Accounting & Finance

Are you scared to retire?

Miriam Zettlemoyer, Consultant Alliance Planning  Transitioning from working years into retirement years can be difficult.  It can create great anxiety and people sometimes rather not deal with what retirement would look like financially and just continue to work.  It can seem like the easier option.  The thought of what might be on the other side […]

Miriam Zettlemoyer, Consultant
Alliance Planning

 Transitioning from working years into retirement years can be difficult.  It can create great anxiety and people sometimes rather not deal with what retirement would look like financially and just continue to work.  It can seem like the easier option.  The thought of what might be on the other side is too daunting a task but at some point, in their life age, health and life forces you to take a look.  I always tell my clients that it might not be as bad as you think.  We start with the budget and we look at current working year’s budget to moving into retirement budget – needs versus wants come into play. Next, we look at income current versus retirement income.

Predictable income can include social security income, pensions if available and other assets like retirement accounts, annuities that can produce income if there is a shortfall between budget and income.  After doing the math on both those items we can determine if there is money for variable cost items like travel, gifting, hobbies or other.  Healthcare can be a big cost if your current employer was paying for your coverage 100% but you may find that moving into a Medicare supplement plan option could reduce your annual out of pocket costs for deductibles, co-insurance, co-pays and other even if the premiums were 100% covered by your employer.  Working with an advisor can help you also get your “stuff” in order and make you think of things that you would normally not be on your mind.  Are your wills and powers of attorneys current and say what you want them to say?  Are your beneficiaries up to date on all your accounts and policies?  Should I keep paying on my life insurance and do I still need it?  Will my car last 20 years in retirement or is that an expense I should budget for?  Lots of questions that can be difficult to think about, but relief follows once answered.  Putting a plan in place to make sure you don’t outlive your retirement can include downsizing, determining a way to reduce necessary expenses, working an extra year to increase your social security income, rolling over some assets into an income producing product, moving in with family and keeping variable expenses to a minimum.

We haven’t addressed or talked about additional health needs and long-term care that can drain the assets quickly.  This is a concern as we age, and health deteriorates that our expenses could increase and use up our assets for care needs. Assisted living costs on average are $3,500+ per month and skilled nursing costs are averaging over $7,500 per month. One of the planning options available to help cover the cost is Long-Term Care insurance. You must however purchase this when healthy and be sure that costs for the insurance even if they increase are manageable into retirement. The markets have allowed for some hybrid life insurance and long-term care options as well as a one-time deposit into a life policy to be used in long-term care situations. These newer products avoid the use it or lose it mentality of the traditional long-term care products that you pay for and if you don’t use then you forfeit all the paid premiums but still include some underwriting/health requirements in order to qualify. Contrary to widespread belief Medicare will not cover long-term care situations. Medicare covers a very limited amount of care in a nursing home and with strict rules of being in a hospital for at least three days and then transitioning directly to a skilled facility for care.

A good advisor will be able to show you different options, plan your budget and income and give you peace of mind when moving into retirement to cover all your basis.  The baby boomer generation include people born from 1946 to 1964 and they started turning 65 in 2011.  Since then there were 10,000 boomers turning 65 per day that will continue for another 12+ years until year 2030.  Are you one of them?  Are you ready?  Meet with your advisor today to review and make sure you have all your ducks in a row. If they aren’t asking you some of these questions it might be time to look for another advisor.  The sooner you start the planning process the better chance you will have for financial success.

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Happily Ever After Retirement

When I first got into the business of Financial Planning, a mentor said to me, “People don’t plan to fail, they fail to plan.” In my view, the key to success for making that “happily ever after” retirement come true rests on one simple, yet overlooked area of planning, BUDGETING! I know that nobody likes […]

