Advisory

There are many situations in which consultation is necessary in business ownership. Many times, these decisions carry higher $$ amounts than on a personal level and require additional considerations as well. Some examples of how we can help are: 

• Choosing a corporate structure (C-Corp, S-Corp, Partnership, LLC, LLP, etc.).
• Timing a significant purchase (purchasing a vehicle and timing weather to purchase in one year or the next (Sec. 179 deduction).
• Purchase or sale of a business.
• Evaluating 1099 contractors vs employees
• Forecasting the tax impact of virtually any transaction.

Life brings upon many situations that have a financial impact. Sometimes going with your gut or taking advice from a family member or friend might feel like the right thing to do, but can sometimes lead to misinformation and missed opportunity. Everyone's situation is different and at the end of the day advice is just that. You will have to make decisions based upon the information you are given as well as what you are comfortable with. Here are three situations in which someone considers how to pay down debt.

Example 1: Paying off a Credit Card

You have $10,000 in credit card debt and the annual interest rate on the card is 15%. You also just received an annual bonus that netted you $15,000 after tax. Credit card rates are typically pretty aggressive so it almost always makes sense to pay the debt as soon as possible. Why? Because even the most experienced investors cannot obtain a 15% return if you invested the money instead.

Example 2: Paying off a Student loan

You have $10,000 in student loan debt and your annual interest rate is 4%. This is where it gets interesting.  Although the amount of debt is the same as in example 1, the interest rate is much lower. If you are comfortable building wealth through investing, which should be a part of everyone's financial plan, then you may be better off making the required monthly payments and saving the rest through an investment account or an investment advisor. Although investments can be volatile from one year to the next, conservative investors can obtain 5-7%+ return over the long-term. Because the projected investment rate exceeds the rate of return you can conservatively expect with an investment advisor, it may suit you to keep paying monthly payments and save the extra money you have.

Example 3: making extra mortgage payments

Example 3 is very similar to example 2. With many current mortgage rates landing in the 3.5-4.5% range, it's easier to justify investing your extra money rather than making extra mortgage payments. It may feel good to throw this extra money at your loan year over year or month over month, however, if you do this over a long period of time (10,20, or 30 years), you are forfeiting an opportunity to gain much more by conservative investing.

These situations are simply a snapshot of what advice can be given in real-time.  There are many other areas in which we give advice such as retirement planning, estate planning, etc.  You just have to ask!