Tag: Article

Pigskins and Procrastinations

October 19, 2022
Finances, Financial Lessons, Financial Planning, Guidance

So, I have two sons who have flirted with college football. One, a quarterback, opted to forego several college football opportunities turning instead toward a career in medicine. Fine, whatever. Maybe I’d have better luck with number two? Sure enough, despite numerous run ins with the law – me – he managed to graduate near the top of his class and was presented with numerous opportunities to play football at the next level – only to delay the decision until the absolute last moment. For us parents, this was, as you might imagine…unpleasant…and ripe with anxiety, frustration, regret and maybe a few four-letter words from his mother. (Or maybe that was me. Heck, I don’t recall.) And we’re just talking about football here! How might a belabored, or in some cases, a broken decision-making process affect your family when it comes to your finances? And why is it so difficult at times to make financial decisions?

Large Financial Decisions are Ripe with Emotion:

Decisions involving money can take on a life of their own. For most of us, or unless you’re the Fed, there’s not an endless supply of money. We just can’t print more when we need more (the aforementioned once again excluded). Money is inextricably linked to provision, and provision is tied to those we care for most. And therefore, large financial decisions can be ripe with emotion. As objective as we may believe we are, when we make large financial decisions, we invariably do so with emotions having a seat at the table. And understandably so, right? Emotions are involved because we recognize the weight of the decision and how it may impact those around us. Can we afford this home? Can I afford to remain in this career? Can we make it with one income? Will we have enough to live off during retirement? Now, with those questions, you may have some control over the outcomes. But what about those you have zero control over? Are we about to enter a global recession? What happens if Europe and Asia become further unstable? Will inflation continue to rise?

All of these concerns have the potential to lead to emotionally based decisions. And equally concerning, they can also lead to paralysis or making no decision at all. It’s a well-known question for a reason: Why do today, what you can put off until tomorrow? When you’re stressed and tensions are high, emotions go from having a seat at the decision-making table to holding the pen in their hand. And that doesn’t often end well.

In Light of the Above, Now What?

Well, that’s the first step – acknowledging that emotion can play an important role in making financial decisions. Not that emotions are bad, mind you, they may just need to be tempered. You may need only to think back a day, a week, or five years ago when your emotions led to a decision, which then led to an outcome, which may have then led to regret. (If not, then you’ve not made many decisions up to this point, have you?) Instead of rushing into a decision or putting it off altogether, let’s pause, take a step back, and insert a little objectivity. Can’t find it, you say? Then allow me to offer the following:

Are you able to recognize when your emotions are making the decisions?
What are the possible consequences of the decision that you’re contemplating currently?
What emotion typically drives your decisions? Fear? Happiness? Empathy?
And if you have a spouse, do you have an agreed upon process with which to make large financial decisions?
And finally, what is it that you value most out of life?

Here’s what I know about you, if I may be so bold. If you’re willing to honestly address the five questions above, you’re on your way to living your one best financial life. At the time this article was written, there’s quite a bit of uncertainty and volatility in the financial markets. And I’m going to presume that such times may create a little stress? If I’m speaking to you, as I’m speaking to myself, there’s little value in delaying a decision based on fear alone. Just as there’s little value in rushing into large financial decisions based on want alone. If you’re in need of some objectivity within your financial decision-making process, that doesn’t make you unique, it makes you human. I happen to work with some pretty special humans who are quite gifted in helping with financial decisions. You don’t have to go it alone. In CapSouth, you have a team to rely on. We can help.

So back to football. The second son did – finally – choose a school. In full disclosure, the emotional wear and tear was on that of his mother and me. He was dead set on what he wanted from a college experience, and he made a plan to get there. He contacted over 50 division1 football programs in search of a home, and he turned down nearly as many – some of which were financial no brainers. But that wasn’t his sole motivation. He was set on certain parameters and was willing to forgo others. He made a series of tradeoffs based on the realities of his recruiting process and chose – albeit 8 days before he was to report to camp – the opportunity that satisfied his ultimate goal – to be a part of a winning program and have an opportunity to play a role in the coming years. He didn’t do it alone, I must admit. He sought counsel from those he trusted and who could help him sort through the emotions that so often accompany large decisions.