When I first got into the business of Financial Planning, a mentor said to me, “People don’t plan to fail, they fail to plan.” In my view, the key to success for making that “happily ever after” retirement come true rests on one simple, yet overlooked area of planning, BUDGETING!
I know that nobody likes to talk about budgeting, so, let’s use a friendlier term. We’ll call it a “spending plan.” The development of an efficient spending plan that adjusts to changes in your life over time will have your future self, thanking you for a well-planned retirement.
Developing a spending plan puts you in control of your money instead of your money controlling you. The activity of physically writing down your income vs. expenses, and then calculating what you have left at the end of each paycheck or month, will provide you with a huge eye opener to seeing your spending pattern. The goal is to spend what you have not what you don’t have. By avoiding credit cards and their outrageous interest on the debt, you will dramatically increase your chances of achieving a well-funded retirement.
Best-selling author, Greg Reid says, “A dream written down with a date becomes a goal. A goal broken down into steps becomes a plan. A plan backed by actions makes your dreams come true.” It is so important to write down your financial goals and look at them every day.  This simple action will implant them into your memory and be a constant reminder of what is important.
Save for the unexpected, or what we call your “emergency fund.” Your emergency fund should be 3-6 months of personal expenses.  It’s OK to start small, like $1,000. But, make it a point to build up to the full deal. You never know what life is going to throw at you!
Attack your debt by developing a debt reduction schedule. Elimination of debt, even at the smallest levels will give you immediate positive feedback that will build momentum. Then, use your new habits and inspiration to tackle the bigger debts. Soon, you’ll be addicted to the success of the debt reduction. Interest on debt is your enemy in saving money for a happily-ever-after retirement.
When you establish your spending plan, you’ll quickly see where your money goes: vacation, a new car, retirement, college for your children, and the list goes on. By saving some extra money every month, you’ll experience how the magic of compounding will increase your total savings and provide a positive incentive towards reaching your retirement goals.
I challenge you to develop a spending plan, give your money a name, spend it on paper before you spend it at the store. Speak to professionals about debt reduction and seek guidance on a comprehensive financial plan tailored to your goals. Build momentum while staying positive and you will achieve your Happily Ever After Retirement!

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Valuation of Closely Held Businesses: Part II

In a previous edition of this publication, we introduced the reader to the concepts and methodologies commonly employed by business valuation specialists to assist the owners of closely-held businesses to determine the value of their enterprises. In this second half of that discussion, we take a closer look at the income-based approaches to business valuation […]

In a previous edition of this publication, we introduced the reader to the concepts and methodologies commonly employed by business valuation specialists to assist the owners of closely-held businesses to determine the value of their enterprises. In this second half of that discussion, we take a closer look at the income-based approaches to business valuation and some of their nuances.
It is important to recall that income-based approaches to business valuation are predicated on the ability to approximate future cash flows. In many instances, lacking any detailed projections, historical financial information is used to forecast these future business returns. In order to approximate future cash flows, however, certain adjustments need to be made to the extent that the potential buyer of the company will conduct the business in a manner different from that under which it is currently operating. This concept called “normalization” refers to eliminating items that are either discretionary or simply above or below market values. For example, if the owner currently earns a salary of $250, 000 but can be replaced by an employee making $75,000, the cash flow will increase by $175,000 for the buyer. Similar adjustments would be made to adjust expense items to their market value such as rent, bonuses, etc. or to eliminate non-business related expenses such as personal travel and entertainment, automobiles, etc.
The next step is to determine the appropriate rate of return on investment. Typically, the valuation analyst may use a build-up model to determine the proper capitalization rate. This starts with a risk-free rate, commonly utilizing the Long Term (20-year) United States Treasury Yield. Next, a historical equity-based risk rate is applied based on historical data that has been accumulated from publicly traded companies. The capitalization rate is further adjusted to allow for the size of the entity, the risk of the industry in which it operates and may be further adjusted due to specific company risk such as reliance upon key employees, limited customer markets, reliance upon key vendors, etc. Conventional wisdom recognizes that the smaller the business enterprise, the larger the risk factor and therefore the larger the capitalization rate or rate of return required on the investment. The final step would be to divide the forecasted cash flow stream by the calculated capitalization rate to determine the approximate value of the company.
Business valuation literature also recognizes that there are specific recognized discounts that are applied to closely held business valuations. The first of these is referred to as the discount for lack of marketability. The discount for lack of marketability recognizes the fact that there is no readily traded public market for the closely held business. The discount for lack of marketability also reflects the fact that there is a time value of money for the period of time it will take to sell the enterprise. This discount also allows for brokerage or sales fees, etc.
The second discount that may be considered is a lack of control discount. These discounts recognize that the sum of the parts does not necessarily equal the whole. If an owner is selling less than a controlling interest in the business enterprise, the potential buyer of the business enterprise would be in a position where they would lack control. Lack of control would include lack of the ability to vote on critical corporate decisions such as acquisitions, expansion, purchase of substantial assets, etc. The common body of business valuation knowledge recognizes that the lack of the ability to control the direction of the enterprise has a significant discounting effect on the value of the underlying stock.
Ultimately, similar to real estate valuations or other asset valuations, the value determined by the business valuation specialists is subjective. The correct price to attribute to the closely-held business is the price that a willing buyer would pay a willing seller under the prevailing market conditions. However, a business valuation specialist can help the small business owner properly plan for business succession and have a better understanding of their family’s accumulated net worth.

