Critical Thinking Required

It's the Christmas season again!  If you want to gift something, either cash, stock, cars, or property to someone your love, or for charity, please watch this episode.  People assume they can gift others whatever they want, because "well it's my money!"  But you know the IRS, they want to tax you for everything.  You can't, as a matter of fact, just give out free money/gifts however you want.  For 2021, you can gift any individual $15,000 per year without paying gift tax.  For example, if my parents want to help me buy a condo, my mom and dad can each gift me $15,000, and then each gift my husband $15,000.  That's $60,000 in total.  Anything above that, they can: 1. count it out of their lifetime exclusion limit (which is $11.7 million per person right now), 2. they can pay the gift tax, or 3. they can consider it a loan, and charge me interest.  Dan and Tim talked about how to gift assets in kind, what the arm's length rule is, and what the 5-year lookback rule is.  For Part II of this episode, we will discuss gifting businesses and investments, and the rules of charitable giving.

This is Part II of LBW's Journey.  Oh dear, do we have some crazy and silly stories for you!  What happened to the office parking lot?  Why did Nathaniel meet a client with a pink towel wrapped around his waist?  Why did Ying come to the office with no pants?  This has been a fun and fruitful 6 years, and we can not express our appreciation enough.  With all of your help and support, we will continue to grow and thrive!

LBW just had its 6-year birthday.  What's our journey been so far?  Let's go back to 1982 when Dan was born... Just kidding!  We started LBW together back in 2015, well, let's be honest because we hated our industry: we didn't want to sell unnecessary insurance products to our clients to fill our pockets, we didn't want to tell our clients to "take 4% distributions" and call it "financial planning", and we didn't want to work in an unfair toxic environment.  We knew we could do better.  About 90% of startups fail, but we made it.  Why?  As Nathaniel and Dan said, preparation is key, and willingness to communicate, change and adapt is also critical.  From the very beginning, we have decided, we are a family.  What's good for the family is what's good for the business, and what's good for the business is what's good for the family.  The team also shared what the transition points were for LBW to upgrade itself to a new level: we are confident in saying that we are not afraid to challenge the norm, we are leaders in the financial planning industry, and we can't tell you how many times we've heard our prospects and clients say: "oh wow, I thought this is what my advisor would do..."

Almost never, will you hear someone say: I wish I could pay more taxes.  Today, we are going to break down this bias and try to explain why sometimes, it's a better choice to pay a little bit more tax in the short term.  Tax bias is everywhere.  For example, we often see some advisors holding onto a stock just because they don’t want to trigger a tax event, or selling a stock prematurely because “you are in a low tax bracket this year” or "it's not doing so hot this year."  However, as Nathaniel said, we firmly believe that if you buy an investment, you should understand the fundamentals of the business, and you sell an investment because it has reached its fair value.  Considering tax consequences is not a bad thing, but it’s not why you invest!  Dan talked about the pros and cons of popular "tax-efficient" choices like stock options, 1031 exchange in real estate, retirement accounts, etc.  Nathaniel explained why it makes no sense in most cases to do so-called "tax-loss harvesting."  As always, read the fine print, understand that taxes are only a small portion of your overall financial picture, and don't sacrifice your long-term life goals for a short-term "tax win!"

Meet our new team member: Financial Planning Analyst Gary Grosskopf.  Growing up in Waunakee, Wisconsin, just north of Madison, Gary spent most of his time outside of school helping his dad take care of his classic cars and boats. Learning about how to fix these machines and solve problems formed his early understandings of the world.  In the interview, Gary talked about why he switched his major from engineer to personal finance and what he dislikes about our industry.  He also shared a lot about his personal favorites: food, games, life mentor, etc.  We are so excited to have Gary as part of the LBW family.  Welcome aboard!