If we can help you sort through your own emotionally charged decisions, please allow us. You don’t have to go it alone. We were made to live in community, and we’d be honored to serve our role in yours. You don’t have to go through it alone. We can help.

Happy fall and *Go Eastern Kentucky Colonels!*

To discuss this article further or to learn more about CapSouth Wealth Management, visit our website at www.capsouthwm.com or call 800.929.1001 to schedule an appointment to speak with an advisor.

by: Billy McCarthy, Wealth Manager

Investment advisory services are offered through CapSouth Partners, Inc, dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable. CapSouth does not guarantee the accuracy or completeness of the information. CapSouth does not offer tax, accounting, or legal advice. Consult your tax or legal advisors for all issues that may have tax or legal consequences. This information has been prepared solely for informational purposes, is general in nature and is not intended as specific advice.

Inflation Reduction Act: What You Should Know

October 5, 2022
Health Insurance, Healthcare, IRS, Life, Medicare, Taxes, Uncategorized

The Inflation Reduction Act, signed into law on August 16, 2022, includes health-care and energy-related provisions, a new corporate alternative minimum tax, and an excise tax on certain corporate stock buybacks. Additional funding is also provided to the IRS. Some significant provisions in the Act are discussed below.

Medicare

The legislation authorizes the Department of Health and Human Services to negotiate Medicare prices for certain high-priced, single-source drugs. However, only 10 of the most expensive drugs will be chosen initially, and the negotiated prices will not take effect until 2026. For each of the following years, more negotiated drugs will be added.

Starting in 2025, a $2,000 annual cap (adjusted for inflation) will apply to out-of-pocket costs for Medicare Part D prescription drugs.

Starting in 2023, deductibles will not apply to covered insulin products under Medicare Part D or under Part B for insulin furnished through durable medical equipment. Also, the applicable copayment amount for covered insulin products will be capped at $35 for a one-month supply.

Health Insurance

Starting in 2023, a high-deductible health plan can provide that the deductible does not apply to selected insulin products.

Affordable Care Act subsidies (scheduled to expire at the end of 2022) that improved affordability and reduced health insurance premiums have been extended through 2025. Indexing of percentage contribution rates used in determining a taxpayer’s required share of premiums is delayed until after 2025, preventing more significant premium increases. Additionally, those with household incomes higher than 400% of the federal poverty line remain eligible for the premium tax credit through 2025.

Energy-Related Tax Credits

Many current energy-related tax credits have been modified and extended, and a few new credits have been added. Many of the credits are available to businesses, and others are available to individuals. The following two credits are substantial revisions and extensions of an existing tax credit for electric vehicles.

Starting in 2023, a tax credit of up to $7,500 is available for the purchase of new clean electric vehicles meeting certain requirements. The credit is not available for vehicles with a manufacturer’s suggested retail price higher than $80,000 for sports utility vehicles and pickups, $55,000 for other vehicles. The credit is not available if the modified adjusted gross income (MAGI) of the purchaser exceeds $150,000 ($300,000 for joint filers and surviving spouses, $225,000 for heads of household). Starting in 2024, an individual can elect to transfer the credit to the dealer as payment for the vehicle.

Similarly, a tax credit of up to $4,000 is available for the purchase of certain previously owned clean electric vehicles from a dealer. The credit is not available for vehicles with a sales price exceeding $25,000. The credit is not available if the purchaser’s MAGI exceeds $75,000 ($150,000 for joint filers and surviving spouses, $75,000 for heads of household). An individual can elect to transfer the credit to the dealer as payment for the vehicle.