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Valuation of Closely Held Businesses: Part I

A successful small business enterprise may be the culmination of a life’s work for a small business owner. A small business may even have successfully transitioned to the second or third generation of a family. Inevitably, the question often arises, “What is my business worth?” It is the role of the business valuation specialist to […]

A successful small business enterprise may be the culmination of a life’s work for a small business owner. A small business may even have successfully transitioned to the second or third generation of a family. Inevitably, the question often arises, “What is my business worth?” It is the role of the business valuation specialist to assist the client in helping to understand the approximate value of their closely held business. The need to value the business may arise from a buyout of a current owner, a family gifting strategy, estate settlement resulting from the death of an owner, marital dissolution, or a first step toward the eventual sale of the company in accordance with a succession plan. In this first of a two-part introduction to business valuation, we will take a look at the primary approaches utilized by business valuation experts to estimate the value of a small closely-held business.

Business valuation principles rely upon a number of recognized techniques widely accepted by experts in the field. The methods utilized to evaluate business enterprises are broken down into three distinct approaches; asset based, income based, and market-based. This article is intended to examine the three separate approaches briefly, but the reader should keep in mind that there are numerous methodologies contained within each approach that go well beyond the scope of this article.

The first, and probably best-understood approach, is the asset based approach. Included in the asset based approach are both going concern and liquidation methods; whereby the going concern value is predicated on the market value of the net assets and assumes the company continues as a going concern, whereas the liquidation method considers the market value of the net assets in contemplation of liquidation of the enterprise. These methods often require an independent third party to appraise the market value of specific assets.

The market-based approaches incorporate a number of methodologies as well. Among those is the company guideline method. The market-based approaches to valuation assume that if you can ascertain the value of a company with similar attributes to the one being valued, then you should be able to apply those same metrics to the subject company. For example, an analysis of closely held businesses recently sold with the same standard industrial classification code as the subject company and of similar size may yield important ratios that can be applied to the subject company including multiples of revenue, price to company earnings, price to seller’s discretionary earnings, etc. Those metrics can then be applied to the subject company to approximate value.

There are limitations in using market-based methods. Many closely held businesses are quite unique and are very difficult to compare to other companies. Some of the comparisons may result from transactions that are significantly older and less relevant.

Transactions may have taken place in other parts of the country that experience different market conditions than that of the subject company. Finally, it may be that the availability of companies that are comparable in many of the commercially available databases are quite limited, and therefore although seemingly a worthwhile tool, market-based methods can have a very limited application.

The third and most common approach to valuing a small business enterprise falls under the category of income based approaches. Income based approaches are based on the theory that a company is worth an amount that will yield the expected return on investment given an interest rate that allows for risk. By way of example, an investment of $100,000 at 5% will earn $5,000. Therefore, it holds that if you anticipate earning $5,000 with an expected 5% yield on the investment, you would need to invest $100,000, i.e., the business value. That is the underlying rationale behind an income based approach. Of course, the challenge in utilizing an income based approach is twofold. The first is to determine the appropriate risk-based return on investment. Second, the valuation analyst needs to understand the potential income and cash flow that the company will yield in the future.

In a future edition of this publication, we will look more in depth at the process by which the income based approaches to business valuation are utilized by business valuation specialists.

*Part 2 Coming Soon in the next edition of Network Magazine*

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Health Is Your True Wealth

Why would someone who does Financial Planning be so concerned with their client’s health?  Beyond the obvious reason, that we deeply care about our clients and want them to live a long and healthy life, health care costs can have a dramatic effect on a person’s finances.  They present a particular challenge for retirees.   Not […]

Why would someone who does Financial Planning be so concerned with their client’s health?  Beyond the obvious reason, that we deeply care about our clients and want them to live a long and healthy life, health care costs can have a dramatic effect on a person’s finances.  They present a particular challenge for retirees.   Not retiring yet?  This still applies to you, since the more time you have to prepare, the better off you’ll be!

