Ask any mature adult, say, over about 40 years old, if he or she would take a 1-time deal to go back to an younger age, and the answer is almost universally, “Sure, I’d love to be younger, but only if I can take with me everything I know today.” There is no direct replacement for experience in life. But, extensive learning and planning provide a healthy boost to the accumulation of wisdom that comes with age.

Perhaps the most difficult period of a young person’s life begins with the realization that it is time to get married and start a family. There is so much to do with so little cash flow, and so many concurrent demands to obstruct the path to a successful financial future. The early years of child rearing present young parents with constant demands for time and money, and conflicts are inevitable.

When presented with the reality that there will soon be three people in the family, a common and natural reaction is panic. Since this is a financial blog, here is a “short list” of financial obligations that will soon be competing for dollars of new parents-to-be.

  • Who should continue to work; one or both?
  • Can we afford today’s astronomical Day Care expenses?
  • Do we need life insurance; what kind, and how much?
  • What expenses will our health insurance not cover?
  • Should we keep renting, or is it time to buy?
  • How will we be able to retire our student debt?
  • Will our current vehicles be large enough and safe enough?
  • When should we start saving for college?
  • Should we make a formal Will?
  • Can we continue to fund our own retirement savings?
  • What changes are needed to our home?
  • How will this impact our social life?

While not an exhaustive list, it is nonetheless daunting. With increasing priorities demanding the attention to allocation of expenses and savings, managing money is a critical priority. Yet, most young adults have little-to-no experience doing exactly that.

Establishing a relationship with a competent financial advisor seems out of reach for most young people, as they believe they do not yet have sufficient net worth to justify professional wealth management. Fortunately, financial planning during this period is primarily a process of identifying and ordering priorities.

There are an increasing number of young couples seeking professional financial advice. The number one caution for young people should be to avoid commissioned salespeople calling themselves financial planners in order to sell insurance and/or annuities. Salespeople are not fiduciaries with respect to their clients of any age. The fiduciary standard, which you can reference using a simple search, is critical to avoid making seriously costly financial mistakes.

Start any search for a fiduciary planner using online resources, such as the Certified Financial Planner Board of Standardsâ (letsmakeaplan.org) or the National Association of Personal Financial Advisorsâ (NAPFA.org). These professional organizations will steer you to the right planner for your situation, and will help you avoid commissioned product peddlers looking for gullible young customers.

Free financial resources are invaluable, but only if they are trustworthy. That is the reason we started the Van Wie Financial Hour, our 1-hour radio program heard every Saturday morning from 10:00 a.m. to 11:00 a.m. on WBOB radio, 600AM and 101.1FM, and streaming on the Internet at wbob.com. You can also hear prior shows through our website, strivuswealth.com, where all past programs are archived. While on our website, look around for other solid financial information and guidelines.

Van Wie Financial is fee-only. For a reason.

As someone who has long supported a Tax Code change to index capital gains for inflation, I am very happy to have read more than one recent story about a proposal currently in Congress. Indexing has failed many prior attempts over three decades, but this time just might be different.

Many people know the difference between “real” and “nominal” profits. “Nominal” refers to an actual numerical gain; i.e. buy a stock for $100, and sell it later for $200, and the “nominal” profit = $100. In the current Tax Code, the entire $100 is taxable. “Real” profit however, is the reduced value of the profit due to inflation incurred during the holding period. In the last example, if inflation had been 20% during the holding period, the “real” profit (the taxable part) would only be $80.

There is a simple argument in favor of indexing capital gains, as taxing the inflationary part of the gain is unfair and discourages investment. In Washington, D.C., of course, nothing is simple, and few things are considered “fair.” Opponents claim that the distribution of tax savings would benefit primarily wealthier people.

There are several considerations that have given me recent optimism for passage of indexing. In no particular order, they include:

  • Having a businessman President steeped in real estate, depreciation, capital gains, and inflation, makes Trump the logical person to drive the current discussion
  • Among the proponents pushing this through Congress is Grover Norquist (from Americans for Tax Reform), who understands far better than most elected officials the benefits of passing tax reform, and many Washington insiders listen to him
  • The current crop of White House economic advisors, including Larry Kudlow and Art Laffer, are not Keynesians, and understand that economic activity in the private sector is far more important than in government (Governments can print money, but they can’t print wealth)
  • Having seen the success of the Tax Cuts and Jobs Act of 2017, many more elected Republicans have come to understand Economics 101 regarding lower taxes
  • The public taste for tax cuts is still fresh, though the Administration did not do a good job educating the public on the concept, and then highlighting the results

