Category Archives: Back to Basics

July 2022 Financial Planning and Capital Market Review – Back to Basics Tax Return PLANNING – Legacy Health Coverage – Feds Pickle – Yield Curve Inverts – By John Kvale CFA, CFP

Hello and Welcome to our July 2022 … Financial Planning and Capital Market Update!

If you are too busy to read, feel free to listen as we describe our post and thoughts in friendly podcast audio format as well as Video!

Newbies –

We like to articulate our thoughts and review on a Monthly basis our Financial Planning Tips, Capital Markets thoughts and current events!

Hope you enjoy!

July 2022 Video

YouTube

Financial Planning Tip(s)

Back to Basics Series – Income Tax PLANNING

In our final fun “Back to Basics” review we discuss Tax PLANNING….

From the post:

Coincidentally, the most important part of Tax Planning is the second word in the subject, Planning!

As we individual or corporate tax payers traverse the tax year, it’s important to take note of unusual events that may be occurring. We’re certainly not saying you have to worry about this every minute of the day, but should you have an unusual increase in income, or decrease in income, this should be thought about before the end of the year for your tax planning.

Later in the post we discuss the key items in reviewing your return as well….. in step by step format!

Legacy Health Coverages

After running into several situations of legacy health care options for long time former employees… Here in this post we outline the possibilities of bridge Health Coverage from legacy companies and how fantastic of an option this can be…

In almost every situation, the key is these plans are not easily discovered. In order to find out if you have an option, it’s best to dig out contact information from HR of your old employer and reach out to them directly.

This is an expense to your former employer, so it would be expected not to receive multiple information regarding such a plan, but if available it could greatly help in bridging the gap for Medicare should we be in the situation of needing coverage before age 65. 

Capital Market Comments

Bond Market turns Upside Down – The R Word

After the second negative GDP print … see next note of Fed’s Pickle…. the bond market really began to price in the R Word…. Here in this post we discuss the inversion of long bonds to short and their meaning…

The Fed’s Pickle

In this post, BEFORE the actual GDP announcement, we discussed the Fed’s pickle, with a hot economy (CPI inflation holding tight) BUT an economy that is slowing …..even qualifying as the R Word now – Recession!

From the BLS release after our post :

Q2 2022 (Adv)-0.9%
Q1 2022 (3rd)-1.6%

Real gross domestic product (GDP) decreased at an annual rate of 0.9 percent in the second quarter of 2022, following a decrease of 1.6 percent in the first quarter. The smaller decrease in the second quarter primarily reflected an upturn in exports and a smaller decrease in federal government spending.

The definition of recession is negative two quarters GDP….

Have a Great Day, Talk to You at the End of August!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

Back to Basics Fun Educational Review – Part Eight and Final – Tax “PLANNING” … The Key is the Second word… Planning!

Welcome back to Part Eight and final of our “Back to Basics” series … we hope you’ve enjoyed the First Seven which started with all about “The Emergency Fund” in Part 1Part 2 being “Protection Planning” and Part 3 discussing All about Debt Planning or “The Good the Bad and the Ugly of Debt”, Part 4 Retirement PlanningPart Five, Back to Basics Education Planning, Part Six, Estate Planning Made Easy , Part Seven KISS Investing and now, with no further ado Tax Planning !

Tax Planning – The Key is the Planning

Welcome to the final part, for now, of our back to basics fun high-level financial planning series, we close this initial series out with Tax Planning!

In keeping with our high-level, most important, basics theme… in this special tax planning article, while we know there are tons of allegedly crafty techniques, sometimes we would call them gray, we want to stick with the basics of blocking and tackling as you can REALLY save a ton staying in the lanes, but just paying extra attention here and there….

So here we go:

Coincidentally, the most important part of Tax Planning is the second word in the subject, Planning!

As we individual or corporate tax payers traverse the tax year, it’s important to take note of unusual events that may be occurring. We’re certainly not saying you have to worry about this every minute of the day, but should you have an unusual increase in income, or decrease in income, this should be thought about before the end of the year for your tax planning.