Missed Opportunities and “Fun Facts”

Young Professionals

  • Not having a power of attorney, medical directives, and a will. Should something happen to you, even if temporary, you’ll want someone to be able to take care of your expenses, and receive the information on your illness.  If married, perhaps your spouse.  If single, maybe one of your parents.
  • If there are people dependent on your income, you need to have your income insured.  You’ll want it to be a multiple of your annual salary.  Term insurance is the most cost effective solution for this purpose.
  • Take advantage of your employer offered benefits such as disability, long term care, and additional life insurance.  They’re usually cost effective but may not transfer with you if you leave.
  • If your health plan offers an HSA (health savings account), this may be very beneficial for you, particularly if you’re in reasonably good health.  Your contributions are tax deductible, and if you don’t use the money before you retire, you can withdraw from it like an IRA.

Pre-Retirees

  • Don’t wait until you retire to think about getting long-term-care insurance.  The longer you wait, the more expensive it may be, and as we age, some health problems start to arrive, and we may no longer be eligible to purchase this coverage.
  • Life insurance that was purchased when we were younger may no longer be needed.  In many cases, the premiums rise significantly, and those funds may be put to better use for long term care insurance.
  • Educate yourself on all of the rules of COBRA.  This is the law that allows you to purchase medical insurance from an employer under certain circumstances.  These may include a layoff, divorce, death, or a child being over the age of 26.
  • Understand the difference between Medicare and Medicaid.  One of the main differences is that if your income is at poverty level, Medicaid could pay for your long-term care needs.  Know all of your options before there is a medical emergency.

Retirees

  • Out of pocket healthcare cost for a 65-year-old couple is $259,000 to $395,000.  This does not include long-term care costs over 100 days, such as assisted living or nursing home care.  This also assumes you’re on Medicare. 1
  • The Medicare Part B premium is based on your retirement income.  Keep in mind that withdrawals from your IRA or 401K increase your taxable income.
  • Medicare covers about 60% of retiree healthcare costs.  The consumer is still responsible for co-pays, premiums, and deductibles.  Also, Medicare doesn’t cover dental, vision, hearing or long-term care costs. 2
  • Healthcare has historically increased at a higher inflation rate than most other expenses, so you should plan for that. 3
  • A person at age 65 has a 70% chance of needing some type of long-term care during retirement. 4
  • If you are still working or covered by a group plan past the age of 65, you can delay paying for Medicare part B, but you will need to maintain continuous coverage to avoid a penalty.

I would love to tell you that there are easy solutions to this challenge, but there aren’t.  This doesn’t mean there’s nothing you can do. Here are some steps to take:
If you haven’t already, talk with your financial advisor to:

  • Estimate your health care costs
  • Develop a retirement income plan to help cover the health care costs
  • Evaluate long-term care funding options
  • Revisit your plan regularly, and make necessary changes

If you have a financial advisor that does full financial planning, they can help you with all of this.  If not, you can do the research on your own.   Some useful sites for information would be:

  • Official Medicare Site
    www.Medicare.gov
  • Employee Benefit Research Institute
    www.ebri.org
  • Affordable Care Act
    www.healthcare.gov
  • Retirement Planning Calculator find one at
    www.raymondjames.com/wealth-management

As a word of caution, don’t spend your health to make money, and then spend your money to try to buy your health back.

FOOTNOTES:
1. Savings Needed for Medigap Premiums, Medicare Part B Premiums, Medicare Part D Premiums and Out-of-Pocket Drug Expenses for Retirement at Age 65 in 2015. Assuming a 90% chance of having enough savings. “Amount of Savings Needed for Health Expenses for People Eligible for Medicare: Unlike the Last Few Years, the News Is Not Good,” by Paul Fronstin, Dallas Salisbury, and Jack VanDerhei, EBRI. October 2015.
2. Employee Benefit Research Institute
3. Bureau of Labor Statistics, June 16, 2016. The annual inflation rate for the United States was 1.0% through May 2016.  PwC Health Research Institute, “Behind the Numbers,” 2016.
4. “Medicare & You 2016,” Centers for Medicare & Medicaid Services.
Mary Evans, CERTIFIED FINANCIAL PLANNER™
Evans Wealth Strategies 902 Chestnut Street Emmaus, PA 18049
“Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. Evans Wealth Strategies is Independent from Raymond James Financial Services.”
The information contained in this article does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Mary Evans and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investments mentioned may not be suitable for all investors. The cost and availability of Long Term Care insurance depend on factors such as age, health, and the type and amount of insurance purchased. These policies have exclusions and/or limitations. As with most financial decisions, there are expenses associated with the purchase of Long Term Care insurance. Guarantees are based on the claims paying ability of the insurance company. Every investor’s situation is unique, and you should consider your investment goals, risk tolerance, and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members.

