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Ever opened your mailbox to find a surprisingly large tax bill, even though you haven’t sold any investments? Yeah, it’s not a fun feeling. This can happen because of something called “capital gains distributions” from mutual funds.
Okay, let’s break this down. Mutual funds are like big baskets of different stocks and bonds. When you invest in a mutual fund, you’re buying a tiny piece of that basket. Now, sometimes, the fund manager decides to sell some of the positions in the basket – maybe a stock that’s gone up in value. When they sell something at a profit, it’s called a capital gain. And guess what? They share that profit with you, the investor!
Sounds nice, right? Well, here’s the catch: they also share the tax bill with you. This is done through capital gains distributions, which usually happen toward the end of the year. And these capital gains distributions are taxable, even if you don’t actually see the money (because it gets reinvested). It’s like getting a bonus at work that you immediately put back into your savings account – yet you still have to pay taxes on it. Many investors don’t realize this, and it can lead to a nasty surprise come tax season, especially when the market has done well.
For most Big Law firms, open enrollment is right around the corner. This means you should soon receive (if you haven’t already) a 50-plus page employee benefits guide with every benefit your firm offers. As an employee, you’re not only expected to read this document from front to back and know every benefit available, but also to know all the jargon. But make sure you don’t mess up your elections because you’re not allowed to make changes for another year!
You may sense some sarcasm in my tone. The reality is you are very busy (especially this time of year with the Holidays and year-end billable hour requirements), and learning all the different options and nuances of your employee benefits might not be feasible. This could lead to missed opportunities that could have a long-lasting impact. In this blog, I discuss five tips that will help you understand the major components of your benefits package and ensure you get the most out of it.
The term financial advisor (or financial planner) seems to be thrown around quite a bit these days. If you asked 100 clients of 100 different financial advisors, I bet they’d each have a different definition. This is no fault to anybody, as the regulatory bodies in charge of the financial services industry have not made it a priority to clarify the job description. The main issue with this lack of clarity is that it affects the perception that most people have of financial advisors.
In a recent study, the CFA Institute found that financial advisors ranked as low as mechanics on the trustworthiness scale. This isn’t a knock on mechanics, but finances are such an integral part of someone’s life that consumers should be able to trust the person they go to for advice. In contrast, other industries have made this a priority. For example, a medical doctor is not able to call themselves a doctor until they’ve gone through rigorous training and graduated from medical school. This supports the CFA Institute’s finding that doctors are at the top of the list in terms of trustworthiness. So how can you find a financial advisor that you know will have your best interest in mind? One way is to look for a fee-only advisor.
It seems like we cannot go one week without reading in the news about a large company being hacked and having its data compromised. The reality is that hackers also target small businesses because they are often more vulnerable due to a lack of data protection infrastructure. Small businesses hold just as sensitive data as large companies (date of birth, social security number, banking information, etc.), making them ideal targets for hackers. Given this environment, there is a good chance your information will eventually make its way into ill-advised hands. With that information, these ill-advised hands could open credit cards on your behalf, or worse, steal your identity. How can we, as consumers, protect ourselves from these cyber threats? One easy and efficient way is to freeze our credit.
If you’re anything like me, the car-buying process can be a roller coaster of emotions. From the excitement of the initial test drive and the smell of new leather, to the paralysis by analysis of doing the research, to the frustration and anxiety of the negotiations. But once that initial rush of emotions is over, you start seeing your car as a useful tool that can take you from point A to point B safely. The issue is many of us get caught up in the emotions of buying the car, and we end up making costly mistakes. In this article, we’ll dive into five crucial financial mistakes to avoid when buying a car, which, in turn, means more money in your pocket and less stress.
For young couples, merging finances represents more than just a logistical step—it’s a pledge to work together to achieve common financial goals, such as buying a house, funding retirement, paying off student loan debt, or sending kids to college. However, much like business partnerships, personal relationships can also fail because of poorly handled finances. From differing spending habits to differing attitudes about risk or debt, couples have numerous hurdles to overcome, and these can become make-it-or-break moments in their journey. Yet, with the right approach and understanding, merging finances and sharing common goals can strengthen the bond between partners and build a secure future together. In this blog post, we’ll explore a four-step process on how young couples can prepare to merge their finances.
If you’re a partner at a law firm, I’m sure you’re well aware that you are now considered a self-employed individual in the eyes of the IRS. Being self-employed does not mean that you work alone. It simply means that you are now getting taxed as a business owner, which you are! At this point, you have likely hired someone to prepare your tax return due to the added complexity. The tax preparation services should also come with an estimate of your tax liability for the following year, broken down into four equal quarterly estimated payment vouchers. So far so good, right?!
Maybe it’s because I’m a financial planner, but I feel like my social media feed is filled with posts promoting new “ground-breaking” ways to invest money that will somehow allow you to retire in 5 years and set off in the sunset on your yacht. The idea of setting off in the sunset on a yacht sounds amazing, don’t get me wrong, but I just don’t buy into the idea that there’s a shortcut around building wealth. Saving consistently every month and every year will have a much bigger impact on your financial situation than getting an extra percentage return on your investment. Skeptical? Just read below. But first, let’s establish what a rate of return and savings rate actually mean.
