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CBC Central FL “Open Your Heart Breakfast” 2013 – Orlando, FL

May 9, 2013 By Leave a Comment

I wanted to take this opportunity to send out a big “Congratulations” to Community Based Care of Central Florida (http://www.cbccfl.org/) for a successful and wonderful breakfast event yesterday. On behalf of us, we are proud to support you and the work you do in our Central Florida communities.

 

Special Thanks to:

Glen Casel

Michael Bryant

Stacy Peacock

Catherine Davis

Debbie Leon

& Keri Flynn for including us as a table captain and making the event such a success.

Thank you to our guests for joining us at our table and for your continued support of CBC

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Filed Under: Blog, Featured, Uncategorized

Our Big Fat Financing Problem

April 29, 2013 By Leave a Comment

Hi Everybody, welcome to this edition of 5-Minute Finances. My name is Kyle Davis, Financial Planner in Orlando, Florida with Integrity Financial Group and today we’re going to talk about a big financial planning problem, maybe the ultimate problem in our personal finances. I’m talking about financing itself.

When you cannot afford to pay for something in full, what are your options?

1) Go into debt and pay interest

2) Pay cash and give up interest

 

Most of us will never pay for a car in cash, so what do we do? We finance them, of course.

Would it upset you to know, and listen very carefully, that the interest you are paying on your car purchases throughout your life will likely be worth VASTLY MORE than you will ever accumulate in your lifetime savings and investment accounts? Does that make you scrunch your forehead a little bit?  It should.

Let me explain.

According to the 2012 report published by the Employee Benefit Research Institute (EBRI), on average through savings and investments, workers will have less than $100,000 saved up by the time they reach retirement. Even if a senior were able to get to that $100,000 savings mark… that means if they lived another 20 years after turning 65 – they would have an extra $5,000 a year from their savings, oh and that assumes no inflation, which is ridiculous.

In other words, our savings habits are a total joke. Worldwide, among developed countries the US is in the bottom 10 nations for savings rates.

 

The. Bottom. 10.

 

Let me show you something that might upset you. Let’s look at the cost of financing a car purchase:

$30,000 Car

6% interest

60-month financing (5-year Note)

_____

The monthly payment will be 579.98

Total Principal with Interest will add up to $34,799

Total interest over the 5 years is $4,799

Car Pmt

 

This is not new information. This is a simple calculation…and it’s also not the upsetting part. Let me show you what you forgot to calculate, and WHY the interest you are paying on the cars you drive will likely be worth VASTLY MORE than you will ever accumulate in your lifetime savings and investment accounts.

If you take ONLY the interest paid on that car, and you’re buying a car every 5 years for 50 years – at the end of that 50 year period, the interest alone compounded at 5% annually would have been worth $232,053. This is not factoring in ANY principal. JUST INTEREST.

 Car financing Opp Cost

 

 

What if we did pay cash for a $30,000 car? What if we delayed gratification for a long time and just paid for the car outright to avoid interest? There’s a financial planning problem there as well, and it’s even bigger. If we put $30,000 into a car, we lose the earning power of that $30,000, don’t we? If we had let that money compound at the same 5% annual interest rate;

 

-15 years later, it would be worth $62,367.85 That’s an extra FREE car

-25 years later it would be worth $101,590.65 That’s 2 extra FREE cars

-50 years later it would be worth $344,021.99 That’s 10 extra FREE cars

 Do you really want to give up that kind of compounding potential for a car? How much easier would it be to do your retirement planning with this kind of extra money?

 

Think about this. What if you could keep your money in that 5% compounding position and still get the car? What if you continue to compound interest uninterrupted for that entire 50 year period, even though you’ve used the same money to make the car purchase?

Suppose there were an account out there that allows you to do that. Suppose this kind of account is older than the IRS tax code and regular people like you and I have had it available to us the entire time?

There is

They are

…and we have.

If you want to know more about the types of accounts that can maximize the efficiency of compound interest and still allow you to make your big life purchases, pick up the phone today and call us at 888-688-1414, or visit us online and fill out the contact form.

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Financial Planning – Inflation and You. Seniors Beware.

April 9, 2013 By Leave a Comment

Hi everyone! This is Kyle Davis with Integrity Financial Group. We are an independent financial planning firm in Orlando, FL. Let’s talk about Inflation. In short…it’s a silent killer. Let me ask you a question. You would be upset if the government taxed 100% of your investment gains, wouldn’t you? If the tax was 0%, you’d be elated! It might not matter. I’ll explain.
Let’s look at a 3% CD in the photo below. This is all about the REAL buying power of dollars, and not just the numbers on the page.

