Anyone here having to consider bankruptcy?
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[quote=BondGuy]
Seriously, you guys are tough![/quote]
BG you make some interesting points.
But still, I'd suggest that when you live on a variable income that rises to a certain threshold, one needs to think about protecting oneself against a severe drop in that income.
One way to do so is to NOT mortgage oneself as greatly as Joe the Plumber. Just because you CAN get approval for that mortgage you don't have to take it.
When I moved a number of years ago, more than one banker told my wife and I we could easily qualify for a 75-80% mortgage on a 850k-900k home. We chose to transfer our equity to a 650k home(at least it was then...) with a much smaller mortgage and thus a smaller monthly nut.
It's not as big, but to borrow your words, it's no shack either.
And I sleep at night even during these crazy times.
Mishigun:
So you're fixing to die tomorrow? I am 61 - my father is 91. My father's folks died when they were 96 (his Dad) and 103 (his Mom). If we all knew exactly when we were doing to die - we could all do a lot better in terms of financial planning. Be at zero net worth when we were buried. Living on the edge is fun as long as you don't go over the edge. And to not go over the edge - you have to stay somewhat away from it. Whatever that means in terms of your own personal financial situation. What do you think it is about spending money that keeps you young? I sometimes spend ridiculous amounts of money on some things. I enjoy the things I spend money on. They make me feel pampered - but they don't make me feel any younger. Perhaps you are buying a pair of 18 year old twins for a night on the town . Interesting story about a friend of mine - a golf pro who became a FA about 1999 or so. He had a lot of friends who took golf lessons from him. Who lived pretty big life styles. $1+ million dollar houses. Expensive cars in the driveway - etc. They all promised him business. And when he became a FA for MER - he went to them. He was a pretty conscientious guy - and did all his homework. Most of these people - after analysis - had negative net worths. And - being an honest guy - he said he couldn't do better for them than to advise them to pay off their high interest debt (second mortgages - HELOCs - car loans - credit card balances - etc. - the old Dave Ramsey stuff). Most didn't follow his advice and many came to grief in later years. After a few years at MER - he went to work for the PGA tour. Where he is doing fine - and is much better off IMO. RobynIndy, with all respect, you can’t take it with you. Some folks want to burn the candle at both ends, and they are willing to bust their a**** for it. You and I are not exactly the biggest risk takers in the world, working in the most exciting, innovative industry. I’ve had some great adventures, I’ll bet you have too. Dave Ramsey is BORING and pedantic, makes a lot of money being that way, too. Living on the edge is FUN most of the time, and it helps keep you young, I know from experience.
[quote=bustedbroker]Back to topic…
RE: you thinking about a bk filing I think you tell your manager and your compliance dept. as soon as you can. They need to know, don't surprise them or they just may terminate you. I hear ya. I know a broker (independant) who has gone through a terrible divorce spending incredible amounts of money trying to do what he thinks is the right thing for his situation and children and has paid the lawyers over the IRS. His thought was this will only take a year or so, but it has dragged on much longer and cost a lot more than originally thought. He has thought about the 13 filing to get on a payment plan and take care of this obligation. Now he thinks his broker dealer will terminate him becasue they are scared that a broker with a large liability could cost the firm a lot of money if does unscrupulous business to cover his debt. Mind you, this broker with over 20 in the industry doesn't have one complaint on his record and even though his IRS debt has added up over 3 to 4 years, now the BD is scared of him. He cant be the only broker in this type of a position!!!!!!! So, anyone have any words of wisdom here? If they terminated my friend for filing a 13, would it be a wrongful termination? Do they have cause? [/quote] Whether or not they have cause - it depends on the wording in his contract. Which probably varies from firm to firm. So the first thing to do is look at the contract. There may perhaps be special