Higher or Lower Income Years

As an example, a sudden increase in income may garner heavier donations, absolute confirmation of maxing out all pre-tax retirement vehicles, double checking your withholdings compared to prior years in what you may have owed or received as a refund, just to name a few.

On the inevitable lower income years you may want to do just the opposite, think twice about making donations, double check your withholdings to see if they are too high, we would certainly like you to max out all pretax retirement vehicles if possible, but not at the expense of our emergency funds as mentioned in prior episodes of the series.

The Actual Return – Scan that dude before signing and Filing

Always take a moment to scan your final return before filing it. Or if you’re using a tax professional or tax software, it’s always a good idea to review, once again the basic blocking and tackling on your actual tax return before filing.

Things that you want to make sure are correctly included on your tax return:

Income:

All income from all sources, this sounds simple but it’s super easy to miss especially in a job change year or retirement year.  The IRS easily picks this up in the form of a paper audit due to a miss match of income.  This includes proceeds from any type of sales, such a stock or other capital gains or any other income receiving asset.

Don’t Miss that Basis – Most all assets have them and the IRS does not

With regards to the prior points, double check that the basis has been entered on anything you may be paying capital gains. In certain instances there are no basis, but most of the time there is a basis on any capital asset that you may have, and if you forget to put it on your tax return the IRS has absolutely no way of knowing that you have a basis in it and therefore you will be paying unnecessary taxes that you otherwise would not.

Confirm You have Credit for Withholdings- Delayed Refunds

Lastly, with regards to the return, reconcile your withholdings from all sources and make sure that your return has all of the withholdings that you may have already sent the IRS. Unlike the prior subject, the IRS will notice a mismatch and eventually give you credit, but there could be months if not years of delays.

Don’t Ignore a Notice – The don’t usually bite

If you ever do receive a notice from the IRS, while it seems obvious, do not ignore it. If you ignore an IRS notice you are basically accepting their argument. If you notice it is correct pay it .. if not send a response. Over the decades of working with the IRS, we have found them to be very friendly and with good responses …usually very accommodating.

All right, there you have it the most important part of tax planning, is just that, planning in advance or maybe along the way. With a little foresight and a mild top of focus throughout the year, we feel certain you can Keep those taxes to a minimum…

Stay Tuned Here for Updates

Oh, one last thought, as long as you are receiving our regular posts here at Street-Cents, we constantly attempt to update everyone on actual, not probable or not maybe legislated, but actual tax law changes… so be sure to read our triple weekly posts…

That’s a Wrap for Now!

There you have it…. A complete Back to Basics from the ground up Financial Planning Review like Course….


Hope you enjoyed!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

June 2022 Financial Planning and Capital Market Review – Investing KISS – Atlanta Fed GDP Nowcast – By John Kvale CFA, CFP

Hello and Welcome to our June 2022 … Financial Planning and Capital Market Update!

If you are too busy to read, feel free to listen as we describe our post and thoughts in friendly podcast audio format as well as Video!

Newbies –

We like to articulate our thoughts and review on a Monthly basis our Financial Planning Tips, Capital Markets thoughts and current events!

Hope you enjoy!

June 2022 Video

YouTube

Financial Planning Tip(s)

Back to Basics Series – Investing – KISS (Keep it simple silly)

In our continued fun “Back To Basics” Series here we discuss Investing our next to last in the series … and just Keeping it Simple in doing so….

From the post:

While many analysis dig so deep into investments that it makes your eyes glaze over, there are really two important parts of investing. KISS – Keep is simple silly

  • 1. Save as much as you possibly can, and s early as you can.
  • 2. Make sure your allocation above is such that during rough rainy times, a.k.a. slowdown/recession you do not eject and sell. Our human nature of fight or flight will take you out of your investment portfolio at exactly the wrong time if you are over allocated to risky investments.

Shady Used Car Offer –

In true musician like unknowing of a popular song… Our post here of a shady used car offer turned out to be a hit…

A true, made as succinct story of a mom having multiple increasing offers of her teenage seniors late model car after being told it was totaled caught a nerve….