There are also reasons for trepidation, including, in no special order:

  • Virtually the entire media complex tries to make Trump look bad, at least until the 2020 election
  • The government is loath to use dynamic scoring for economic proposals, preferring the old static process (Dynamic scoring would show that increased economic activity from the indexing proposal would raise revenue for the public and the government)
  • Indexing is a complex issue that will require extensive planning and design

Still, this time I do believe that the indexing push may produce results. If so, income planning, tax planning, and estate planning will all be enhanced for the average citizen – you do not have to be a “one-percent” upper-income American to benefit from user-friendly tax law. My fingers are crossed.

Van Wie Financial is fee-only. For a reason.

Each and every week on the Van Wie Financial Hour, we present to the listeners a trivia question. The winner (if any) receives whatever prize we are offering for the week. Trivia questions (our way, at least) are designed for more than time fillers — we always strive to educate people. Most often, our point is designed to give the audience an appreciation for the “order of magnitude” of a topic.

Order of magnitude is a concept with several definitions, but the fundamentals involve having a concept of the size (and/or relative size) of almost anything. A few examples include:

  • An amount of money (Millions have 6 zeros, Billions have 9 zeros, and Trillions have 12 zeros)
  • The size of a population (worldwide, US, statewide, or local)
  • Geographical distances between any 2 points
  • An amount of time (no matter how long or short)
  • Financial market statistics (one of our concentrations)
  • Relative sizes of economies and companies

Topics for trivia are nearly endless, and our questions always have a point. The exact answer to any of our trivia questions is far less important to us than the message we are trying to convey. Understanding the Order of Magnitude in the subject matter gives savers and investors an edge when they see or hear actual news. Being able to analyze information logically and in the correct setting is one key to financial insight.

There are about 8 billion (9 zeros) people on our planet, but only about 330 million (6 zeros) of them are in the USA. The US produces an astounding 24.4% of the world’s GDP (Gross Domestic Product). Americans are fortunate to be experiencing current economic prosperity. Understanding the relative value of your own personal place in the vast American economic engine can propel you to success.

The size of the U.S. Stock Market (measured by market capitalization, meaning current prices times number of outstanding shares) is about $30 Trillion (12 zeros). Since the last federal election, that has risen about $7 Trillion (12 zeros). Understanding the underlying reasons is critical to sound investment strategy.

One person, or a small but organized group, can make a relatively large impact, and in a capitalistic society, the rewards may be significant. A thorough understanding of the order of magnitude of your own endeavors can only help your progress.

Never stop learning, and never stop teaching, and we will all grow. The Van Wie Financial Hour has been criticized for our “silly” trivia, but we will not stop utilizing our teaching technique. Listen every week, and you will gather very useful information that should increase your understanding of where you are going. We also think it is fun, and hope that you do as well. Comments regarding our radio show are always welcomed.

Van Wie Financial is fee-only. For a reason.

Have you ever heard of an Income Share Agreement? If you have not, you are not alone. It is an innovative way to pay for college when all other options are exhausted. This type of plan is currently only offered at a few colleges like Purdue University and the University of Utah.

The way an Income Share Agreement works is that in lieu of taking on loans, students sign a contract that pledges a certain percentage of their income once they graduate and get a job back to the University. The amount and the term varies by major. For instance, in computer science, a graduate would pay a lower monthly rate for less time based on the assumption that their income will be higher. Conversely, an English major will pay a higher percentage of their income over longer period of time based on their lower earning potential. The most popular major that uses this program at Purdue is Biology. Biology students end up paying about 16% of their annual salary back to the school for 112 months, or $550 per month.

Income Share Agreements are not for everyone. The are largely unregulated, there is no early payoff option, and the are 100% private meaning there is no government forgiveness option. However, they provide an opportunity to finance higher education that may not be available for certain students, and they won’t saddle you with debt for 20-30 years. Despite the very small number of schools currently using this program, it is a program that I could see becoming more popular in the future.

Today’s society is saturated by acronyms, contractions, and verbal shortcuts. Who doesn’t like a good “BOGO” (buy one, get a second one free) or a “Twofer” (two for the price of one)? These are often found in grocery stores and general retailers, but have you ever heard of a “Twofer” for financial planning services?

Several years ago, Adam and I started a new financial planning organization, Van Wie Financial, modeled on our collective business experience. Business School students and graduates use a lot of buzz-words these days, and one of them is “best practices.” That is exactly what we set out to do with Van Wie Financial.