With the Holidays now behind us, and spring not quite here yet, it’s easy to find ourselves daydreaming about our next vacation. Beach or mountain? Sun or snow? Kids or no kids? But for most of us, after a few minutes of daydreaming, negative thoughts start creeping in. Can I really afford to go on vacation right now? Will I need to tap into my emergency account to pay for the trip? Can I still contribute to the kids’ college accounts if we take this vacation? These thoughts are very normal because we are constantly trying to balance enjoying life now, while also making sure we don’t completely neglect our future selves. The good news is with some basic planning and a little bit of willpower, you can get both. Here’s a four-step process to help plan your next trip without compromising on your long-term goals.
Becoming a parent is up there with some of the biggest moments in a person’s life. From feeling tiny hands wrapped around your fingers to watching them take their first steps, the first years of a child’s life can be magical. Nevertheless, it can also be stressful as parents learn to navigate increased financial responsibilities on top of the many other challenges of raising a newborn. In this article, I will break down five financial items to add to your to-do list before your due date.
Attorneys are taught to delegate early in their careers. From a junior associate assigning tasks to paralegals and secretaries, to equity partners delegating tasks to senior associates, delegating happens at all levels of the firm. And attorneys don’t just delegate in the workplace, they delegate all sorts of personal tasks from lawn care to childcare. Generally, it’s not because they are not qualified to perform these tasks, it’s because their time is better spent on activities for which they are most qualified. At what point, though, would it make sense to “delegate” your finances and hire a financial advisor?
Becoming a law firm partner should be an exciting time in your life. All of the hard work that you’ve put in as an associate is finally paying off. Not that you can just hit cruise control from now until retirement, but you get the point—you’ve made it, and you should celebrate! Beyond the recognition, partnership also comes with some significant financial advantages, such as increased compensation (although some new partners may feel like they’re taking less money home in the first couple of years). But it may also come at a time in your life where things are getting more complex.
Over the past few weeks, I’ve spent countless hours on the phone with the Federal Student Aid phone line and with various loan servicers trying to find the best student loan repayment strategy for my clients. Between the new changes that the Biden Administration announced in July 2023 and the end of the 3.5 year-long student loan repayment pause (with payments restarting this month), borrowers have found themselves with unanswered questions: What is the new SAVE repayment plan? When should I re-certify my income if I’m on an Income Driven Repayment Plan? Should I refinance my loans with a private lender?
Did you notice that your take-home paychecks have increased recently? If that’s the case, you may be wondering why, since the last time you checked, you hadn’t gotten a raise.
The answer is likely that you’ve maxed out your Social Security tax for the year.
If you are considering a job opportunity outside of Big Law, you may be questioning whether the new salary can support your current lifestyle. Let’s face it, moving away from Big Law will likely involve a pay cut, whether you go in-house, to a boutique firm or the Government, or decide to leave the law profession altogether. There are practical steps that you can take to ensure that (1) you will feel confident enough to step away from your current position and (2) you won’t need to come back because you cannot afford your lifestyle. In other words, how can you remove the infamous “golden handcuffs”?
Two weeks ago, the Supreme Court struck down the Biden/Harris Student Loan Debt Relief program, delivering a blow to borrowers who hoped to have up to $20,000 of their federal student loans forgiven. In conjunction with the ruling, the student loan repayment pause established during the COVID-19 Pandemic is set to end at the beginning of September 2023 with payments restarting in October 2023. Now that we know what’s ahead, how can you as a borrower better prepare for when the payments restart?
I can already feel the eye rolls through the screen of whatever device you are reading this on. I get it, for most of us, the word budgeting is cringeworthy.
Just stick with me for a few minutes. My goal with this blog post is not to show you how to pinch pennies. Rather, I want to illustrate that through budgeting, you can remove the stress of not knowing where your money is going and create better savings habits.
Did you know that one in four of today’s 20-year-olds can expect to be out of work because of a disabling condition before they reach normal retirement age?* I was shocked when I read that statistic from the Social Security Administration.
May is Disability Insurance Awareness Month (I know there’s an awareness month for everything nowadays!), so for this month’s blog post, I figured I’d dive into what disability is, the risks of becoming disabled, and how to plan for it.
This may sound like a simple task, but in the wake of bank failures like Silicon Valley Bank and Signature Bank, cash management should not be an afterthought. In this blog post, I discuss why one should keep cash in the bank (as opposed to investing it) and best practices on which types of accounts to use.
Whether you’re opening a new credit card, buying a new couch on credit, or applying for a new mortgage, the lender from whom you are borrowing is pulling your credit score to see if you are a good borrower and how likely you are to pay the debt back on time (i.e., your creditworthiness). The interest rate that you will be paying on the loan is largely influenced by your credit score, which will impact the total amount that you have to pay back. Keeping track of your credit score is critical, even if you have a good income.
I’m sure at some point in your life, you’ve heard of the benefits of compounding growth. Roth IRAs can enhance compounding growth further because of their tax advantages. However, many individuals, especially attorneys, cannot contribute directly to a Roth IRA because their income is too high. Click on the link below to learn how you can invest in a Roth IRA even if you make above the income limits.
The last couple of years have been wild for the real estate market. From home prices skyrocketing during 2021 and the first half of 2022, to now a bust due to increasing interest rates and an overall economic slowdown, it has been a tough environment for home buyers, especially first-time buyers. Following this seven-step process will help you focus on what is in your control, so you are ready when the opportunity presents itself.
As we approach year-end, some of you might be eagerly waiting for comp memos to hit your inbox.
The question is, when that bonus gets deposited into your bank account, what are you going to do with it? Are you planning a weekend getaway? Splurging on something? Or do you plan to save it? This article discusses a few ideas on how to use your year-end bonus.