We received comments from across the country, many of folks we do not even know, but chimed in to give their two cents worth….

Maybe slightly controversial …. for the record we try to stay away from too much drama as there is enough roaming around the airwaves, but we could just not resist this true story!

Trust but verify those used car offers!

Capital Market Comments

Atlanta Fed Predicts Slowdown – The R Word

Literally in the last week of the quarter, out pops an updated research report from the Atlanta Federal Reserve called their GDP Nowcast

After holding strong at a 1% Q2 2022 GDP estimate for some time, new data entered into their model dropped the estimate WAY down to -2.1% for their most recent estimate…. see far right green line of the graph….

If correct, this means the US is officially in a recession already!

We will talk much more on this soon, but for the record we were very surprised at much of the Wall Street Reaction to this report, most notably interest rates, which went down dramatically!

Have a Great Day, Talk to You at the End of July!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

Back to Basics Fun Educational Review – Part Seven – Investing … KISS (Keep It Simple Silly) Next to Last Review

Welcome back to Part Seven of our “Back to Basics” series .. we hope you’ve enjoyed the First Six which started with all about “The Emergency Fund” in Part 1Part 2 being “Protection Planning” and Part 3 discussing All about Debt Planning or “The Good the Bad and the Ugly of Debt”, Part 4 Retirement PlanningPart Five, Back to Basics Education Planning, Part Six, Estate Planning Made Easy and now, the next to last Review… Investing – Not to Worry we will keep this simple and straight forward…

As a reminder this is a high level Financial Planning Education like overview, starting with the basics of and we will continue into advanced topics in order of Planning Importance.  

Investing – It’s Not that Hard – Many Make Paralysis through Analysis

The most important part, save as early and as much as you can and make sure you can make it through the bad times without hitting the eject button.

Investing, specifically investing in the capital markets, can sometimes seem extremely confusing and often times can have paralysis through analysis.

In the spirit of staying with our back to basics theme, we are once again going to lay this out and have what we think very easy to understand format.

Stocks versus Bonds

While we realize there are many different types of investments, for the subject of this series were just going to keep it straight forward and talk about the basic two stocks and bonds.

Stocks a.k.a. Equities

These investments can be made via indexes, individually, mutual funds or various other wrappers .. the most important thing to understand about stocks also known as equity investments, are they for ownership of publicly traded companies.

The second most important thing to know that this asset type is they can be volatile. Major indexes can endure drop by 40 even 50% at times.

Allocations to these instruments should be made with this in mind.

All of the above being said, generally the younger and longer-term … the greater an allocation can be made to these higher volatile but generally greater returning vehicles.

Bonds a.k.a. Fixed Income

Just like stocks, bonds can be wrapped in indexes, mutual funds, individual and there are various different types.

Bonds are the tortoise, whereas stocks are the hare. Generally bonds have a much lower risk profile and therefore are much less volatile, especially with higher quality bonds.

Lower quality bonds, also known as high-yield bonds have characteristics more similar to stocks and should be thought of that way during allocations.

The Most Important Part of Investing – KISS

While many analysis dig so deep into investments that it makes your eyes glaze over, there are really two important parts of investing. KISS – Keep is simple silly

  • 1. Save as much as you possibly can, and s early as you can.
  • 2. Make sure your allocation above is such that during rough rainy times, a.k.a. slowdown/recession you do not eject and sell. Our human nature of fight or flight will take you out of your investment portfolio at exactly the wrong time if you are over allocated to risky investments.

There you have it…. The keys to investing and investment!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

Back to Basics Fun Educational Review – Part Six – Estate Planning … No Fear of the Fancy Terminology!

Welcome back to Part Six of our “Back to Basics” series .. we hope you’ve enjoyed the First Five which started with all about “The Emergency Fund” in Part 1Part 2 being “Protection Planning” and Part 3 discussing All about Debt Planning or “The Good the Bad and the Ugly of Debt”, Part 4 Retirement PlanningPart Five, Back to Basics Education Planning and now “Estate Planning!”