public policy rules which would void a specific contract provision in a particular state. Since there are 50 states - most with different rules - second thing to do is consult with a lawyer experienced in this area of law where he lives. And - as you probably know - if he were to be terminated - his remedy would be arbitration (used to be that only industry arbitrators handled these cases - don't know what the story is today). And I am not sure he has had terrific legal advice if he paid his lawyers before he paid the IRS. If you have a roof over your head - a bed to sleep in - and aren't starving - IRS comes next. Perhaps a second legal opinion is in order. FWIW - if the divorce isn't yet final - many states have divorce mediation these days - where everyone sits down in front of someone who isn't perhaps the sharpest legal knife in the block - but who tries to work things out so peoples' lives aren't destroyed in the process. RobynAll of Bond Guy’s theoretical posts are Exhibit A as to how not to live your life. I have absolutely no sympathy for idiots who buy boats, expensive cars, and million dollar houses to “get noticed”. When I first got into this business, I was on a Jones diversification trip, and Jim McKenzie came and sat next to me at breakfast one morning. All the Jones guys know who he is. (Spiffy is getting misty-eyed about now, but I’ll get to the point.) He could tell from my nametag that I was fairly new, but having some success as I was on the trip. He asked me, “What do your best clients have that you don’t have?” I threw out a few shallow answers before he helped me. “Net worth. It’s net worth. Work on your own net worth every day. Not just stocks and bonds, but real estate, collectibles, a business, intellectual property, what have you. Commit yourself to that–everyday–and this business will treat you well, and you’ll have the respect of other people who have a significant net worth.” (Spiff reaches for Kleenex about now.) I swear to God this is true, and it has stuck with me ever since. I came home and started working on my net worth.
I bought a house I could afford in 1999. Since that time, there are years that I have made almost 7x as much money as I did then. I still live in the same house, only now it is paid for. I got involved in a significant commercial real estate development project in 2002. I collect cash flow from serveral of those properties today, and used the profit to own the building where my business is located. There are also 6 other tenants in my building ranging from a small law firm to an engineering firm. The success of that project made me a millionaire at age 39. I had my second million 3 and a half years later. I drive what would be considered a "luxury" automobile, but never buy new. I have a good friend and client who is sales rep at a luxury dealership. He calls me when idiots like BondGuy's wife bring in their 30-month lease car with 24K miles on it. I pay 50-55% of what the car stickered for when new, and pay cash on the spot. 2 years later I will sell it private party, which usually means it costs me $200-$300 per month to own it. Usually a car like this is still under warranty and has no maintenance costs. I sell when the warranty is about to expire. My kids go to private school not to impress anyone, but because--well, read my tagline at the bottom of this post. I don't have a country club membership, but I do have a gym membership. I don't think about or worry about money much anymore. I have everything I need. I never took an upfront check from a wirehouse. Went from Jones to indy. Own my book. (Again, that decision add to my net worth. I volunteer and help out on many fronts in my community and church. I don't think people that I come in contact with think less of me because I don't live in a 4500 sq. ft. house. I do think they probably figure that I'm financially secure although I don't flaunt it. I don't have to. I never did have to. All that BS is for guys who just aren't comfortable in their own skin. For Christ sake, we're not Hollywood celebrities or rock stars, we're financial advisors. Act like one. Live live one. And remember, work on your own net worth every day. Life is what you make it.What do you think it is about spending money that keeps you young? I sometimes spend ridiculous amounts of money on some things. I enjoy the things I spend money on. They make me feel pampered - but they don't make me feel any younger. Perhaps you are buying a pair of 18 year old twins for a night on the town .