Column A invested 100,000 in a 3% CD for a year at a time of 3% inflation. They paid no tax. That’s $3,000 interest, but because of the 3% inflation, the spending power of those $3,000 is a complete wash. Inflation is eating away ALL of your investment gains RIGHT NOW, and you don’t see it on any statement…anywhere.

Column B invested 100,000 in a 3% CD for a year at a time of 0% inflation. They were taxed 100% on their gains. They would be VERY angry, but at the end of the day, in a 0% inflationary year, their purchasing power would be exactly the same as Column A.

Seniors and others on fixed income are affected the most. You CAN protect yourself against this. Enlist the help of a financial advisor, but be aware there are FEW solutions that can counteract inflation effectively.

It is in the Fed’s best interest to create inflation, which they are doing. I can prove this.

“Inflation is as violent as a mugger, as frightening as an armed robber, and as deadly as a hitman.”
-Ronald Regan

Inflation Kills

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Life Insurance – For Our Friends at the Executive Referral Group

February 14, 2013 By Leave a Comment

Hi everyone! This is Kyle Davis financial planner with Integrity Financial Group. We are an independent financial planning firm in Orlando, FL.

Yesterday, for my “Business of the Month” presentation, I shared the Ten Minute Lesson on Life Insurance. You may recognize the picture below! At the end of my presentation, I had a couple of questions about why a lot of the “Financial gurus” were strongly opposed to permanent life insurance in all of its forms. While I agree that some types of permanent life insurance are not all they are cracked up to be, saying that it’s all terrible is very shortsighted and I believe very unwise.

There are a lot of things that these folks say that I agree very strongly with. Dave Ramsey and Suze Ormond and such help a lot of people take positive steps and get their debt/spending under control, but it’s very clear to me that they don’t fully understand life insurance. Like I said when I did the lesson, “After seeing this, you will know more about life insurance that MANY life insurance agents”.

One of the biggest reason these folks hate permanent life insurance so much is because they are looking at it completely wrong. They are looking at it from an investment point of view, and don’t understand how to effectively use it. I’ll be the first to tell you, life insurance is not an investment – it is a VERY EFFICIENT SAVINGS VEHICLE that can earn significant compound interest if designed and used properly. Permanent insurance, especially WHOLE LIFE, can provide all of the benefits I talked about at our meeting (look at the list on the right side of the photo) and a lot of others that I didn’t have time or space to write. It is a place to put your money that effectively allows you to become your own bank, and with the build up of cash values over time, you will never have to finance a major purchase ever again for the rest of your life, except maybe a house. This is not speculation, and this is not market-sensitive. This is fact.

Let me show you a little math to prove my point:

Person A

He makes an investment of $100,000 and earns 20% that year.

Gross Gain of $20,000 with a tax bracket of 30%

$20,000 – $6,000(30% tax) = $14,000

He has a net gain of $14,000 which leaves him with a total of $114,000

Person B

He makes an investment of $100,000, but uses his cash values in his life insurance policy and also earns 20% that year.

Since he’s taking a loan from his policy to get the money out, he has to pay 8% to use that money.

Gross Gain of $20,000 – $8,000 (the 8% interest he’s having to pay) = $12,000 with tax bracket of 30%

$12,000 – $3,600(30% tax) = $8,400

He has a net gain of $8,400, but remember the 8% interest? that’s not going to any finance company. It’s going back into his policy, so that’s $8,400 + $8,000…and also, if you have the right kind of insurance, the $100,000 is just a loan AGAINST the policy. It’s still actually inside the contract earning interest, so it could be earning, let’s say 4% interest there.

So we actually have $8,400 in gains from the investment, the $8,000 interest that’s coming back to us (from the gains in the investment), and an additional $4,000 of interest earning in the policy anyway, so a net after-tax gain of ($8,400 + $8,000 + $4,000) = $20,400 which leaves him with a total of $120,400

 

Dave and Suze either don’t understand financing, or they just don’t understand life insurance. I’d be more inclined to think the latter.

This type of financial planning has been around for over 100 years. This was what people did before America began our dance of death with Wall Street.

Call me if you have questions or want to know more. I have a page on my website that says a bit about this topic http://www.financialservicesamerica.com/life-insurance-annuity-concepts/

My Business of the Month illustration about Life Insurance

My Business of the Month illustration about Life Insurance

Filed Under: Blog, Financial Planning, Life Insurance Tagged With: , , , , , , , ,

Financial Planning – The Lunch Story

February 5, 2013 By Leave a Comment
Brown bagging it could dramatically affect your financial picture!

Brown bagging it could dramatically affect your financial picture!