As a reminder this is a high level Financial Planning Education like overview, starting with the basics of and we will continue into advanced topics in order of Planning Importance.  

So who needs Estate Planning?

In a word, everyone should have an Estate Plan and Estate Documents.

As your family complexity increases, the need for Estate Planning documents rises. Young families just starting out with no dependents that may be moving to another state in the very near future can have a brief hall pass as each state has its own unique rules, but the clock is ticking.

Couples with a dependent, you need an Estate plan!

Even with simple family situations, as we get older, statistically we get closer to utilizing these documents, thereby increasing our need.

Any further complexities, as an example multiple assets, multiple dependents, some type of unique family situation, you absolutely must have a good Estate Plan and Estate Planning documents.

Why do we need estate plan documents?

Without them you are leaving your wishes recklessly in the hands of the public domain via the court system for a prolonged timeframe and an unfamiliar person, (a judge), to try and guesstimate what your wishes would have been, using the general rules of the state you reside! Not good.

OK enough lecturing on who needs them and why, let’s take the complexity out of Estate Planning and make it very easy for you to prepare and complete the documents.

Rather than go into the complexities of all of the documents, keeping with our “Back to Basics” theme, we are going to go into what you need to think about to easily complete all of your Estate Documents. Don’t worry about the fancy legal and financial terms, if you can answer the following few questions, your Estate Documents can be easily completed …

So here we go!

If something happens to one of the couple, the general rule is the other is the primary default, hence the following terminology for decisions.

If something happens to both you and your spouse at the same time, Who will be in charge of administrating your estate and who is the backup person? This is called your executor.

If something happens to both you and your spouse, who will take care of your minor children? This is called guardian.

Assuming you and your spouse once again are gone, who will take care of the financial stuff for your minor children? This is called your Trustee and you’ll need at least one back up.

At what age do you want you’re now grown children, once again assuming you and your spouse are gone, to distribute financial assets? This is the terminal clauses of your trust, a very common age is 1/3 at age 25, 30 and 35 but parameters can vary widely. Trusts cannot be perpetual and therefore must eventually end.

Lastly, a very unlikely scenario, but one that should be answered, if everyone in your immediate family… you, your spouse, and minor children should perish, think of where you would like your assets to be distributed i.e. beneficiaries.

Other Documents

There are a few simple peripheral documents such as Power of Attorney (POA) and healthcare power of attorney that will need decisions, but we find if you have answered the above questions you likely already have a person that fits each of these roles.

One planning tip: Try and match the personality of your person to the role, i.e. the caring family person may be best fit for guardian, a good financial person trustee, a close relative with a very pragmatic attitude and calm and nature, your executor… as this is the most emotional role and comes first.

That’s it, each of those answers fit into a fancy legal term and your legal professional will know exactly how to formulate the appropriate language for your specific state. With the aforementioned answers your Estate Planning documents can be easily created.

Over the years we found many people fearful of the complexity of the documents, when in reality the majority of the problems are simply answering the questions above.

You are now armed with how to easily complete your Estate Documents, why you need them, how to be ready and how to easily complete!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

Back to Basics Fun Educational Review – Part Five – Education Planning … The 529 – The Not to 529!

Welcome back to Part Five of our “Back to Basics” series .. we hope you’ve enjoyed the First Four which started with all about “The Emergency Fund” in Part 1 … with Part 2 being “Protection Planning” and Part 3 discussing All about Debt Planning or “The Good the Bad and the Ugly of Debt”, Part 4 Retirement Planning and now we happily bring you Part Five Back to Basics Education Planning!

As a reminder this is a high level Financial Planning Education like overview starting with the basics of and we will continue into advanced topics in order of Planning Importance.  

Did you notice we put Retirement Planning BEFORE Education planning? Do you recall in Part 3 in Debt Planning we said one of the few good debts are educational related debts ….We of course are not advocating Student debt/loans… but they are available in abundance and again not a bad debt. There are not retirement planning loans…. just saying!

