4-minute Money Ideas

Why You Might Benefit from Having a U.S. Brokerage Account By Douglas Goldstein, CFP® Unsure of the benefits of a U.S. brokerage account? Use a free interactive form to find why it may be helpful to keep some of your investments in America even though you live in Israel. See the URL below. One of the most common financial problems Americans living in Israel face is when their U.S. investment company closes their account because of their Israeli address. There is no legal reason why you can’t have an Israeli address on American brokerage and IRA accounts. In fact, while some investment companies balk at your foreign address, others have no problem. (My company, Profile Investment Services, Ltd., specializes in dealing with people who live outside the United States but still want to have their investments held in America.) This issue can affect you even if you don’t have an American investment account Often, clients initially call my office when they receive an inheritance from a family member in America. Ameri

The Best Way to Pay for a Wedding By Douglas Goldstein, CFP® After accepting all the good wishes and mazal tovs, the first thing parents of a newly engaged couple need to think about is the best way to pay for a wedding. Making a wedding can be costly. If you have savings to cover the cost, great. That’s the topic of today’s article. If you haven’t saved for the big day, however, you’ll need to adjust your child’s expectations since you should certainly not take on debt to cover a four-hour party (no matter how much your bank – or children – encourage you). From which account should you withdraw? If you have retirement accounts, don’t use those funds to pay for a wedding. Those funds were earmarked to pay for your retirement, and will likely be subject to onerous taxes and fines if you withdraw them before retirement age. If you have some well-performing assets and some under-performing assets, which ones should you sell? Though it’s not written in stone, analysis of stock portfolios often shows that winning

Should You Have a Shared Savings Account With Your Spouse? By Douglas Goldstein, CFP® What’s the best way to invest with your spouse? Should you have a shared savings account or separate accounts? Whenever I help a couple set up U.S.-based brokerage and investment accounts, I ask whether they want a “joint” account, or whether they want to keep their money separate. Shouldn’t couples always invest together? In an ideal world, spouses would combine both their personal and their financial affairs. But given the complexities of today’s family structure, one account type doesn’t meet everyone’s needs. Some couples enter matrimony on equal financial footing, while others have children from previous marriages, and debts from the past. Before deciding on the structure of the account, therefore, consider each party’s assets, obligations, and needs. Money should not become a power tool in a marriage. Benefits of a joint account A joint account often makes sense as either owner can give trade orders in a joint brokerag

  Some people say the next best thing to being personally financially successful is having rich kids. However, teaching children good financial habits can be challenging. Here’s where Tom Corley and his book Rich Kids comes in handy. This is a great resource for teaching children (of all ages) about money. The three paths to wealth There are three paths to wealth: Live below your means. If you put 20% of your monthly salary into savings, as well as save all raises and bonuses, you are setting yourself up for a safer future. This is because not only do your savings increase with compound interest, but you avoid increasing your lifestyle beyond your means. Expand your means. Find efficient ways for generating more income, such as a side job. Use both strategies together. By saving properly and increasing your earnings you can effectively build your wealth. Starting young While these paths sound like they may only apply to adults, children can - and should - acquire these habits. If you give your children an a

Note: After reading the following true story, try the free Investment Evaluation Tool to determine if you are invested more aggressively than you should be. Details for accessing the tool are below. When I talk with people about how they should structure their U.S. investment accounts, one of the common questions I ask is how long do they plan to keep the money invested. Folks who see themselves as “long-term” investors can often take on the added risk of the stock market. What about long-term investors who don’t need growth? I recently met with a couple who were good earners, solid savers, and on top of it all, had inherited a sizeable amount of money.  They told me that they thought they should invest mostly in the stock market. “Why do you need to take on the added risk of stocks?” I asked. They felt that they should invest for growth because “that’s what everyone does.” I told them that even though the media and popular websites might tell people that they must invest in the stock market if they’re long-t

Is Panic the Best Reaction to a Drop in the Market? By Douglas Goldstein, CFP® As an investment advisor who helps olim manage their American brokerage accounts, I’m often asked, “Why should I invest in the stock market when it only goes down?”  If you believe that the stock market only goes down, then putting your money in stocks is a big mistake. The people who tend to make money in the stock market aren’t investing for the short term. They realize the market can, and sometimes does, drop, but their long-term time frame allows for plenty of opportunity for the market to recover. If you’re trying to grow your wealth and believe that the economy will strengthen, the stock market offers many possibilities. Remember: “possibilities” does not mean guaranteed gains; it includes the very real chance of loss. Folks who can’t tolerate volatility should avoid the market. This doesn’t mean that you have to panic, sell everything, and bury your treasure in your backyard. There are investing opportunities that aren’t bas