Hi everyone! This is Kyle Davis financial planner with Integrity Financial Group. We are an independent financial planning firm in Orlando, FL. Most of the time when I write these blog posts it’s because I want to cover a lesson – a piece of financial planning knowledge that might benefit a certain demographic of people. Today I thought of something out of the blue, and it kind of took on a life of its own. A topic that applies to EVERYONE, I don’t care who you are.

I was on Facebook during lunch one day last week and, being the nerd that I am, I finished eating and got my calculator out. I wrote the following post that  has been getting numerous comments and feedback. I was thinking about the cost of the lunch I had brought from home today, and the post went like this:

The strangest things run by my brain during lunch…
Cost to bring lunch from home today – $2.50
Cost to eat lunch out around my office – $7-$9 (Split it and say $8)

I work around 48 weeks a year, M-F (5 days x 48 weeks = 240)

Bring lunch from home every day (2.50 x 240 = $600/yr)
Eat out every day (8 x 240 = $1920/yr)
Realistically, I eat out once and bring lunch 4 times in a week ( 192 days x 2.50 and 48 days x $8 = $864/yr)

It costs me $864 a year to eat lunch. I spend $1,056 a year LESS than the guy who eats out every day, and I still get fed, same as him, probably with less calories.

I’ll be 30 this year. If I took $,1056 a year starting at age 30 and put it away earning just 5% compounding APR until age 65…do you know how much I’d have?

I WOULD HAVE $95,378.

Yup.

Just for bringing my lunch 4 days and treating myself once a week, I would have $95,378 and the guy who ate out every day wouldn’t.

Enjoy your lunch :)

A little food for thought…no pun intended. Sometimes it’s the smallest things that we do every day that causes us to lose out on so much down the road financially… can you imagine what else is out there that may be affecting your future? If eating lunch can have THAT much impact on our overall financial picture, than what else are you missing?

This is what I do folks, and I’m here to help. Think about this.

What is causing YOU to lose out on future dollars?
I did a video on this topic last year, and you can find it here.
It was actually the first one I ever did, way back when.

I hope this little bit of no-nonsense lunchtime math has helped you in some way.

All the best from Orlando, FL!

 

Kyle A. Davis

Integrity Financial Group

9161 Narcoossee Road Suite 210

Orlando, FL 32827

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Financial Planning | Bank CD’s

October 23, 2012 By Leave a Comment

Filed Under: Videos

Qualified Plans: Know The Rules Before You Play

September 19, 2012 By Leave a Comment
www.financialservicesamerica.com

Do you know the rules of the game?

Hi everybody. Welcome to this edition of 5-Minute Finances. My name is Kyle Davis with Integrity Financial Group. We are an independent financial planning firm in Orlando, Florida. Today we’re going to discuss qualified retirement plans and some of the misconceptions that a lot of Americans have about these plans. Examples of qualified retirement plans are IRA’s, 401(k)’s, Simple IRA’s, and 403(b) plans, to name a few.

 

What is a qualified plan? A qualified plan is a savings and investment account that meets the requirements set forth by the IRS which “qualifies” it to receive certain tax benefits. Do people pay more taxes than they have to? The easy answer is yes, most people pay more taxes than they would like and would prefer to avoid taxes whenever possible, preferably today. One of the most popular pieces of advice is to put your money into a qualified retirement plan to grow for the future. Ok, now that you know what a qualified plan is, I want to ask you this. What do qualified plans do? First, they defer taxes. You get a tax deduction on the money that you contribute each year. Sounds pretty good, right? I want to talk about something else that qualified plans do that may surprise you. They also defer the tax calculation, defer being a fancy way of saying “postpone”. They are tax postponement accounts… let that roll around in your head for a moment… The IRS isn’t saying that you don’t have to pay the tax…they are simply saying that you can pay the tax later…but at what bracket? Because we don’t know the future of your income or taxes, it is impossible to someone to tell you that you will “save” on taxes by contributing to a qualified plan, such as a 401(k)…in fact if your tax bracket rises, you won’t save on taxes at all…quite the contrary…you will owe additional taxes. Your tax bracket, as you can see, is a big part of this discussion. Most people focus on the tax bracket that they are in today, and NOT the bracket that they will be in when they take the money. Which tax bracket will you be in when you take the money out?

 

Another problem is liquidity, and this is the big one for me. What happens if you get into a bind and need to access the money in your qualified plan for an emergency or a big purchase? Not only will you be forced to pay the taxes when you take it out, but if you’re under age 59 and 1/2, you’ll also pay a 10% penalty on the money. The key to understand here, is when you have money in a qualified plan during your working years, that money is locked up. You do not have liquidity, use, and control of those funds. Instead, there are tax consequences and penalties. Having those dollars locked away could force you to pay expensive finance charges or go into debt that you could have avoided.

