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Kevin Taylor

Better Money Habits: The first 8 “good” money habits (2/2)

Finding yourself in a healthy and happy financial life means practicing better money habits. And, putting you and your family in the best position possible. Raising your income, having income that not employment related, mitigating taxes and positioning your assets in a way to provide maximum benefit for your family are all a part of having “good” money habits. Following these eight very controllable tips will have a positive impact on your families outlook. Your net worth to the world is usually determined by what remains after your bad habits are subtracted from your good ones. ~ Benjamin Franklin By Kevin T. Taylor AIF® and Peter Locke CFP® Define your wealth stage The stage of life you are in should greatly impact your financial picture now and in the future.  Knowing which phase of wealth you are in will help make decisions regarding your other “Better Money Habits.” Having a near term understanding of your wealth stage will govern parts of the financial and investment decisions you make. In general, there are four main wealth stages that individuals move through and between over the course of life: Starting – Here some of the characteristics are establishing a career, buying a home, getting married or starting a family. Some of the hurdles are getting into a rhythm, setting goals and budgets, and defining your expectations. The main objectives: Earning, saving and growing assets. Stabilize – You have a stable career and are in or approaching your peak earning years, are a homeowner, starting to think about retirement and estate planning. Some of the hurdles here are major life expenses, vacations, college, and the generally hectic lifestyle and constant pulls of family life. The main objectives: Creating a balanced portfolio of preservation and growth, staying focused on long term goals, and making the time to manage the business of your household Success – Retired or working by choice, using accumulated wealth to generate income as a salary replacement, keen on protecting assets, estate and wealth transfer planning is a priority. Some hurdles here are investment shortfalls from the stabilization years, a lack of planning for tax and spending, investments not meeting current needs, mounting tax liabilities, and rising healthcare costs. The main objectives: steady cash flow, defined spending habits and risk mitigation.  Significance – Everyone wants to know that if they have led a fiscal life and executed on their financial plan that there will be a lasting ripple in the lives of their family and the causes they care about. Hurdles are a lack of planning beyond yourself and no legal direction for your lasting wealth. The main objectives: direction for your assets, a written commitment to the causes you would like to see flourish, and the supporting documents to see that intention carried out.  The stage of life you are in should help you benchmark your plan, find common ground with those in a similar stage and find strategies and nuances that help you support the current need to keep all things in balance.  Caution: Don’t forget to monitor! Wealth plans and projections should be treated as living, breathing documents. To make sure they continue to work for your personal situation, they need to be reviewed on a regular basis with a person or team who have earned your confidence and whose opinions and expertise drive value into your life. One of the better money habits is to revisit these plans annually and upon major live events. One of the best ways to ensure you revisit it regularly is to simply schedule the time in advance on your calendar. Make investment with your better money habits and your style Matching your financial vision with the right investments is an important part of finding a plan that will work for you when circumstances are not what is planned. Investing in perfect conditions is easy, but not lasting. While there is a wide variety of investment options available, the two primary types of accounts in which they are held — Qualified and Non-Qualified — can have implications for investors. Qualified: Accounts allow you to grow your wealth without the immediate handicap of taxation. These platforms will allow you to focus on the total return without adjusting for annual losses due to taxation, they also will help you compound those returns over time, and make adjustments to the strategy without being concerned about tax. They offer the most flexibility in your earning years, and are part of the whole picture when determining the taxes you want to pay later.  Non-qualified: Accounts allow you to build cash flow ecosystems that support your current cash flow needs and allow more flexibility for the uses of cash generated by your investments. They’re however, subject to taxation and the consequences therein.  In addition to using the right types of accounts, you should also use the right types of investments that will keep you focused on the big picture. Using a gains and losses framed approach causes inexperienced investors to sell and buy at the wrong time. Finding the right balance of risk and volatility is an effort to future proof against yourself when conditions become questionable. Having a written Investment Policy Statement will help you stay focused on you better money habits when your emotional side steps in.   Know some concepts You should always work with someone you are comfortable telling that you may not be familiar with an idea, and you should never invest in anything you don’t understand. How an investment makes money and returns that money to you is key to being a successful investor. If you don’t understand an investment at its root, move on, there are always other opportunities.  What’s the difference between an asset class and an investment vehicle? An asset class is a broad category of investments (e.g. cash, bonds or stocks) that have a distinct risk/return relationship.  They are viewed as a group and have a predictable range of returns. An investment vehicle is the financial product that

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Dear Next American President: Preserve Section 199A Deduction of The Tax Cuts and Jobs Act (TCJA)