Business startups can be tedious and difficult, but they present a perfect opportunity to “get it right the first time.” That was our goal in forming Van Wie Financial and the Van Wie Financial Hour radio program. Starting a service business means finding a way to provide top quality services that provide actual value. Being a boutique family business in a big industry dictates differentiating ourselves from others, many of which are large and high-profile.

Aside from the natural advantage of being an educated and qualified father-son team, we decided to operate the business as a “Twofer.” This means that all clients of the firm are handled by both of us, from the initial meeting through what we hope will be years of an ongoing business relationship. They are our clients, not “Adam’s clients” or “Steve’s clients.”

While our business structure provides an obvious value to clients, it also provides them with a viewpoint fashioned through different experiences, over a varied time frame. Generational outlooks are not always identical, so we blend our knowledge and experiences into a customized approach for any particular client’s situation.

Van Wie Financial has been very successful, which reflects the thought and planning that went into its creation. We are proud to say that about 35% of our clients are single women and female-controlled accounts. Some are widows, some divorced, some single, and others happily married while being in charge of the financial aspects of life. All are comfortable with their business relationship with Van Wie Financial.

Anyone seeking a long-term association with a financial advisor should consider getting a “Twofer.” Check out our website, “strivuswealth.com” or give us a call at (904) 685-1505 to discuss our services. After all, doesn’t everyone love a “Twofer?”

Van Wie Financial is fee-only. For a reason.

Late spring is graduation season across America, including high schools, colleges, vocational colleges, and military academies. As a direct result, a sudden rush of job seekers annually pours into the labor market. While competition every year is intense, 2019 is shaping up to be one the best years in history for graduating job applicants. There are, quite literally, more jobs available than applicants to fill them.

Many of today’s graduates are, like “Uncle Eddie” in National Lampoon’s Christmas Vacation, “holding out for a management position.” Graduates too often believe that everything they need to know is reflected in the diploma they received for completing the required curriculum. They are too often wrong.

Even the most diligent among the graduating masses may not be prepared for the “big jobs” they seek. College doesn’t prepare students for that job; it only prepares them to begin a career. Even the professions, including medicine and law, will not produce outstanding practitioners right out of college. Many, in fact, need several more years of study, only then to become someone’s understudy while their skills are honed.

Offering advice to recent graduates is likely an exercise in futility, as many have not yet learned how, when, and why to listen. Science has recently shown that the human brain is not fully developed until ages 26 to 28. Complex decision making is a skill developed over time and with experience.

How many times have we all mused, “If only I had known then what I know now?” Success in 21st Century America is dependent on what you actually know, how hard you work, and how artfully you utilize everything you learn. The college education dilemma will get more and more complicated. Rethinking post-high school education is a must for young people today. There are many ways to quality for success and a happy life.

These days we are having a great national debate, not just on younger voting, but on the value vs. cost of higher education. Educational debt now exceeds credit card debt, and consumes such a large portion of the income of recent graduates that lifestyle decisions are being postponed. This helps no one.

Not everything you need to know will be taught in school. Formal education is, in fact, a small, but important step in a successful life. Enjoy the ride, make some mistakes, but most of all find and seize an opportunity to begin your real education. Life.

Van Wie Financial is fee-only. For a reason.

Americans love their income tax refunds. Some take vacations with the proceeds, others finally pay off lingering Christmas bills, and yet others put a down payment on a new car or other high-priced toys. A few use the annual event to fund a Retirement Account, and we congratulate them for finding a worthwhile use for their own money. After all, their own money is being returned to them by the same government that took it away in the first place. The annual refund has become a staple in American lifestyle. That is unfortunate (I know, that is not what most people believe, much less what they want to hear).

Every now and again our overly-complex U.S. Tax Code is changed significantly by Congress. When this happens, new tax withholding tables are produced by the IRS. The new tables are designed to reflect differences in expected individual tax bills after the tax changes are applied. In theory, your individual refund (or tax due) will remain roughly the same as the prior year. In theory.

The Tax Cuts and Jobs Act of 2017 was passed late in 2017, and took effect almost immediately on January 1, 2018. This change caught most of us by surprise, and left insufficient time for IRS to make required tax withholding table changes. Subsequently, many people were surprised that their refunds were vastly different in early 2019. Reactions went both ways, as the tax changes affected people differently.