 

I’m not saying that qualified plans are bad, but you MUST know the rules before you jump in. Also, what’s your strategy for taking the money? Do you have to pay all of the tax? If there were an opportunity to avoid paying some of the taxes that you’ve deferred, would you want to know about that? I hope this video has been thought provoking, and has helped you get a better grip on qualified plans and how they really work.

 

If you have any questions about qualified plans or if you’d like to speak personally, call or visit us online at www.financialservicesamerica.com. Please subscribe to our YouTube Channel and check out this article on video as well as many others!

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Top 5 Financial Blunders for Young Adults

August 17, 2012 By Leave a Comment

Top 5 Financial Blunders for Young Adults

 

It’s easy to make mistakes when you’re in the early phases… it’s also easier to correct them.

Hi everyone!

This is Kyle Davis – Financial Planner with Integrity Financial Group in Orlando, Florida. Today I’m going to focus on a few very important habits that could be costing you tens of thousands over the course of your working life. These bad habits are particularly dangerous for younger adults ages 25-35. This age group has the opportunity to get a HUGE head start on saving for their future goals, whatever those goals may be. Ever heard the phrase, “Time is on your side.”? Earning interest on your money works best over a long time frame, uninterrupted. Would an extra ten years of doing the right things make a difference on your overall financial picture? You bet it would.

 

#5 Filet Mignon Tastes / Ramen Noodle Budget

Let’s face it, as far as food goes it’s very easy to get caught up in spending a lot of money unnecessarily on fast restaurant lunches and effortless dinners out… but these luxuries come at a huge premium. When you’re looking at a 10 dollar lunch when you could have packed something from home for 2-3 dollars, over time that really adds up! Not to mention the 4 dollar drive-through coffee. It’s not reasonable to ask someone to cut these pleasure out altogether, but be conscious of your habits and enjoy treats in moderation. My wife and I only go out to eat at a restaurant once a week. It was one of the easiest things we’ve ever done to help our budget, plus now it’s more special and we look forward to it even more!

 

#4 Misunderstanding Big-Ticket Payments

Many of us think that just because we have the monthly cash flow to support the payments on a big-ticket item, it means we can afford it. We are actually spending our future away. We get what we want today, but we’ve effectively pre-spent money that we’ll never be able to get back. What if you’d been able to earn interest on that $3,000 that you spent on a new 60” flat screen and entertainment center from 5 years ago? What would it be worth today? I’m not saying to not make your big purchases, but you need to be aware of the real implications of spending your future and how you are making that payment; which brings me to my next point…

 

#3 No Savings

It may seem obvious that everyone needs extra savings or an “emergency fund”, but did you know that you could end up paying double duty for your big purchases without one? Think about it. If you can’t pay cash for a purchase, you are forced to finance. You sacrifice your future to get what you want today. You’re forced to pay interest on top of the original purchase price, further adding to your monthly payment and future obligations. Again, just because the monthly payment fits into your budget does not mean you’re doing a good thing.

 

#2 Bad Credit

One can end up with a bad credit score for a number of reasons. A few of which include lack of credit history, late payments, maxed out balances, and types of credit in use just to name a few. Even if you are diligent about saving and setting aside money to avoid debt there will be times in life where you will have no choice but to finance. For many people these include things such as vehicle purchases, student loans, and especially home purchases. A bad credit score can force you to pay a higher interest rate to have the same access to capital as someone with a good score. You pay more, because the institution is taking a bigger risk on you. While we’re on the subject of credit, let’s move on to for top financial blunder for young adults and that is…

 

#1 Living the Plastic Lifestyle

Carrying a balance and living off of credit cards is the ultimate mistake for young adults. You effectively end up paying more than the regular price for EVERYTHING YOU BUY. Not only are you paying for the price of the purchases, but since you carry a balance there is also a daily compounding interest rate for any charges that you do not pay off quickly. There are thousands of articles out there on how to “get out of debt” but it simply comes down to time, patience, and commitment. Finance charges are your worst enemy at ANY age.

 

Nobody can avoid mistakes 100% of the time, but the more you think about these things early on in life, the more headaches and money problems you might be able to avoid later.
Don’t be a stranger!

-Kyle A. Davis
Integrity Financial Group – www.financialservicesamerica.com

 

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Home Financing From a Different Angle

July 23, 2012 By Leave a Comment

www.financialservicesamerica.comHi everybody. Welcome to this edition of 5-Minute Finances. My name is Kyle Davis with Integrity Financial Group in Orlando, FL. Today we’re going to go through a quick lesson that I was taught, and it continues to be one of my favorite examples to use with my clients to illustrate a simple concept about mortgages. I like to call this one, “Happy House, Sad House” and it shows you an alternate angle that might help you with your overall retirement planning.