Corporate Alternative Minimum Tax

For taxable years beginning after December 31, 2022, a new 15% alternative minimum tax (AMT) will apply to corporations (other than an S corporation, regulated investment company, or a real estate investment trust) with an average annual adjusted financial statement income in excess of $1 billion.

Adjusted financial statement income means the net income or loss of the taxpayer set forth in the corporation’s financial statement (often referred to as book income), with certain adjustments. If regular tax exceeds the tentative AMT, the excess amount can be carried forward as a credit against the AMT in future years.

Excise Tax on Repurchase of Stock

For corporate stock repurchases after December 31, 2022, a new 1% excise tax will be imposed on the value of a covered corporation’s stock repurchases during the taxable year.

A covered corporation means any domestic corporation whose stock is traded on an established securities market. However, the excise tax does not apply: (1) to a repurchase that is part of a nontaxable reorganization, (2) with respect to certain contributions of stock to an employer-sponsored retirement plan or employee stock ownership plan, (3) if the total value of stock repurchased during the year does not exceed $1 million, (4) to a repurchase by a securities dealer in the ordinary course of business, (5) to repurchases by a regulated investment company or a real estate investment trust, or (6) to the extent the repurchase is treated as a dividend for income tax purposes.

Increased Funding for the IRS

Substantial additional funds are provided to the IRS to help fund operations and business systems modernization and to improve enforcement of tax laws.

If you like to further discuss the provisions of the Inflation Reduction Act, contact an advisor at CapSouth Wealth Management.

To learn more about CapSouth Wealth Management, visit our website at www.capsouthwm.com or https://capsouthwm.com/what-we-do/ or call 800.929.1001. Click to Schedule a Discovery Call.

CapSouth Partners, Inc, dba CapSouth Wealth Management, is an independent registered Investment Advisory firm. This material is from an unaffiliated, third-party and is used by permission. Any opinions expressed in the material are those of the author and/or contributors to the material; they are not necessarily the opinions of CapSouth. Information provided by sources deemed to be reliable. CapSouth does not guarantee the accuracy or completeness of the information. CapSouth does not offer tax, accounting or legal advice. Consult your tax or legal advisors for all issues that may have tax or legal consequences. This information has been prepared solely for informational purposes, is general in nature and is not intended as specific advice. Any performance data quoted represents past performance; past performance is no guarantee of future results.

Women and Money: Taking Control of Finances

August 11, 2022
Finances, Financial Planning, Wealth Management, Wisdom

As a woman, you have financial needs that are unique to your situation in life. Perhaps you would like to buy your first home. Maybe you need to start saving for your child’s college education. Or you might be concerned about planning for retirement. Whatever your circumstances may be, it’s important to have a clear understanding of your overall financial position.

That means constructing and implementing a plan. With a financial plan in place, you’ll be better able to focus on your financial goals and understand what it will take to reach them. The three main steps in creating and implementing an effective financial plan involve:

Developing a clear picture of your current financial situation
Setting and prioritizing financial goals and time frames
Implementing appropriate saving and investment strategies

Developing a clear picture of your current financial situation

The first step to creating and implementing a financial plan is to develop a clear picture of your current financial situation. If you don’t already have one, consider establishing a budget or a spending plan. Creating a budget requires you to:

Identify your current monthly income and expenses
Evaluate your spending habits
Monitor your overall spending

To develop a budget, you’ll need to identify your current monthly income and expenses. Start out by adding up all of your income. In addition to your regular salary and wages, be sure to include other types of income, such as dividends, interest, and child support.

Next, add up all of your expenses. If it makes it easier, you can divide your expenses into two categories: fixed and discretionary. Fixed expenses include things that are necessities, such as housing, food, transportation, and clothing. Discretionary expenses include things like entertainment, vacations, and hobbies. You’ll want to be sure to include out-of-pattern expenses (e.g., holiday gifts, car maintenance) in your budget as well.