Education Planning

Very similar to the most important parts of retirement planning, education planning carries many of the same qualities but with a few caveats:

  1. Start Early and if you do consider a 529 plan due to the tax free compounding features.
  2. With many states giving you a state income tax bracket break for your 529 contributions … making those states a green light to fund a 529 right up to the years a student is about to attend or is even attending –
    1. Planning Strategy– if you are very near the student using the 529, only fund the amount needed to get the deduction on the state level. Those residing in states where there is no state income tax deductions have far less benefits to the late funding/in and out of 529 state deductible contributions.
    2. Second Planning strategy– late funding plans of any type should be in VERY safe almost emergency funds like asset classes since their use will be so fast.
    3. Third Planning strategy– Do not overfund a 529 as if you do there can be stiff tax penalties for non-educational uses.
  3. Think of educational funds as fast use retirement funds, therefore make sure the allocations are very conservative as the child approaches use age.
  4. Make it easy for Grandparents and others to contribute to an Educational fund, we find other generations very frequently help with Educational Funding since they also know the importance, but may be more set in their retirement funds…

Education Costs are Increasing Fast

Not withstanding the above warning of overfunding a 529 plan, understand that higher education costs are rising very quickly as noted here in detail and be sure to plan accordingly … here is our favorite chart on the Growth of Student Loans:

Have a Great “Education Planning” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

Back to Basics Fun Educational Review – Part Four – Retirement Planning … The Key – Start Early!

Welcome back to Part Four of our “Back to Basics” series .. we hope you’ve enjoyed the First Three which started with all about “The Emergency Fund” in Part 1 … with Part 2 being  “Protection Planning” and Part 3 discussing All about Debt Planning or “The Good the Bad and the Ugly of Debt” and now we happily bring you Part 4 Retirement Planning!

As a reminder this is a high level Financial Planning Education like overview starting with the basics of and we will continue into advanced topics in order of Planning Importance.  

Retirement Planning

The most important parts of retirement planning are very easy and as follows:

  1. Start Early
  2. Save as much as you can especially when you are young as compounding is your friend, do not worry about the amount, just save!
  3. Don’t overthink your investment options, just allocate as available and save save save…

Starting out with a healthy savings percentage of our earnings at an early age will lead to eventual maxing out of your retirement plans, forcing you happily into other savings vehicles thereby balancing your eventual portfolio with pre-tax retirement savings and after tax buckets of investments.

Continued high percentage earnings savings will also ultimately create the habits of not living on all that you are earning. This is especially important as we get closer to retirement and create just darn good habits.

There will likely be times in our lives when we may not be able to save as much on a percentage of our earnings as we would like, but constant top of mind savings habits will garner success in the long term, don’t let life’s curve balls distract your long term savings effort, you can do it!

Early savings should be very aggressive as the corpus of your savings are the actual savings component.  All equity type of investments especially during the first 5-10 years are not out of the realm of possibilities, again your continued contributions dominate the investment during these early stages.  As your retirement savings and for that matter other investments grow in size adjustments are necessary especially as we near retirement.

While there are talks of optimal retirement allocations, it’s not unusual to find inferior investment options in retirement accounts. Not to worry, don’t throw your employer or your plan under the bus … the most important item in your retirement savings program is the actual deferral of your hard earned work and the broad allocation! Be aggressive in the beginning and slowing down the allocation as it matures in size and our chapter nears retirement.

Weather 401, IRA, Sep- (Simplified Employee Pension), Roth.403b. 401A or any other retirement vehicle, the vehicle is not as important as participation!.

We will help you optimize from a tax standpoint which vehicle is best. and of course with the allocations as well!

Have a Great “Retirement Planning” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

February 2022 Financial Planning and Capital Market Review – By John Kvale CFA, CFP

Hello and Welcome to our February 2022 … Financial Planning and Capital Market Update!

If you are too busy to read, feel free to listen as we describe our post and thoughts in friendly podcast audio format as well as Video!

Newbies –

We like to articulate our thoughts and review on a Monthly basis our Financial Planning Tips, Capital Markets thoughts and current events!

Hope you enjoy!

February 2022 Video

YouTube

Financial Planning Tip(s)

Third In Back to Basics Series – “Debt Planning”

The third post of a neat (well we think so) new idea, series we discuss “Protection Planning” !