Wow, renting twins huh. I like to spend money on golf, organic food for my body, good health insurance, kid's college - and don't make a ton of money or pay a ton in taxes. Get to the office at ten, out by three to play golf. Not saving a pile, drive a nice car, live in a nice house. Not planning to retire before 70. Why should I? I like to read the Wall Street Journal and wait for my clients to call me ( I trained them to do that). A cash reserve and good insurance are about all you need. After 70, my house will be paid, SS will be high, taxes low,health should be good. Maybe I'll go do some social work again (like I did when I was in my early 20's). Point is, financial planning is personal, it's about what you want for yourself. All of these people calling in to Dave Ramsey, or these advisors bragging about being cheap and building a huge net worth, are making me sick. Keeping money out of my life keeps me young. Rich people just worry about staying rich, poor people worry about what they don't have. Blessed are those who know and enjoy their blessings (freedom, intelligence, personal responsibility). Screw the government, and screw the media (and I mean all the people like Ramsey and Suzie who are selling their books). Think for yourself.
Mishigun:
Some do...many don't. It depends upon your definition of rich and the variety of rich you run into. Many of my clients with net worths in excess of a million (which is questionably rich these days) are living well and not worrying about it. I don't like golf (blasphemy, I know), but I do enjoy fishing. It's not an expensive hobby unless you do a lot of fly-in trips. I live a pretty simple life, but I don't feel the least bit deprived. Simple is the way I like it. Soothsayer has taken a similar road and I seriously doubt if he feels the least bit deprived either. Living a fullfilling and interesting life doesn't necessarily mean spending a lot of money. If it does mean writing a large check, I don't want that to be a mentally stressful thing, so I do systematically save for the unexpected and unnecessary. There are many different ways to live a happy and fulfilling life. Your way would stress me out and my way would probably bore you to death...chacun à son goût.Rich people just worry about staying rich…
Right on, Indy.
I'm just trying to challenge conventional thinking here, not win any points. For example, tax deferred investing is one of the biggest scams ever devised by our industry - with some notable exceptions, like picking up matching contributions. Tax deferred investing is mainly for employees, or those of average intelligence - and Uncle Sam. Try saving a couple hundred thou in money markets, muni ETFs, high dividend (taxable) stock ETFs, paying off your mortgage and cars, and see how that changes your life. So much of this industry is recycled crap. Most of the rich people I serve drink too much, or lead weird lives. Okay, they have a lot of fun, too. I used to love fishing, but I realized I could get the same thrill playing golf, and not have to stink like fish :). Fishing is cool.Michigan, most,…most of the rich people you serve drink too much ? Or are weird ?
Yeah. Well, at least, their rich kids are weird. As for the drinking part, I know this sounds really basic, but I bet a lot of us were drinking better wine a few months ago. It’s amazing how well really, really good wine goes down.
[quote=Mishigun]
...I like to spend money on golf, organic food for my body, good health insurance, kid's college... [/quote] Agree about golf. But you like to spend money on health insurance? You must be pretty young - with fairly cheap rates. Don't think you'd like to pay what we have to pay . Robyn[quote=Mishigun]
...I'm just trying to challenge conventional thinking here, not win any points. For example, tax deferred investing is one of the biggest scams ever devised by our industry - with some notable exceptions, like picking up matching contributions. Tax deferred investing is mainly for employees, or those of average intelligence - and Uncle Sam. Try saving a couple hundred thou in money markets, muni ETFs, high dividend (taxable) stock ETFs, paying off your mortgage and cars, and see how that changes your life... [/quote] What's wrong with tax deferred investing? Robyn[quote=RobynG][quote=bustedbroker]Back to topic…
RE: you thinking about a bk filing I think you tell your manager and your compliance dept. as soon as you can. They need to know, don't surprise them or they just may terminate you. I hear ya. I know a broker (independant) who has gone through a terrible divorce spending incredible amounts of money trying to do what he thinks is the right thing for his situation and children and has paid the lawyers over the IRS. His thought was this will only take a year or so, but it has dragged on much longer and cost a lot more than originally thought. He has thought about the 13 filing to get on a payment plan and take care of this obligation. Now he thinks his broker dealer will terminate him becasue they are scared that a broker with a large liability could cost the firm a lot of money if does unscrupulous business to cover his debt. Mind you, this broker with over 20 in the industry doesn't have one complaint on his record and even though his IRS debt has added up over 3 to 4 years, now the BD is scared of him. He cant be the only broker in this type of a position!!!!!!! So, anyone have any words of wisdom here? If they terminated my friend for filing a 13, would it be a wrongful termination? Do they have cause? [/quote] Whether or not they have cause - it depends on the wording in his contract. Which probably varies from firm to firm. So the first thing to do is look at the contract. There may perhaps be special public policy rules which would void a specific contract provision in a particular state. Since there are 50 states - most with different rules - second thing to do is consult with a lawyer experienced in this area of law where he lives. And - as you probably know - if he were to be terminated - his remedy would be arbitration (used to be that only industry arbitrators handled these cases - don't know what the story is today). And I am not sure he has had terrific legal advice if he paid his lawyers before he paid the IRS. If you have a roof over your head - a bed to sleep in - and aren't starving - IRS comes next. Perhaps a second legal opinion is in order. FWIW - if the divorce isn't yet final - many states have divorce mediation these days - where everyone sits down in front of someone who isn't perhaps the sharpest legal knife in the block - but who tries to work things out so peoples' lives aren't destroyed in the process. Robyn[/quote]
PEOPLE HELPING PEOPLE, IT'S A POWERFUL THING!