To help you stay on track with your budget:

Get in the habit of saving–try to make budgeting a part of your daily routine
Build occasional rewards into your budget
Examine your budget regularly and adjust/make changes as needed

Setting and prioritizing financial goals

The second step to creating and implementing a financial plan is to set and prioritize financial goals. Start out by making a list of things that you would like to achieve. It may help to separate the list into two parts: short-term financial goals and long-term financial goals.

Short-term goals may include making sure that your cash reserve is adequately funded or paying off outstanding credit card debt. As for long-term goals, you can ask yourself: Would you like to purchase a new home? Do you want to retire early? Would you like to start saving for your child’s college education?

Once you have established your financial goals, you’ll want to prioritize them. Setting priorities is important, since it may not be possible for you to pursue all of your goals at once. You will have to decide which of your financial goals are most important to you (e.g., sending your child to college) and which goals you may have to place on the back burner (e.g., the beachfront vacation home you’ve always wanted).

Implementing saving and investment strategies

After you have determined your financial goals, you’ll want to know how much it will take to fund each goal. And if you’ve already started saving towards a goal, you’ll want to know how much further you’ll need to go.

Next, you can focus on implementing appropriate investment strategies. To help determine which investments are suitable for your financial goals, you should ask yourself the following questions:

What is my time horizon?
What is my emotional and financial tolerance for investment risk?
What are my liquidity needs?

Once you’ve answered these questions, you’ll be able to tailor your investments to help you target specific financial goals, such as retirement, education, a large purchase (e.g., home or car), starting a business, or increasing your net worth.

Managing your debt and credit

Whether it is debt from student loans, a mortgage, or credit cards, it is important to avoid the financial pitfalls that can sometimes go hand in hand with borrowing. Any sound financial plan should effectively manage both debt and credit. The following are some tips to help you manage your debt/credit:

Make sure that you know exactly how much you owe by keeping track of balances and interest rates
Develop a short-term plan to manage your payments and avoid late fees
Optimize your repayments by paying off high-interest debt first or take advantage of debt consolidation/refinancing

Understanding what’s on your credit report

An important part of managing debt and credit is to understand the information contained in your credit report. Not only does a credit report contain information about past and present credit transactions, but it is also used by potential lenders to evaluate your creditworthiness.

What information are lenders typically looking for in a credit report? For the most part, a lender will assume that you can be trusted to make timely monthly payments against your debts in the future if you have always done so in the past. As a result, a history of late payments or bad debts will hurt your credit. Based on your track record, if your credit report indicates that you are a poor risk, a new lender is likely to turn you down for credit or extend it to you at a higher interest rate. In addition, too many inquiries on your credit report in a short time period can make lenders suspicious.

Today, good credit is even sometimes viewed by potential employers as a prerequisite for employment–something to think about if you’re in the market for a new job or plan on changing jobs in the near future.

Because a credit report affects so many different aspects of one’s financial situation, it’s important to establish and maintain a good credit history in your own name. You should review your credit report regularly and be sure to correct any errors on it. You’re entitled to a free copy of your credit report from each of the three major credit reporting agencies once every 12 months. You can go to www.annualcreditreport.com for more information.

Working with a financial professional

Although you can certainly do it alone, you may find it helpful to work with a financial professional to assist you in creating and implementing a financial plan.

A financial professional can help you accomplish the following:

Determine the state of your current affairs by reviewing income, assets, and liabilities
Develop a plan and help you identify your financial goals
Make recommendations about specific products/services
Monitor your plan
Adjust your plan as needed

Keep in mind that unless you authorize a financial professional to make investment choices for you, a financial professional is solely there to make financial recommendations to you. Ultimately, you have responsibility for your finances and the decisions surrounding them. There is no assurance that working with a financial professional will improve investment results.

To discuss this article further or to learn more about CapSouth Wealth Management, visit our website at www.capsouthwm.com or call 800.929.1001 or click to Schedule a Discovery Call