This series is a review of the basics, and will serve as somewhat of a semester study of the Financial Planning foundations all the way to more advanced topics later in the series…. We plan on a mid month release of each part and somewhere south of double digit parts…. possibly with a video added to each for additional insights…. thanks in advance for sharing with those who may find this series helpful….

In this Debt Planning section we cover from a high level …

The Good, the Bad and the Ugly Forms of Debt

Yes there are some debts that or ok, but there are also some that are very much sinners….

Review that Social Security Statement

In this annual reminder post, receiving a weekend email alert directly form the Social Security Administration our review was set in motion and a new post was born….

Happily as mentioned in the post, the SSA had updated the site and there are really neat new features such as a graph for delayed benefits and a neat spousal calculator.. Well done guys!

Please be sure to take 5 minutes and review that your hard earned earnings are being credited to your Social Security Benefit/Number!

Capital Market Comments

Interest Rates Jump Ahead of Fed – Short Term Pressure on Bonds Long Term Gain

While this post concerning how the bond markets, more specifically the two year and ten year treasuries front run the FOMC (Federal Open Market Committee) we also want to remind that such movement, especially seen in the two year treasury puts pressure (lowers) on the value of the bond but also ups the income from the bond……

So initial headwind, and eventual tail wind…yay

Re-Review “The Anatomy of a Slowdown/Recession” the Snap Back

With market jitters creating headlines and lower values, in this post we reviewed our luckily timed lead article in our Q 1 2022 Newsletter article, called the “Anatomy of a Slowdown”

The main purpose of the article and the re-run is to remind everyone INCLUDING OURSELVES, slowdowns (markets dropping in value) do occur, and while we don’t want them to, they do anyway!

In this post, we review three very large what we coined snap backs…. large rallies of 5%-to over 10% which are for some reason very confusing during slow down times and also tend to totally ignore headlines…

No idea for sure WHY they happen, just know they do … thought worth reminding as some great questions came in on the subject.

Have a Great Day, Talk to You at the End of March! Going fast this year!!!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

Back to Basics Fun Educational Review – Part Three – Debt and Debt Planning, The Good The Bad and The Ugly

Welcome to Part Three of our fun educational “Back to Basics” series original started here with Part One “The Emergency Fund” and continuing with Part Two, Protection Planning, and now on to Debt and Debt Planning!

The goal of this series is to cover the most important Foundational Financial Planning items in not only order of importance but also order of technical difficulty. Once complete we expect to have a foundational, almost college like course of Financial Planning topics and goals that can be shared all at once in Netflix series drop like format for any that may be in need or interested. Longtime clients will most certainly find a repetition of items we have spoken or written about before but may occasionally uncover a topic that needs addressing due to a change in our situation.

Debt and Debt Planning – The Good the Bad and the Ugly

Debt and Debt Planning is an extremely important topic, ESPECIALLY in today’s buy now and pay later constantly pushed promotional items. But be careful, nothing is for free and one misstep could lead to an unneeded compound interest tragedy….

In a perfect world, no debt of any type may be a desire and many might feel success is reached upon this achievement, but not all debt is bad, and there are likely mandatory times of debt!

Once again, adhering to Part 1, and having a healthy Emergency fund allows control of ones own destiny giving full control of this topic… so let’s jump in!

The Good Debt

Student Debt May Be The Best Debt Someone Can Have

An investment in ones self in the form of higher education … while we can discuss the merits on how enrollment costs have increased rapidly, is generally a very helpful item for the long term and again generally, if career pointed will frequently pay off in the long term.

  • Reflect on what you are incurring the student debt for with watchful eye for help upon completion i.e. Might not be a good idea to incur debt for something you may never use career wise in the future
  • Keep an eye on the total expected amount of debt you may be saddled with upon completion and mind possible less expensive options
  • Watch the terms of the debt, deferred interest, government subsidized, zero interest, low interest
  • Of course try to keep it at a minimal

Residential Mortgage Debt

With long term Mortgage rates (30 year) recently in the 2% -3% range we can argue that Mortgage debt is not bad debt. Cautiously we put Mortgage Debt here in the good, but there is an interest rate that would make it bad debt i.e. An exaggerated example from decades ago of 10%+ would not be good debt.