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Finding the Best Financial Institution for Your Small Business

There are numerous options when looking for commercial financing. Large national and regional banks can certainly fit the bill if you’re looking for large amounts of capital and a wide array of services. But do the large banks want your business bad enough to be responsive? If your business is like the vast majority of […]

There are numerous options when looking for commercial financing. Large national and regional banks can certainly fit the bill if you’re looking for large amounts of capital and a wide array of services. But do the large banks want your business bad enough to be responsive? If your business is like the vast majority of small businesses that drive the US economy, you will likely do best with a local community bank or credit union that is responsive to your needs without crushing you with fees and red tape.

The Lehigh Valley Market

The latest U.S. Census Bureau statistics state that there were 5.73 million employer firms with less than 500 employees in the nation. Businesses with less than 20 workers accounted for 89 percent of the small business workforce category. Locally, research done by the Lehigh Valley Economic Development Corporation indicates that the Lehigh Valley Region has 14,645 businesses and that just 114 of those businesses have more than 250 employees. In addition, data from the U.S. Small Business Administration shows that 99% of the people employed in the Lehigh Valley work for small businesses. Eighty-four percent of employee locations in the region have less than 20 workers. The economic impact that small businesses have upon the region is large and undeniable.

Need For Capital

What do all these businesses have in common? They all need capital to survive and grow. For businesses large and small, access to capital is the engine of growth. In today’s financial markets, there are numerous sources of funding. The most common sources are commercial banks. Since the easy money days of the Great Recession, commercial banks have been under new regulations designed to prevent another needless downturn like the one we recently faced. At the same time, many of these new regulations have put undue strain on the banking system, especially on the larger banks with over $10 billion in assets. As a result, the relative cost of serving the small business community has presented a challenge for larger banks.

The small business customer will likely find a better home with smaller community institutions that have a vested interest in the communities they serve.  After all, these institutions live and die by the financial health of these communities.

Credit Unions

One of the often overlooked sources of business capital is the Credit Union. Credit Unions are unique in that they are not-for-profit entities. They do not issue stock and have no investors other than their members. Credit Unions are the quintessential community bank, literally owned by the community. As such, they are relationship driven as opposed to profit driven.  The member is the focus of the institution, not the need to provide higher dividends to the stockholders.

Credit Unions are regulated and insured by the National Credit Union Administration of the US government. Being member owned and federally insured translates to higher interest rates for savings and lower interest rates on debt. The organizations typically operate with less red tape, lower fees, and quicker decisions. It is not unusual to get a commercial loan decision in a matter of days.

In order to do business with a credit union, you will need to become a member. The easiest to join are those that have a Community Charter. In this case, the organization accepts members who live, work, or worship in a given geography. Other credit unions accept members based on their affiliation with a specific employer or group, or for members of a given trade, industry or profession. There are two major credit unions in the Lehigh Valley offering commercial loans; People First Federal Credit Union is one of them. People First is a Community Chartered credit union and accepts members who live, work, or worship in Lehigh and Northampton Counties. People First currently has 66,000 members or roughly 10% of the population of the Lehigh Valley! There’s nothing better than banking where you own the place.

For more information, contact John Orsini, Business Loan Officer at People First Federal Credit Union 610-797-7440 x 120, or orsinij@peoplefirstcu.org

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Using Single-Member LLCs to Own Real Estate

Single-member LLCs (SMLLCs) are LLCs with only one member (owner). Thanks to the taxpayer-friendly “check-the-box” entity classification regulations, SMLLCs have become a popular entity choice for various business and investment activities. Because of its unique attributes, SMLLCs are also ideal for real estate holdings. Why, Because they provide liability protection along with tax simplification, while […]

Single-member LLCs (SMLLCs) are LLCs with only one member (owner). Thanks to the taxpayer-friendly “check-the-box” entity classification regulations, SMLLCs have become a popular entity choice for various business and investment activities.