While there is a direct relationship between “take-home pay” and tax refunds, that distinction is lost on many Americans. Although most people received larger paychecks throughout most of 2018, many failed to make the connection between their net paychecks and the next tax refund (or bill). Many were mightily unhappy with refunds they received in 2019 for the prior tax year.

As the 2019 tax return filing season began, early tax refunds were, on average, smaller than those received in 2018. This left many people bewildered, and served as political fodder for opponents of this Administration. However, as more and more tax returns were processed, 2019 refunds rose to historical averages. The naysayers quickly quieted.

From the perspective of a financial planner, the most desirable tax refund (or tax bill) is a big, fat Zero. This would mean the taxpayer pre-paid the exact amount due, rather than making an interest-free loan to “Uncle Sam.” Theory is wonderful, but it is apparent that many people would rather receive a refund.

IRS uses Form W-4 to give taxpayers some say in how much of their gross pay is withheld from every check. The W-4 is once again being redesigned, and when that is complete, we will cover the new form and its implications. For now, rest assured that about 84% of taxpayers received actual cuts in taxes starting in 2018. Managing your refunds will take some doing. We offer Tax Planning to clients as part of our overall service.

Meanwhile, do not expect to find a simpler Form W-4 in 2019. Adapting your own withholding to the current Tax Code will require a more thorough understanding of the changes.

Van Wie Financial is fee-only. For a reason.

A simple definition of tariff is a tax levied on imports. There is considerable discussion as to who actually pays any tariff. Eventually, all taxes are passed on to the ultimate consumer. The tariff is not, however, called a tax at the point of purchase. Instead, the tariff is embedded in the price of the item being purchased, which then costs more. Once collected, tariff revenues are sent to the Customs Agency of our Federal Government.

There are tariffs built into the cost structure of a vast array of imports purchased in the USA. Generally small, most tariffs do not completely offset the cost of buying American counterpoints, but they make our goods somewhat more competitive. The remaining inequity results from bad trade “deals” negotiated over decades by US trade officials. The North American Free Trade Agreement, or NAFTA, is a great example. There are dozens of Trade Agreements, but NAFTA has proven extremely onerous to Americans.

NAFTA was implemented on January 1, 1994, after which our economy boomed. At that time, NAFTA was apparently doing no harm, and perhaps was even contributing to the success of the economy. That is exactly what we were told by politicians and the media. Below the economic surface, in America’s Rust Belt things were deteriorating fast. Factory closings and job losses were mounting, and replacement jobs were nowhere to be seen. Still, macroeconomic numbers remained strong for a long time, due to the burgeoning Internet economy. Then, in early 2000, the “Dot-Com” bubble burst.

Most political conservatives were free trade disciples, and many still are. From now on, however, we will find out just how “free” and just how “fair” our Agreements are in reality. Merely including the word “free” in a trade agreement does not make it so. Details matter, words mean things, and information is now readily available, thanks to the Internet.

The Trump Administration is currently imposing tariffs in order to eliminate tariffs. As strange as that may sound, it is working. Tariffs imposed by the Administration in 2018 on steel and aluminum imports from Canada were lifted several days ago. Three days later Canada lifted the retaliatory tariffs they had imposed on our farmers and ranchers. This is a giant step toward fairness and complete implementation of the USMCA (United States, Mexico, and Canada Trade Agreement), otherwise known as “NAFTA 2.0.”

President Trump claims that tariffs are a necessary tool toward “getting to zero tariffs.” So far it has worked as advertised. If correct, this will be a turning point in worldwide trade, eventually benefiting everyone, everywhere, for a long time. What an incredible legacy that would be.

Brilliant economist Milton Friedman once said, “One of the great mistakes is to judge policies and programs by their intentions rather than their results.” Recent results suggest that tariffs can be used as a force for free and fair trade.

Van Wie Financial is fee-only. For a reason.

April 15, 2019 was a month of reckoning for the Tax Cuts and Jobs Act of 2017. That was the first time taxpayers had to pony up their unpaid taxes on income earned in the first year under the new law. We know that more than 80% of taxpayers received a cut relative to the prior year, but we had so far been unable to gauge the effect on government revenues. Simple reasoning says that when tax cuts are implemented, the government collects less money. This assumption uses “Static” budgeting, which does not account for changes in human behavior, and once again it has proven fallacious.

“Dynamic” analysis considers changes people make in response to external stimuli. Economically, when people have more money to spend, the confident consumer tends to purchase more merchandise and services. Companies prosper, profits rise, and taxes are paid on those profits. At the same time, hiring takes place, and more taxpayers are created. Concurrently, businesses are started and expanded, and the Treasury gets a share of all the new prosperity.

