Category Archives: Financial Planning

Investing in China

Posted on by

Ray Dalio, founder and chairman of the world’s biggest hedge fund firm, Bridgewater Associates, on CNBC Squawk Box.

Dalio has long been vocal in support of Chinese investments and Bridgewater Associates is among the largest foreign asset managers operating in China, according to Forbes. 

However, much of Wall Street disagrees and many American investors fled after China’s recent regulatory crackdowns on the technology and education sectors. 

Source: https://www.cnbc.com/2021/11/30/ray-dalio-says-cash-is-not-a-safe-place-right-now-despite-heightened-market-volatility-.html

Comprehensive Financial Planning

Posted on by

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.

Protect yourself from identity theft

Posted on by

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

Posted on by

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

Posted on by
  • “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

    Posted on by

    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

    Posted on by

    “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

    IRS Bank Account Reporting Requirements Intended to Catch Tax Cheats

    Posted on by

    The IRS would require banks to report gross flows of money in and out of some taxpayers’ bank accounts.

    The Internal Revenue Service (IRS) could be missing out on collecting approximately $1 trillion every year from taxpayers who are not paying their full tab, Charles Rettig, the IRS commissioner said during a Congressional hearing.

    To effectively collect taxes, IRS has to know about the financial transactions before it can assess appropriate federal taxes. In recent years, the agency has been stepping up enforcement and IRS researchers looked into tax evasion and pointed a finger at the wealthiest taxpayers.

    The new bank reporting proposal that was once considered by Congress would take a step at addressing this tax evasion concern. It would only apply to bank and financial institution accounts with more than $10,000 of annual cash flows. And the biggest sources of income for most Americans—paycheck deposits and government payments such as Social Security—would not count toward that $10,000, according to MarketWatch.

    It is also intended to strengthen the IRS’s enforcement arm to catch tax cheats and evaders, which is illegal. The bank reporting proposal is designed to improve the IRS’s ability to select who to audit, so that it does more audits of tax cheats—especially wealthier tax cheats—and fewer audits of wage earners who pay what they owe.

    Currently, the IRS is able to easily enforce tax laws involving workers’ wage income, but enforcement is patchy or nonexistent when it comes to forms of income that flow disproportionately to high-income Americans—especially income from businesses and other income producing assets. 

    Employers are required to file a W-2 form reporting employees’ annual wages—and as a result of that and paycheck withholding, 99% of wages are properly reported to the IRS.

    But there is little or no third-party reporting of types of income that flow disproportionately to wealthy workers and businesses, and as a result, hundreds of billions of dollars goes unreported every year.

    The Treasury Department estimates the overall amount of unpaid taxes to be $600 billion a year, with the richest 1% responsible for more than $150 billion of that. 

    By building on the existing system of bank information reporting, it should become more difficult for wealthy individuals to hide income. Currently, banks and other financial institutions are required to issue Form 1099-INTs to customers receiving $10 or more of interest a year. This proposal would require banks to report two additional pieces of information for some personal and business accounts—the total amount of money that has flowed in for the prior year, and the total amount of money that has flowed out, rounded to the nearest $1,000.

    The proposal would only apply to personal and business accounts with more than $10,000 of cash flows. And the biggest sources of income for most Americans—paycheck deposits and government payments such as Social Security—would not count toward that $10,000. So most Americans’ bank accounts wouldn’t be included.

    This proposal would have no effect whatsoever on people’s tax liability. Nobody—not even the wealthiest Americans, who would pay more or would owe extra taxes because of enhanced bank reporting.

    Rob Nichols, president and CEO of American Bankers Association, was unconvinced. “Even with the modifications…, this proposal still goes too far by forcing financial institutions to share with the IRS private financial data from millions of customers not suspected of cheating on their taxes,” he said in Barron’s.

    The proposal will still raise “privacy concerns, increase tax-preparation costs for individuals and small businesses, and create significant operational challenges, particularly for community banks,” he said.

    What bank reporting would do is give the IRS the ability to detect possible indications of tax evasion in instances where an individual or business partnership has millions of dollars flowing into a bank account but does not file a tax return or reports minimal gross receipts. That type of information would help the IRS select audits more efficiently and deter tax cheating and evasion.

    “Today’s new [bank reporting] proposal reflects the administration’s strong belief that we should zero in on those at the top of the income scale who don’t pay the taxes they owe, while protecting American workers by setting the bank-account threshold at $10,000 and providing an exemption for wage earners like teachers and firefighters,” Treasury Secretary Janet Yellen said in a statement.

    References:

    1. https://www.marketwatch.com/story/most-taxpayers-would-be-less-likely-to-be-audited-under-bidens-new-irs-enforcement-proposal-11634854551
    2. https://www.marketwatch.com/story/tax-cheats-cost-the-u-s-far-more-than-previously-thought-and-cryptocurrency-is-part-of-the-problem-irs-commissioner-says-11618340252
    3. https://www.barrons.com/articles/biden-irs-taxes-banks-51634737549

    Emotional Well-being: College Student Mental Health

    Posted on by

    Improving the lives and futures of young adults by strengthening connections and building resilience.