 

Alright, we have two couples entering retirement. Both have lived in Colorado for many years in a home worth 500k, and both have 401(k) dollars totaling 500k. Both couples decide they want to move down toFloridato spend their retirement years. They both sell their houses for 500k and move into their newFloridaresidences, which cost them 500k. All of the amounts are equal, and we do it this way to simplify the illustration. Obviously this situation would be rare, but it explains the point very simply.

 

Couple A took the 500k from the sale of their house, which is tax-free by the way (Sec 121 of the Tax Code) and paid cash for their new residence outright. They are free and clear with no responsibility to pay a mortgage. Couple B took the 500k tax-free from the sale of their house and invested it, instead using the 500k in the 401(k) fund to pay the mortgage down with.

 

At first glance, which situation would you prefer? A mortgage, or being debt-free?

 

Let’s take a real world look at what’s actually happening here. Couple A is going to be fully taxed on the 401(k) withdrawals as ordinary income, which means they are automatically going to have less money in their hands over time…up to 35% a tax as of 2011 depending on their marginal tax bracket…but they have no mortgage. The 401(k) will be for living expenses. Couple B is able to invest that money earning a conservative 6% compounding rate of return (which, by the way will generate about 30k a year in interest) and they keep a mortgage and use the 401(k) proceed to pay the mortgage down over time. The 401(k) is still fully taxable to couple B. However, because they have a mortgage and are paying mortgage interest on a primary residence, they get a home mortgage interest deduction on their taxes each year. So, they are paying tax on the 401k distributions, but they are getting a deduction from their interest payments on the house.

 

Now, what happens to Couple A if they need to get to the 500k in their home? They have to qualify for it…it’s not liquid. They have to go to the bank and home they can get a home equity loan. Their money is locked away in the house. If the house becomes valued at LESS than 500k, well, they’ve lost. Couple B has not pumped all of their money into this house. They are liquid. They still have the house, they still have the 401(k) and they still have the 500k tax free from the sale of their old house. What happens to couple B if the value drops on their home? Well, they have options. Their money is not locked away.

 

If you have any questions on this example or if you’d like to speak personally, call or visit us online at www.financialservicesamerica.com . Please subscribe to our YouTube Channel. 5-Minute Finances – Financial Wisdom in 5 Minutes or Less.

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Opportunity Cost – The Hidden Cost on Every Dollar

May 11, 2012 By Leave a Comment

Every dollar has a hidden cost. That is called opportunity cost.
www.financialservicesamerica.com

Hi everybody. Welcome to this edition of 5-Minute Finances. My name is Kyle Davis with Integrity Financial Group of Orlando, Florida. We are a local financial planning firm dedicated to helping our clients make smart money decisions and achieve their financial goals. Today we’re going to discuss a hidden cost on every dollar you acquire called Opportunity Cost. In the very broad sense, there are only 2 things you can do with a dollar. You can spend it or save it. Spent dollars are lost forever and you can never get them back. The potential future value of those spent dollars is called “opportunity cost”.

 

Example: hold out one of your hands. Every dollar that I put in your hand you can do one of two things with it. You can either spend it, or you can put it in your pocket. If you spend it, it’s gone forever and you never get it back. If you put it in your pocket, it will earn 10% interest this year. So if I give you one dollar and you choose to spend it, how much did that purchase really cost you? You not only spent the dollar, but you lost what the dollar could have earned for you had you been able to put it in your pocket. That 10% interest that you lost is the “opportunity cost”.

 

Let’s do some real numbers here! What is the cost of a purchase, including opportunity? Well, let’s take an expense of $10,000. If you had $10,000 but instead of spending it, you invest it at 6.00% APR compounding  10 years, you would have earned $8,194 in addition to the original sum…but remember…you didn’t invest it. You spent it. Because you spent it, you don’t get the extra $8,194 that it could have earned in interest over the 10 year period. That money that you lost out on, is opportunity cost.

 

We have to take opportunity cost into account for every major purchase in our lives. You have to ask yourself, what is this REALLY costing me? Because remember, you’re either earning interest on your dollar, or you give up the ability to earn interest. You must not only consider the cost of a purchase, but the opportunity cost as well.

 

If you have any questions on dealing with opportunity cost or if you’d like to speak personally, call or visit us online at www.financialservicesamerica.com. Thanks for reading this edition of 5-Minute Finances – Financial Wisdom in 5 Minutes or Less.

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