Proponents of the 2017 Act cited the probability that cutting taxes would actually enhance government revenues. This “Dynamic” budgeting proponents were basing their argument on history by pointing to the aftermath of tax cuts implemented by John F. Kennedy, Ronald Reagan, and George W. Bush.

Results of what actually happened during 2018 (and paid in April of 2019) were announced earlier this month, and the “Dynamic” scorers prevailed. According to Investors Business Daily, government revenue in April was $515 Billion, an increase year-over-year of 13%, and a new April record. Further, for the first 7 months of this fiscal year, revenues are up 11.5%. Payroll taxes are also up, increasing by 2.8%.

Now the CBO (Congressional Budget Office) is increasing its estimates for economic growth and revenue, having added an additional $1 Trillion to their earlier estimates. Congress forces the CBO to use Static Budgeting. It doesn’t take a rocket scientist to understand that a change to Dynamic Budgeting would produce more reliable results. Congress apparently has very few accomplished economists, and even fewer rocket scientists.

One additional complaint about cutting taxes was also dispelled in the recent CBO report. Claims that tax cuts went mostly to “the rich” didn’t pan out, as taxation became even more “progressive” after the 2017 Act. Right now, fewer people are living paycheck-to-paycheck than ever before, and the “Quality of Life Index” is at a 14-year high.

Tax cuts work every time they are tried. How much proof do we need to provide for Congress to make the lower rates permanent? Or, better yet, to further reduce our tax burden.

Van Wie Financial is fee-only. For a reason.

“Crisis” is one the most abused words in the English language today, being haphazardly applied to whatever political disagreement of the day, the national debt, our failing “public” educational system, border security, the increasing national drug problem, trade wars, and on and on, ad nauseum. Perhaps the biggest tragedy in this scenario is that truly important issues become indistinguishable from lesser problems. When everything is called a crisis, nothing gets treated appropriately as a crisis.

We shouldn’t use the term “crisis” lightly – it should be extremely important on a national scale. The size and rate of increase of personally-held educational debt qualifies (in our opinion) as a national crisis. We know how we got there; can we find a way out? Let’s “set the table,” as the popular saying goes.

Following the victory experienced by the USA winning WWII, remaining service members came home in large numbers. Concurrently, at every level of production, America was returned to a consumer orientation. Multitudes of marriages occurred, tens of thousands of homes were built, and vast numbers of children were born. The “American Dream” was in full bloom. The “Greatest Generation” (a term coined by Tom Brokaw as far as we know) desired to provide their offspring with a better quality of life than they themselves had experienced.

Our national standard of living rose dramatically in the years following WWII. It was widely assumed that the Baby Boomer Generation would go to college, simply because that was acknowledged to be the path to success. The American Dream, parents believed, begins at the hallowed halls of higher education.

At the time, post-secondary education was inexpensive, effective, and rare. Demand was growing, and prices inevitably rose. New college entrants began to borrow money, and lenders were more than happy to oblige. When the borrowers graduated, they simply paid off the debts the old-fashioned way; monthly payments until the balance was zero.

However, the rapidly-escalating cost structure of institutions required ever-increasing borrowing. Students were delighted to have their parents absorb part of the debt. Today, parents account for 14% of new college loan originations. Many parents lack resources to repay their loans without sacrificing hard-earned lifestyles.

We have said that student loan debt has become a crisis. According to the website Studentloanhero.com, aggregated college debt in the U.S. is now $1.56 Trillion, spread among 45 million Americans. That figure is approximately 1.5 times the nation’s credit card indebtedness.

During the “Great Recession,” wages and salaries stagnated, and only recently have they begun to rise. 11.5% of student borrowers are 90 days or more behind in their payments. Far too many parents and grandparents on fixed incomes are experiencing declining quality of life. Graduates are feeling pressure to delay big decisions regarding starting families, buying homes and cars, and other life-changing events. This creates a drag on the nation’s economy.

Unlike many forms of debt, student loan debt is generally not forgiven in a bankruptcy, despite contributing to many of those same bankruptcies. There are now some student loan forgiveness programs, but they are complicated and fraught with potential pitfalls.

There are answers to the complexities of educational funding. More than ever, college planning has become a key element of Comprehensive Personal Financial Planning. It is never too soon to begin the process of planning for educational expenses. Finding a qualified financial advisor begins with a search for a fiduciary Certified Financial Plannerâ.

Van Wie Financial is fee-only and always a fiduciary. For a reason.