The Tax Cuts and Jobs Act of 2017 represented a significant shift in the landscape of American economic policy, particularly affecting small businesses and self-employed individuals who form the backbone of the economy. Among its many changes, Section 199A stands out as a pivotal element of the legislation, offering a substantial deduction of up to 20% on qualified business income for eligible business owners. This crucial provision not only eases the tax burden for these vital contributors to the national economy but also influences their financial strategies and growth plans, touching every facet of their business operations. As the political climate continues to ebb and flow with discussions of amendments and overhauls, the relevance and necessity of the 199A deduction remain topics of critical importance. Preserving this deduction is not just about maintaining a tax break; it’s about fostering an environment where small businesses and entrepreneurs can thrive. In this article, we will explore the integral role that this deduction plays in promoting a healthy, dynamic, and equitable economic landscape. Stimulating Small Business Growth Small businesses are the undeniable powerhouse behind the U.S. economy, playing a critical role in driving employment, innovation, and community development. According to the U.S. Small Business Administration, small enterprises are responsible for creating two-thirds of new jobs annually and account for 44% of U.S. economic activity. This impact is not just in numbers; small businesses contribute uniquely to the innovation landscape, often pioneering technologies and services that reshape the market. The vibrancy they bring to local economies is vital, helping to revitalize communities and stimulate economic development at a grassroots level. Recognizing the pivotal role of these enterprises, the Section 199A deduction under the Tax Cuts and Jobs Act of 2017 was designed as a strategic tool to lessen their tax burden. By allowing eligible business owners to deduct up to 20% of their qualified business income, this policy enables small businesses to retain a greater share of their earnings. This retention of capital is crucial for small businesses, providing them with the financial flexibility needed to expand, hire additional staff, raise wages, and improve their products and services. Such investments have a multiplier effect, not only on the businesses themselves but also on the economy at large, enhancing the overall service and product offerings available to consumers. However, the future of this deduction is under scrutiny, with ongoing debates about its potential curtailment or elimination. Should such changes occur, the additional financial strain imposed on small businesses could significantly dampen their ability to contribute to economic diversity and job creation. The National Federation of Independent Business has highlighted that changes to this deduction could reverse the gains made since its introduction, potentially stifling the entrepreneurial spirit that is crucial for continued economic growth and innovation. Maintaining this deduction is therefore not just a matter of tax policy but a fundamental component of fostering a robust and dynamic economic environment where small businesses can thrive and continue to drive the U.S. economy forward. Enhancing Competitiveness Small businesses face a myriad of challenges in today’s economy, especially when pitted against larger corporations with more substantial resources and sophisticated tax strategies. One crucial measure that has sought to mitigate these challenges is Section 199A of the Tax Cuts and Jobs Act. This provision grants small businesses the ability to deduct up to 20% of their qualified business income, significantly reducing their tax burden. Such measures are not merely fiscal benefits but are strategic tools designed to level the playing field, offering small businesses a viable chance to compete and succeed alongside their larger counterparts. The importance of fostering a competitive environment cannot be overstated. A healthy business ecosystem, marked by robust competition, drives innovation, enhances product quality, and keeps prices in check, ultimately benefiting consumers. Section 199A plays a vital role in this process by enabling small businesses to reinvest their tax savings back into their operations—funding research and development, expanding service offerings, and improving product quality. This ongoing reinvestment not only supports the businesses themselves but also promotes a diverse market landscape where innovation can flourish. However, the potential reduction or elimination of this deduction poses a significant threat to the competitive balance within the market. Without the financial relief provided by Section 199A, small businesses may struggle to maintain their market share against larger corporations, which could lead to a reduction in market diversity and consumer choices. According to a study by the Brookings Institution, the absence of such tax incentives could lead to increased market consolidation, thereby stifling competition and innovation. Preserving Section 199A is therefore critical, not just for the survival of small businesses but for the preservation of a dynamic and competitive marketplace that fosters continual growth and innovation. Encouraging Innovation Innovation serves as the driving force behind economic and technological progress, and small businesses are often at the forefront of this movement. Due to their size and structure, small enterprises possess an inherent agility that allows them to swiftly adapt to new technologies and shifting consumer demands—capabilities that their larger counterparts typically cannot match with the same speed. This responsiveness is crucial in today’s fast-paced market environments where being first can mean the difference between leading the market and lagging behind. The introduction of the Section 199A deduction by the Tax Cuts and Jobs Act has been a significant boon for these nimble entities, providing them with much-needed financial relief. This tax relief allows small businesses to channel more of their resources into research and development without the overarching pressure to deliver immediate financial returns. This kind of investment is vital for fostering an innovative environment where creative ideas and technologies can be tested and developed, ultimately leading to industry advancements and enhancements in product offerings and services that enrich the consumer experience. Preserving the 199A deduction is therefore critical not just for the health of small businesses but for the broader landscape of industry and innovation. According to research from the National Bureau of Economic Research, small businesses contribute

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Articles
Kevin Taylor

What is an ETF and why do we use them?

Exchange-Traded Funds (ETFs) are a type of investment vehicle that combines the features of mutual funds and stocks. They are funds that hold a diverse portfolio of securities and are traded on an exchange like a stock. ETFs provide investors with a low-cost, transparent, and flexible way to invest in a variety of sectors and factors. One of the main advantages of ETFs is their ability to provide exposure to specific sectors and factors. ETFs can be designed to track the performance of specific sectors, such as technology, healthcare, or energy, or to target specific investment factors, such as value, growth, or momentum. This allows investors to easily allocate their investment capital to the areas of the market that they believe will perform the best, based on their analysis or investment strategy. ETFs can also offer investors greater control over their investments. Unlike mutual funds, which are only priced once a day, ETFs trade on an exchange throughout the day, allowing investors to buy and sell shares at any time during trading hours. Additionally, ETFs provide transparency into their holdings, with most ETFs disclosing their holdings on a daily basis. This allows investors to better understand what they are investing in and make more informed decisions about their portfolio. Finally, ETFs can offer tax advantages over other investment vehicles. Because ETFs aren’t structured as pass-through entities, they are generally more tax-efficient than mutual funds. This is because mutual funds are required to distribute capital gains to their shareholders, which can trigger a tax liability. Investors of ETFs can avoid these capital gains taxes by never selling the underlying fund. So while the companies in the fund may change, the investor never triggers a capital gains event. In summary, ETFs can be an excellent tool for investors who want to access specific sectors and factors, maintain control over their investments, and benefit from tax-efficient investment strategies. With low costs, high transparency, and greater flexibility, ETFs are an increasingly popular choice for individual and institutional investors alike.

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