In this episode, Nathaniel and Tim shared their home purchasing journeys and discussed the emotional aspect of it.  Nathaniel and Ying have decided to stick with the urban condo concept for its convenient lifestyle.  Tim and Becca have chosen the traditional house route for the extra square footage and family BBQ time in the backyard.  They all went through the emotional roller coaster, and have so far come up empty-handed in today’s insane housing market.  Nathaniel has a couple of coping tips to share with you: one, look at your current living situation and ask yourself: what kind of square footage do I really need and/or want; two, make a “life events priorities” list, and see where the “new big house” sits; three, understand that if the listing price is already on the top end of or outside your budget, in today’s market, the selling price will likely be even higher.  That will leave you little to no room for life's accidents like pay cuts, losing your job, unexpected kids, other investment opportunities, etc.  Don’t make illogical decisions because of FOMO.  Tim also added that it’s important to start this journey with the right expectations.  The market is tough for buyers, don’t expect an easy search unless you have unlimited cash to burn.  We always stress to our young clients the importance of financial planning before you are ready to buy: you plan well today to position yourself so that you can buy better tomorrow.

This is Part II of “Personal Household Merger – Communicate and Conquer!”  There’s not a “one right way” to do this: it doesn’t matter who pays what; but there’s certainly a “wrong way” to do this: not communicating your financial decisions or hiding your spending.  As Tim said, regardless of you wanting to combine your finances or not, sometimes it might be a good idea to have one person take the lead and pay closer attention to your household finances.  The keyword is “lead”, not “control”, not “takeover”, but “lead”.  Because what you don’t want is to go to the other extreme: one partner completely takes over the finances, and that person, unfortunately, passes away first, leaving the other partner unaware of their finances.  On top of losing a loved one, they have to face the unbelievable stress of learning and sorting out their household finances. For our team, Dan and Carey choose to keep their finances independent, and Nathaniel and Ying choose to combine their household - they each shared what their tricks for teamwork are.  Finance is often an emotional topic, but please communicate with your partner, see the big picture, don’t miss the small details, and enjoy your life together!

This is Part I of Household Finance Merger: To Combine, or not to Combine.  We have been asked quite frequently whether people should combine their finances if they get married, or commit to a long-term relationship.  You can go either way really, there’s no wrong answer.  But what really matters is to truly understand what it means and what it takes to combine (or not) finances.  Dan and Tim talked about the rights and responsibilities from an estate planning perspective.  What FDIC insurance can do for you, and how Community property (aka Marital property) states and Common law property states affect your decisions.  In the second part of the episode, we will talk about the importance of communication and the emotional impact of your decisions.

For more information, visit us at WWW.LBW-WEALTH.COM

For this episode, we are going to discuss technology in the financial industry.  Tim just came back from the Money Experience Summit presented by MX, and he was eager to share his thoughts.  He talked about the state of the Financial Services tech and Wealth tech landscapes.  Just like the healthcare system, the financial industry has so much data, but the old infrastructure and tech systems have slowed the industry down in terms of using this data more efficiently and ultimately helping clients.  Nowadays, there are more and more so-called "financial planning" apps available, and people ask us, why do I need you?  Because what the apps can give you is just raw data, but how do you understand the data?  What does it mean?  How do they apply to you specifically?  My best friend and I both have the same income, but she might need to help with her parents' retirement and I don't; having a house is a must for her, but I'm happy with my 2B/2B condo for the long term.  Dollar value means absolutely different things to everyone.  Financial planning is an intimate process.  Spoiler alert: LBW is ahead of the industry, and we are determined to break down the old infrastructure and build a whole new world！

This episode is for investing DIYers, and/or you are interested in learning about portfolio management.  Nathaniel and Dan are going to talk about 6 Dos and Don’ts about investing.

1. Do have a long-term investment time frame.  Please do NOT invest, for example, your down payment if you plan to use it in the short term.
2. Don’t time the market, give it time.  Nathaniel had some shocking but not surprising numbers regarding market timing.
3. Do set parameters before you invest. And don’t overweight your positions in one shot.
4. Don’t chase the next “fad”.  Trends come and go.  Don’t let FOMO (fear of missing out) get the best of you.
5. Do understand the tax consequences.  The advantages of qualified accounts (for example, Roth IRAs and 401ks) should never be underestimated.  In taxable accounts, once you realize your gains, even if you lost it later in other investments (very common for short-term traders), you will still need to pay the capital gains taxes on your gains!
6. Don’t forget about the commissions.  Don’t let the “$0 commission” slogan fool you, there are so many hidden commissions and fees.  Do your research before you invest.

Dan said it well, trading is not investing – if you want to invest for the long run, please follow these do’s and don’ts!

Learn more about us at www.lbw-wealth.com