html
    2. https://www.aarp.org/retirement/social-security/questions-answers/social-security-full-retirement-age/
    3. https://www.ssa.gov/pubs/EN-05-10035.pdf

    Emotional Well-Being

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    “Love and meaningful relationships are vital to physical and emotional well-being.” Deepak Chopra

    Many people fail to understand that emotional well-being has potential to affect your overall health and well-being. In fact, mental and emotional stress can translate into adverse physical reactions, a weakened immune system, and overall poor health outcomes.

    It is natural to feel stress, anxiety, grief, and worry during and after a disaster or pandemic. Everyone reacts differently, and your own feelings will change over time. It’s important to take notice and to accept how you feel.

    Taking care of your emotional well-being during an emergency will help you think clearly and react to the urgent needs to protect yourself and your family.

    Self-care and being proactive during an emergency will help your long-term healing.

    Look out for these common signs of distress:

    • Feelings of fear, anger, sadness, worry, numbness, or frustration
    • Changes in appetite, energy, and activity levels
    • Difficulty concentrating and making decisions
    • Difficulty sleeping or nightmares
    • Physical reactions, such as headaches, body pains, stomach problems, and skin rashes
    • Worsening of chronic health problems
    • Increased use of alcohol, tobacco, or other drugs

    It’s vital for you to learn how to manage your stress and take the action to improve your mental well-being. You can take the following steps to cope:

    • Take care of your body– Try to eat healthy well-balanced meals, exercise regularly, and get plenty of sleep. Avoid alcohol, tobacco, and other drugs. Learn more about wellness strategiesexternal icon for mental health.
    • Connect with others– Share your concerns and how you are feeling with a friend or family member. Maintain healthy relationships, and build a strong support system.
    • Stay informed– When you feel that you are missing information, you may become more stressed or nervous. Watch, listen to, or read the news for updates from officials. Be aware that there may be rumors and misinformation during a crisis, especially on social media. Always check your sources and turn to reliable sources of information like your local government authorities.
    • Avoid too much exposure to media and news– Take breaks from watching, reading, or listening to news stories. It can be upsetting to hear about the crisis and see images repeatedly. Try to do enjoyable activities and return to normal life as much as possible and check for updates between breaks.

    References:

    1. https://emergency.cdc.gov/coping/selfcare.asp
    2. https://austinblog.heart.org/october-is-emotional-wellness-month/

    Billionaire’s Income Tax

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    “Some liberal lawmakers hope the “billionaire tax” will eventually be extended to millionaires.”

    A ‘Billionaires Income Tax’ would be a fundamental change in how the tax system operates in the United States, and open up a new revenue stream for the Treasury. The wealth tax plan would “get at the wealth of the richest Americans that currently goes untaxed until assets are sold”, according to Roll Call.

    The Senate has proposed a special new tax on the uber wealthy, think billionaires, that Democrats will use to help pay for their next big multi-trillion dollar ‘Build Back Better’ fiscal spending package. The proposed tax on the net worth of billionaires’ stock holdings, real estate and other assets could help Democrats accomplish goals of raising taxes on the wealthy and funding their pet social safety net and climate programs.

    The Senate Finance Committee Chair wants to “begin requiring people with more than $1 billion in assets, or who earn more than $100 million in three consecutive years, to begin paying capital gains taxes each year on the appreciation in value of their assets, regardless of whether they are sold”, Politico reported.

    The ‘billionaire tax’ plan would reportedly hit around 700 Americans and generate several hundred billion dollars in tax receipts. “We have a historic opportunity with the Billionaires Income Tax to restore fairness in our tax code, and fund critical investments in American families,” said Senate Finance Chair Ron Wyden (D-Ore.). “The Billionaires Income Tax would ensure billionaires pay tax each year, just like working Americans.”

    The proposal, should it pass Congress and be signed into law by the President, would almost certainly be challenged in federal court on its constitutionality. The Constitution restricts so-called direct taxes, ‘a term referring to levies imposed directly on someone that can’t be shifted onto someone else’. There’s a big exception for income taxes, as a result of the 16th Amendment, which allows Congress to tax income and earnings. (All current taxes are either forms of income tax or levies on transactions).

    The proposed plan would tax people on the appreciation of their publicly traded marketable securities. Effectively, the plan would tax billionaires’ assets on any gains or appreciation in value of those assets. For example, if that asset became worth $110, they’d only owe on the $10 gain. And, the proposal would begin by imposing a one-time tax on all the gains that had accrued before the tax had been created.

    Stocks, bonds and other publicly traded assets, marketable securities, would be assessed the levy each year. Harder-to-value assets like real estate or ownership stakes in privately held businesses would not be taxed until they are sold, but would then face an interest charge designed to approximate the tax people would have faced if they had been publicly traded assets.

    Capital losses

    Under the proposal, a billionaire subject to the tax whose asset values take a dive during the year would have two options. They could choose to:

    • Carry those losses forward to offset potential future mark-to-market gains, or
    • Carry them back to a year within the previous three to generate refunds for taxes paid on unrealized gains.
  • Carrybacks could only offset prior mark-to-market tax, not taxes paid on other income.

    • Nevertheless, the plan would incentivize the wealthy to move into non-publicly traded assets in order to avoid having to pay the IRS. And if the billionaire wealth tax survives the certain court challenges under the current conservative Supreme Court, you can safely bet that many liberal leaning states will follow suit and implement their own version of a billionaire or millionaire wealth tax.

    This new billionaire tax on wealth, instead on income, is a tax that some liberals lawmakers hope will eventually be extended to include every millionaire in assets, regardless of actual net worth. However, Congress always seem able to devise work arounds to exclude their own financial assets and the assets of their big re-election campaign donors from these extremely regressive tax policies.

    Additionally, this proposal, if enacted into law, would dramatically impact compound growth of assets and, would have the unintended consequences of slowing job creation and capital investments in the U.S.

    Senator Mitt Romney (R-Utah) said that the billionaire tax will leave the rich thinking: “I don’t want to invest in the stock market, because as that goes up, I gotta get taxed. So maybe I will instead invest in a ranch or in paintings or things that don’t build jobs and create a stronger economy.”

    References:

    1. https://www.rollcall.com/2021/10/27/wyden-details-proposed-tax-on-billionaires-unrealized-gains/
    2. https://www.politico.com/news/2021/10/27/billionaires-income-tax-details-wyden-517318
    3. https://www.marketwatch.com/story/mitt-romney-says-a-billionaire-tax-will-push-the-rich-to-buy-paintings-or-ranches-instead-of-stocks-11635269305