Tax Benefits of Mortgage Debt can help make the headline rate even lower after tax benefits. But those can come and go as tax laws change.

Most can qualify for WAY WAY more than one should actually have! Our conservative view equation is generally a mortgage of twice annual earnings is a really good place to start, especially for those early in their careers.

Free/Zero Interest Debt is Ok if Handled Properly

Again pointing to our healthy Emergency Fund, Interest Free/Zero debt CAN be ok. Do not take it as an excuse to make an unaffordable purchase!

Watch the terms, as one mistake often carries a huge carry forward of interest, far negating the extra interest one would earn by using the “Free” debt.

Also be careful with a large lump sum payment at the end of a “Free” term… make darn sure we have the funds available and it will not damage our Emergency Funds stash!

The Bad Debt

Interest bearing debt for an item not needed is Bad Debt and borderline Ugly debt. As mentioned earlier, we live in a highly promotional world of “Buy Now, Pay Later” …. Do not bite.

Examples may include what we call Toys, such as extra motorized or floating vehicles, overly expensive devices or equipment and the like.

It is fine to “Treat” ourselves every once in a while, but don’t do it on Bad Debt and don’t mess up your Emergency fund !

The Ugly Debt

Any high interest debt, especially Credit Card type debt.

With interest rates very low on savings rates, having a debt interest rate over mid single digits would be called Bad Debt!

Most of the time this debt occurs is usually attributed to our Part 1 Emergency Fund inadequacy … possibly combined with a “life’s curve ball” unexpected event.

Rates as high as 20% are not common in this swimming pool… please don’t swim here and keeping that emergency fund healthy will keep you out of the water!

Now that we have a good foundation…. next up, Retirement Planning!

Have a Great “Debt Planning” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

January 2022 Financial Planning and Capital Market Review – By John Kvale CFA, CFP

Hello and Welcome to our January 2022 … the First Month Review of 2022 – YAY … Financial Planning and Capital Market Update!

If you are too busy to read, feel free to listen as we describe our post and thoughts in friendly podcast audio format as well as Video!

Newbies –

We like to articulate our thoughts and review on a Monthly basis our Financial Planning Tips, Capital Markets thoughts and current events!

Hope you enjoy!

January 2022 Video

YouTube

Financial Planning Tip(s)

Second In Back to Basics Series – “Protection Planning”

The second post of a neat (well we think so) new idea, series we discuss “Protection Planning” !

This series is a review of the basics, and will serve as somewhat of a semester study of the Financial Planning foundations all the way to more advanced topics later in the series…. We plan on a mid month release of each part and somewhere south of double digit parts…. possibly with a video added to each for additional insights…. thanks in advance for sharing with those who may find this series helpful….

In this Protection Planning section we cover from a high level … Health, Auto/Home/Umbrella and Life Insurance basics and best ways to implement !

New Uniform Table Gives RMD Break – We are all Younger!

In this post we highlight as the calendar turned, we are all viewed as younger (actually the tables have us living longer- semantics)…

A very important result of this change is to give those mandated by RMD’s (Required Minimum Distributions) relief…. since the tables in effect make us younger/living longer, less money is demanded out (Uncle Sam wants his taxes) thereby lowering taxable income!

Capital Market Comments

Re-Review “The Anatomy of a Slowdown/Recession”

With market jitters creating headlines and lower values, in this post we reviewed our luckily timed lead article in our Q 1 2022 Newsletter article, called the “Anatomy of a Slowdown”

The main purpose of the article and the re-run is to remind everyone INCLUDING OURSELVES, slowdowns (markets dropping in value) do occur, and while we don’t want them to, they do anyway!

In this post, we review the following chart and outline the normal 9-12 month slowdown time line… very much unlike the last three we have experienced…

Have a Great Day, Talk to You at the End of February!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

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