Because of its unique attributes, SMLLCs are also ideal for real estate holdings. Why, Because they provide liability protection along with tax simplification, while also setting the table for tax-deferred transactions under both the Section 1031 like-kind exchange rules.

Under the check-the-box regulations, the existence of an SMLLC is generally ignored for federal tax purposes (the exception is when the member treats the SMLLC as a corporation, which is relatively unusual). This disregarded entity status means that the business or investment activity carried on by the SMLLC is considered to be conducted directly by the SMLLC’s member for federal tax purposes. When an individual uses an SMLLC to operate a business, the tax results are reported on the individual’s Schedule C, just as if the business were a sole proprietorship. No additional federal tax forms need be filed. When an individual’s SMLLC is used to own and operate rental real estate, the tax results show up on the member’s Schedule E. When a corporation owns an SMLLC; the SMLLC is considered to be an unincorporated branch or division. When an SMLLC is owned by an entity treated as a partnership, the SMLLC’s activities are directly reflected on the member’s Form 1065 with no additional federal tax forms required.

Real estate investors are rightly concerned about exposure to all the various and sundry liabilities that property ownership can entail. These can range from environmental liabilities to personal injury claims when tenants slip and fall on the sidewalk. Setting up an SMLLC to own real estate addresses the liability exposure problem without adding tax complexity since no additional federal tax forms are required. Of course, the SMLLC’s member will often be required to guarantee any mortgages against the SMLLC’s property personally, but that’s par for the course.

Here’s where it gets interesting. As explained earlier, the SMLLC’s member is considered to directly own, for federal tax purposes, any real estate that is owned by the SMLLC. Therefore, an exchange of property owned by the SMLLC will be treated as an exchange by the member for purposes of the Section 1031 like-kind exchange rules. Meanwhile, the relinquished property given up in the exchange and the replacement property received in the exchange can at all times be held within the liability-limiting confines of the SMLLC.

If the property to be relinquished in an upcoming Section 1031 exchange is currently owned directly by an individual, he or she can set up a new SMLLC to receive the replacement property. The exchange will still qualify for Section 1031 tax-deferred treatment because both the relinquished and replacement properties will be considered owned directly by the individual for federal tax purposes. However, under applicable state law, the SMLLC will protect the individual from liabilities associated with the replacement property because he or she will never appear in the chain of title.
Single member LLCs are excellent entities to own real estate.

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financial-advisor

10 Reasons You Should Talk to a Financial Advisor

Throughout this journey we call life, so many things happen.  Think about it – you start grade school and in 13 years you’re graduating high school, regarded as an adult and making life long decisions that will impact you and your future family forever.   Most of us will spend a lifetime working on the career […]

Throughout this journey we call life, so many things happen.  Think about it – you start grade school and in 13 years you’re graduating high school, regarded as an adult and making life long decisions that will impact you and your future family forever.   Most of us will spend a lifetime working on the career we choose, buying a house, getting married, having a family, sending kids to college, retirement, weddings, funerals and all of the stuff in between.

It’s a lot.  It’s life. Some of us are prepared more than others and some sooner than most and some not at all.  All our hard work and decisions we make throughout life somehow end up typically dealing with finances, budget or money in some aspect.  Finding a trusted advisor is one of the first steps to being able to develop and create a plan to deal with all the situations that life will throw at you.  Here is a list of reasons why it’s important to communicate with your advisor and weigh their advice to help make educated decisions on your money.

#1 Graduating college – lots of debt with college loans – seek the advice of an advisor to help determine what’s the best way to pay it back, protect my parents from being responsible should something happen to you and save money for other things in life.

#2 Starting a family – if something happens to me how will my loved ones continue life without me financially; tax deduction?  That’s a good thing, right?  Saving for their college expenses. An advisor can help give you options and show you strategies that will have you protecting and saving for your new bundle(s).

#3 Buying a house – what’s a good interest rate?  How much house can I afford?  Another tax deduction, right?  An advisor can review what the expenses associated with buying versus renting can do to your budget.

#4 Saving for retirement – where are the best places to put my money for the future?  Contribute to an employer retirement plan or start my own retirement account?  An advisor can show you how investing in your retirement can solidify your future years.