    Mental health continues to be a major concern on college campuses around the world, according to new research published by the American Psychological Association.

    The research reveals that the prevalence of depression and anxiety in young people continues to increase, now reaching its highest levels, a sign of the mounting stress factors due to the convergence of the coronavirus pandemic, political unrest, and systemic racism and inequality. 

    Additionally, researchers from the World Health Organization found that a staggering 35 percent of first year college freshmen struggled with a mental illness. The most common mental illness observed was major depressive disorder, with 21.2 percent of respondents experiencing lifelong symptoms, followed by general anxiety disorder, which affects 18.6 percent of students.

    When it comes to suicide in particular, the American Academy of Child and Adolescent Psychiatry points to data showing that by 2018, suicide was the second-leading cause of death for people between the ages of 10 and 24.

    And, since 2014, anxiety and depression have been college students’ leading mental health issues, according to research conducted by Boston University.

    According to the most recent Healthy Minds Study, which surveys tens of thousands of college and university students across the U.S., 41% of all students screened positive for depression over the spring semester, and 34% screened positive for anxiety. They are the highest levels observed by the study. However, this year’s results are part of a steadily increasing trend, and students surveyed said that while the pandemic impacted their mental health, it wasn’t the root cause.

    Help is on its way

    RADical Hope is a nonprofit committed to improving the lives and futures of young adults by strengthening connections and building resilience. The RADical Hope movement is two-fold: educate all constituents of the college community the warning signs and implore them to take action. And, help to identify students who need help but are not able to ask for it.

    RADical Hope wellness program, RADical Health, attempts to empower and equip college students with tools to stay well and stay resilient dealing with the day-to-day challenges of life on college campuses. Their strategy is to utilize proven effective techniques and procedures to counter the accelerating rise in college student anxiety and depression.

    RADical Hope is currently partnering with ten colleges and universities to develop, identify and partner with frontline engagement programs that deliver three priorities: Connectivity, Engagement, Empowerment.

    And, reaching college-age kids is vital. “64% of kids who drop out of college do so because of mental illness,” says Ken Langone, Co-Founder of Home Depot, who adds, “Our purpose [for RADical Hope] is to identify the kids who aren’t reaching out for help and assure them there is a better future.”

    References:

    1. https://www.cnbc.com/2018/10/04/4-ways-to-be-proactive-about-your-mental-health-in-college.html
    2. https://www.bu.edu/articles/2021/depression-anxiety-loneliness-are-peaking-in-college-students/
    3. https://radicalhopefoundation.org
    4. https://www.wuft.org/news/2021/09/22/mental-health-challenges-abound-among-college-students/
    5. https://healthymindsnetwork.org/hms/

    The National Suicide Prevention Lifeline contact is 1-800-273-8255 (en español: 1-888-628-9454; deaf and hard of hearing: 1-800-799-4889) or the Crisis Text Line by texting HOME to 741741.

    Inflation and Investment Opportunities

    Posted on by

    Fiscal spending proposal has the potential to overheat a U.S. economy that is already struggling to keep up with record demand.

    Rising inflation has Americans worried about their future purchasing power and their retirement plans, according to CNBC. Yet there are some opportunities to make and save money in this environment, as well as protect your investments.

    With consumer prices up in October 6.2% from the year prior, inflation is too high and appears to be a clear and present threat to America pocket books and wallets.

    With inflation at its highest level in several decades, economists are concerned that the pending multi-trillion dollar fiscal spending package will further overheat a U.S. economy already struggling to keep up with demand. The concern is that the package would exacerbate more fundamental supply constraints in the economy, driving up inflation over the longer term.

    Thus, cash in the bank or in low-yielding bonds aren’t the best option in an inflationary environment when the stock market has gained nearly 27% this year, explains financial advisor Delano Saporu, CEO of New York-based New Street Advisors Group. Inflation reduces the value and purchasing power of that cash.

    “If you are sitting on too much cash, you are doing yourself a disservice,” Saporu said.

    Thus, it is recommended that you keep only enough cash to cover expenses for 12 months to 24 months. This way, if inflation becomes a big issue and causes stocks to tank, you aren’t forced to sell in a down market.

    Investors do not love high inflation, which can hurt the growth prospects of high-rising tech stocks, among others. Because, higher prices can result in higher interest rates, which can lower the appeal of growth stocks compared to less risky alternatives.

    The stock market tends to beat inflation given its rate of return, although growth may be slowed during inflation periods. Yet investing is for growth, not inflation hedges.

    Since inflation is typically considered a result of a strong economy, financial experts recommend cyclical companies, which follow the cycles of an economy. That means sectors like industrials, energy and consumer discretionary. Also, gold, which is near five-month highs, and possibly cryptocurrencies are seen as inflation hedges.

    References:

    1. https://www.cnbc.com/2021/11/16/as-inflation-rises-here-are-opportunities-to-make-and-save-money-.html
    2. https://www.forbes.com/advisor/investing/inflation-worries-2021/
    3. https://www.bloomberg.com/opinion/articles/2021-08-12/inflation-worries-it-may-finally-be-time-to-bring-them-back