Excellent syopsis, Ice! On top of that, most tax-deferred accounts will be subject to the whims of the federal government. Tax rates are just part of it - they have all the control to change the minimum age for withdrawals, add excise taxes on large balances, etc.
Dam, I think I just found the smart people here. And then there’s the " be a good little boy, an’ put your money in the IRA (which usually ends up being something like an Oppenheimer fund [Barron’s #59/59 one year winner] with an outrageous expense ratio that ends up screwing the advisor AND client, but helps the manager and the b/d the most.
[quote=iceco1d]
To be brief, the argument is that tax rates will probably be going up, not down, in the future (not trying to have a crystal ball, just being logical and applying basic economics). So, theoretically, you could be deferring your taxes from now, when you may be in a 15% bracket, to 30 or 40 years from now, depending on your age, when you may be in a higher tax bracket. Instead, you could just invest in a tax-efficient manner today, and forego the tax break now, and pay (theoretically) lower capital gains taxes (or invest in something that pays tax-free interest) in the future. You could also forego the tax-deferred accounts today, and opt for the tax-free Roth options available in most plans/accounts. The other consideration is for higher net worth people, and the transfer of wealth. If you have multiple-millions to transfer upon death, your heirs could end up paying more than 100% in taxes on the money you hold in qualified, tax-deferred accounts...of course, this depends on your NW, and the estate tax exclusion levels, etc. Disclaimer - this isn't my original thought, this is just some ideas where that comment ccame from.[/quote] I agree with some of this - under certain circumstances - but don't think it's a one size fits all situation. For example - for someone in a low tax bracket - a Roth may be perfect (assuming the person otherwise has sufficient savings outside the Roth). If you're in a really high tax bracket - a regular deductible IRA (or pension plan) may be better. My husband and I were in a 50% "earned income" tax bracket - and a 70% "unearned income" tax bracket during quite a few of our high earning years. Tax brackets can go higher than that - but we were willing to take our chances at those levels. And with taxes almost certain to go up in the near future - the value of the deduction will go up. Unfortunately - the rules on pension plans for small corporations became really onerous quite a few years ago (I used to have qualified plans - but terminated them and rolled my money over into an IRA). Still - if I were a high wage earner running a small business - and had few or no employees - I'd look into them now - run the numbers - and see if they make sense. Of course - the primary advantage of tax-deferred plans is avoiding the friction of taxes. And then there is the freedom of investing without regard to taxes. I've seen people who refuse to sell because they'll have to pay taxes on their gains. It's kind of silly - but a real psychological phenomenon. I don't pay much attention to things like 401k's - but my impression is that the investment options are usually very limited and not so great. Even if there is an employer match - you are still putting some of your own money into a not so great deal. Is my impression correct? Note that I don't believe in putting all savings into tax-deferred vehicles. I think there should be a mix. I agree that tax planning can be a nightmare (it can take a couple of days to figure out a "stretch IRA" - assuming you don't die from boredom before you finish reading). But if you have a fair amount of money - you can afford an accountant and estate planning lawyer to walk you through the options. Anyway - like most things having to do with financial planning - many of the options/concepts aren't easy to understand - the reading is stupendously boring - and the best solution for a particular person may depend not only on his profile "by the numbers" - but