#5 Insurance – should I have it, what kind and how much?  Starting a protection plan in your life is a good thing and imperative if people are depending on you for any reason.  An advisor can work with your budget and create a plan that will protect your family and change as needed with your journey.

#6 Death – a parent or other family member passes that will impact you financially in some way is a good time to connect with an advisor.  They can help you get through the estate options available to you and be a good sounding board at an emotional time.  Helping you make good decisions that can affect future life.

#7 Retirement – when to take social security?  What do I do with my employer retirement plan?  How will my budget be impacted in the transition into retirement?  This is a critical stage in life where an advisor can be a huge help to determine the best options in these questions and a hundred others you will have.

#8 Budgeting – it’s a good foundational start to all financial planning.  An advisor can help determine where your money is going and if costs are higher in some aspects of your budget than others like car insurance or interest rates.  Paying off debt can be a great time to connect with an advisor as well ensuring to pay off the higher interest rate debt first and then snowball the payments into other lower interest debt.

#9 Winning the lottery or an inheritance – if we were so fortunate to have this happen to us in our journey it can be full of endless ideas of what to do with the mullah.  An advisor can help plan the best attack on debt, savings and discretionary dollars to ensure you don’t run out of money in the first week.

#10 Starting a business – you have a great idea that you can transition into a business or it’s time to fly solo and make the jump to business ownership.  An advisor can explain the different options, discuss budgets, employees, salary and other important business decisions necessary to help you be successful in this new endeavor.

Wherever life takes you on this journey, it’s important to find that trusted advisor that you can lean on to help you move through life in the happiest parts and the saddest parts. Relying on a trusted advisor can assure you and your family, the decisions you make, will turn out better than just okay.

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Data Security: A Constant Threat (Part 2)

Threats of a Fraudulent Loss Creep into our Daily Business Identity theft by Social Engineering is arguably the fastest growing crime – globally, and affects all of us. Social engineering fraud is a broad term that refers to scams used to compromise data by cyber-hackers. It refers to the manipulation of people into performing actions […]

Threats of a Fraudulent Loss Creep into our Daily Business

Identity theft by Social Engineering is arguably the fastest growing crime – globally, and affects all of us. Social engineering fraud is a broad term that refers to scams used to compromise data by cyber-hackers. It refers to the manipulation of people into performing actions or divulging confidential information. Think in terms of, people being “tricked” for the purpose of information gathering, fraud, or system access.

Telecom Fraud is most common by imposters pretending to be government or some other official demanding payments for family members in financial need. Two well-known scams are IRS payment demands or family members traveling abroad and needing money for transportation home.

Others are email scams. Imposters create a scenario which seems to come from a legitimate source, and their stories are often plausible. We know these as phishing attempts. The emails often contain a link or an attachment that runs an executable file. Once opened, or clicked on, it secretly downloads malware and keystroke memory programs, for example.

Data Security Can Be A Science Project For Business

Businesses that have a well-communicated guide for handling sensitive information tend to have stronger security. They use such a guide to train their staff to recognize different types of fraud. For IT and Technology, for example, update network security and comply with the PCI DSS standards to identify vulnerabilities. Consider dual and even triple authenticity [user name, password, and image] for VPN and remote access. Require updates and changes to passwords at prescribed times and use secondary authentication for password resets. IT should require firewall settings, strength of passwords and failed attempts before granting network access. Develop a clearly defined policy on Bring Your Own Device [BYOD] and the use of personal computers. The policies should also define appropriate access points in areas with free Wi-Fi.

Safeguards for Business and Individuals

We have all received emails or phone calls with an offer that seems just too good to be true. Be sure to check the sender’s email and the URL to any links. Be vigilant and take time before opening any email and answering questions with personal information – even if it comes from someone you know! There are a lot of “don’ts” to protect your information.

If you receive an email message you weren’t expecting, or it is from an unknown source:

  • Assess domain names, subject lines, and content
  • Do not click on unrecognizable links or reply to emails from unknown people
  • Do not open any attachments
  • Do not reply or forward
  • Do not send money
  • Do not disclose personal information
  • Do not release business data
  • Do not send Identification Documents
  • Do not release details of bank accounts
  • Do not give out your credit card

What We Believe

Risks to your data and data security are real, and they are in real-time. Cyber-attacks are sophisticated and far-reaching. Breaches can and do occur and, more so, new threats occur before business are even aware of the risk [e.g., dwell time and zero-day attack.]
Yes! We have become complacent with our information. True! Businesses underestimate the scope of compliance. The three big things remain the three big things in exposed data:

  • Credit and payment card information
  • Medical and Personal Health Information
  • Employment and Personally Identifiable Information

You can reduce the risk of data loss. There is a greater need for diligence and compliance since Cyber-attacks have become so sophisticated. Strict regulations, such as HIPAA and HiTECH, and performance standards including PCI-DSS and Business Process Management, will remain complex.

While this article provides some practical advice and awareness, it is intended to explain the importance of protecting data and illustrate just some of the consequences when it is not. While we discussed safeguards, these are not all-inclusive or complete. The level of protection needed may be determined by your CIO and IT department and may include other operational safeguards such as Policies and Procedures, Training, Access Control and Enforcement, Assessing Network Hardware and Software, Securing Data Transmission and Encryption, and Auditing of events such as inappropriate and unauthorized access to information.

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Choosing the Ideal Financing Option for Home Construction Projects

With spring arriving early in the Lehigh Valley, we’ve noticed an early uptick in inquiries on how to best finance home construction projects. Finding a knowledgeable and experienced construction mortgage lender is as important as working with a reputable builder. Consumers need a partner who is familiar with the process and can talk through the […]

With spring arriving early in the Lehigh Valley, we’ve noticed an early uptick in inquiries on how to best finance home construction projects.

Finding a knowledgeable and experienced construction mortgage lender is as important as working with a reputable builder. Consumers need a partner who is familiar with the process and can talk through the nuances of available programs, allowing homeowners to focus on choosing their dream fixtures and finishes without worrying about the financing.

As consumers shop their options, it’s helpful to understand some construction financing basics. The most common forms of construction financing are One-Close and Two-Close loans. These loan programs vary among banks, credit unions, and mortgage companies. Additionally, the size and scope of the project may limit the options.

One-Close Loans

One-Close construction loans involve one settlement prior to construction. The rate is established at closing and applies throughout the construction period and during the permanent financing period.

During the construction period, interest is paid monthly based on the total draws advanced to-date. Upon completion of the project – typically when the occupancy permit is issued – the financing converts from construction to permanent, and principal and interest payments begin based upon the amortization set at closing.
Since the permanent financing rate is established before construction begins, the worry about a rising rate environment is eliminated. The process is easier and can save money, and borrowers do not need to be reapproved, and they only pay closings costs once.

Two-Close Loans

With a Two-Close construction loan, there is one settlement before construction commences that funds for the new home and a second after completion to secure permanent financing that will pay off the construction loan.

The loan rate applicable during the construction period is typically adjustable and requires monthly interest-only payments. Construction loan terms are similar One-Close loans, although longer periods are more common. After construction is completed, the borrower must secure permanent financing and be reapproved, and the property must be reappraised. Under the Two-Close scenario, the borrower typically arranges to have the permanent financing in place and has to pay closings costs a second time.

In a potentially decreasing interest rate environment, there’s an opportunity to capture a lower rate for the permanent financing when the home is completed. Upgrades resulting in cost overruns from the initial plans may be able to be financed into the permanent mortgage.

How to Choose?

So, if you’re considering residential construction financing, which option is best? As you’ve probably guessed, the choice hinges on a number of factors. Let’s look at some complications for each loan type.

One-Close rates can typically be higher than market rates at the time of closing since the lender is establishing the rate for the construction and permanent periods. Any upgrades or cost-overruns that occur after the loan closes will need to be covered by the borrower out of pocket. Hence, it is advisable to make upgrades/changes before finalizing the construction contract with the builder so the costs can then be included in the financing.

Two-Close loans do not provide interest rate protection on permanent financing until the project is completed; there are typically additional expenses due to the permanent loan closing. Also, if a borrower’s circumstances change during construction, there could be difficulties getting reapproved. The property would likely have to be reappraised, which could play a factor in the permanent loan approval.

An important consideration when choosing between the two options is where interest rates are heading. If rates increase by the completion of the project, One-Close saves money by locking you in to the preferential, lower rate prior to the commencement of construction. If rates decrease, the Two-Close option is preferable.

Ultimately, a number of factors will come into play when considering financing for home construction projects. The best way to make an informed decision is by speaking with an experienced construction mortgage lender to explore your ideal personal options.

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