on his personal goals - risk tolerances - etc. For example - if you're 25 - and your dream is to save money and start your own business before you're 30 - you don't want to tie up your money in any retirement account. I think if the average investor spent as much time investigating the area (with professional assistance if necessary) as he did reading about LCD versus plasma TVs - he might wind up doing a better job of figuring out which options are best for him. RobynForgot to mention one thing. I would be wary of muni ETFs. I sometimes trade junk bonds. Used to do it through mutual funds. During this last cycle - I’ve been experiementing with junk ETFs. And they have a lot of problems (they tend to trade on relatively low volume - bigger buy/spread spreads than I care for - act more like closed ends than open ends in terms premiums/discounts to NAV - etc.). Doubt muni ETFs are any better.
Unless a client has almost no money (in which case he or she probably doesn't need munis when interest rates are normal) - just buy (and hold) a diversified portfolio of high quality bonds (I am only buying state GO's these days). I tend to be an opportunistic buyer of long paper when I think rates are pretty high - but a more conservative investor might be more comfortable in a laddered portfolio of intermediate term paper. FWIW - one of the better websites I've found that deals with ETFs is ETFConnect. RobynI hate it for you. Only one REAL way out ... start busting your arse harder than you ever had and get your production up.
I don’t know how old Bond Guy is - but one thing he has neglected is a sense of historical perspective. Since he lives outside Philly - I’ll give a Philly example. My husband and I moved there shortly after we got out of law school. Worked as assistant DA’s. Made a grand total of $19k/year between the 2 of us in 1972. Sounds awful. But we rented a 1 bedroom 800 sf apartment at the Dorchester (a luxury high rise on Rittenhouse Square) for $280/month. Bond Guy - will $280/month even get you a parking space in center city these days?
We had a car - a Mercury Cougar - bought new for a little more than $3k. We used to drive to NJ to save money on gas (which was then about 25 cents a gallon). A can of tuna fish was 19 cents. At the time - my father was building and selling houses in south Jersey for about $19,000 (side to side splits with maybe 3 bedrooms - 1 bath). My husband's family had a similar house in Montvale NJ (you NY/Jersey guys will know the area) that cost about the same amount. When we went to Harvard Law School ('68-'71) - room tuition and board was less than $2k a year. My father could afford to send me. My husband's father couldn't afford to send him. So my husband worked during the school year as a bartender - and summers on the Ford Motor Company assembly line at the Mahwah plant (he was a member of the UAW). Between the two of us - we graduated with $500 in debt (lack of bartending gigs my husband's last year in law school). Yada yada yada. Flash forward. What do all these things cost today? And what do people earn - like a newbie DA in Philadelphia? Obviously - prices of these things have risen more - in many cases a ton more - than peoples' earnings. So people a generation or two younger than we are have had to run very hard just to stay in place. What kid today could put himself through an Ivy League school by working part time? The double income family is now longer an oddity - but - in many cases - a necessity. Children have become a luxury. (Which is why gay customers are frequently prime customers - they tend to be DINKs. It is an unfortunate but harsh fact of life that Obama may think you're rich if you earn $250k before taxes - but you aren't. You are probably about the same or worse off than we were when we were earning $19/k year - particularly if you're trying to raise a family in a relatively high cost area of the country. All I can say is I'm glad I'm not starting out now. Robyn[quote=Mishigun]Robyn, are you … like … a hobbyist or something?[/quote]
Maybe she’s an FA groupie?