How to Solve this Common Problem with American Brokerage Accounts By Douglas Goldstein, CFP® I often receive calls at my office from people who say that their U.S. investment advisor asked them to change firms. It’s not because they don’t meet the minimum balance requirements. Rather, it’s just because they have chosen to live overseas. For various regulatory reasons, several large investment companies in the United States have decided to stop servicing clients who live abroad, many American olim included. Stringent legislation designed to prevent terrorism, money-laundering, and other criminal activities has made it much harder for U.S. brokerage firms to deal with cross-border finance. For this reason, some firms that used to work with U.S. citizens living overseas have decided that it is no longer worth their while to do so. Despite the legislators’ intentions to hurt terrorists, many law-abiding citizens who live overseas are also feeling a negative effect from the war on terror. If you’ve recently gotten

What You Need to Know When Blending Two Families By Douglas Goldstein, CFP® Many second marriages are the blending of two families, not just two people. This situation raises various questions about child support, how to divide household bills, and inheritance issues. To ensure a smooth financial union, make sure to discuss these issues before the actual ceremony takes place. Sign on the dotted line A financial prenuptial agreement detailing which assets belong to whom and which funds will be used for specific purposes such as children’s college funds and weddings is critical in second marriages. Both spouses should use their own lawyer and the couple should meet with a financial advisor who has experience with blended families to discuss the fairest ways to protect their financial responsibilities and their children. Joint and separate accounts Sometimes it makes sense to keep three separate bank accounts in second marriages: his, hers, and joint. Individual accounts can continue to support previous financia

Why You Need to Think Big and Start Small to Get Rich By Douglas Goldstein, CFP®  One of the most effective ways to achieve your financial goal is to develop good habits. Here’s what you need to know: Rome wasn’t built in a day Acquiring good financial habits does not happen overnight. First, you need to decide what you want to change, such as your spending or saving habits, budgets, etc. Whatever you decide to change, make sure you are beginning with a small step. Habits built on small, but steady, steps take hold quicker and last longer than sudden drastic changes. One small target at a time If you want to become less extravagant and more careful about spending your money, start by writing down what you spend every day for a week. When you have done that, think of which of your regular purchases are unnecessary. Rather than dropping them all at once, gradually phase them out of your shopping list, one item at a time, week by week. At first this may be difficult for you, but each time you successfully save

What is the Best Way to Transfer Dollars to Israel? By Douglas Goldstein, CFP® When clients ask to transfer dollars from their U.S. investment account to their Israeli bank, the details they must provide sometimes take them by surprise. Living in a different country from your assets means that money transfers are necessary to meet your cash-flow needs. Following procedures properly can expedite the process. The easy system of transferring funds Although we help people choose investments for their U.S. brokerage, IRA, and 401(k) accounts, many clients seek more than advice on what to buy/sell. They are looking for service and attention to details. When transferring funds, you must pay meticulous attention to details. Even if all the account numbers, names, and addresses match up, the clearing firm often asks additional questions. Because of regulatory concerns and anti-money-laundering policies, compliance officers can require documentation related to the purpose of the funds. This means that what you might h

Do All Married Couples Need to Share Their Money? By Douglas Goldstein, CFP®           What’s the ideal way to handle your money? In a perfect world, married couples merge their lives as well as their finances, and have joint accounts. However, sometimes a couple can be connected at the heart but have separate bank accounts. While partners should look at their overall assets together, depending on the circumstances, sometimes having separate accounts is more appropriate. A second marriage Most people enter second marriages with financial baggage from their first marriage. Either partners may be supporting children, or they may have debts incurred by the cost of a divorce. This creates a delicate situation, balancing the financial needs of merged families. To resolve issues such as making sure that children from the first marriage are supported or that one spouse is not responsible for the other spouse’s debts, separate accounts may be a wise idea. It creates clarity and makes sure that each side is dischargi

How to Make the Most Out of Your Parents’ Stocks By Douglas Goldstein, CFP® What should you do if you inherit a portfolio of stocks from your parents? Should you sell them? To answer the question of whether you should sell the stocks, start by asking yourself whether you would buy these stocks if you had extra cash. You have no moral or legal obligation to keep the positions just because your parents owned them. I’ve had people come into my office with stocks that their parents bought decades earlier, and they said, “My father said this was such a great company that I should never sell the stock.”  But how could anyone have known whether a company that was in business 10 or 20 years ago would still be a good investment today? Remember Pan Am, Blockbuster, or Enron?  Even though your father’s research many years ago suggested that a company would be a good buy, times have probably changed. What about the tax I’ll have to pay? Everyone is in a different tax situation, but people who live and die in the United

What You Need to Know About Start-Up Investing By Douglas Goldstein, CFP® In a dramatic repeat of what I saw many times in the late 1990s-2000, another start-up company just collapsed, taking with it millions of dollars from investors’ pockets. Not only are the founders’ dream shattered, but its investors’ profits are destroyed and cash lost. As a financial advisor, I review many new companies from the investor’s viewpoint. In almost every case, the story ends badly. Don’t invest unless you know how The main cause of these disastrous results stems from investors putting their money into an idea instead of into a team. Many great ideas fail because of bad management, but lots of new concepts – even mediocre ones – turn into solid businesses when handled properly. Venture capital professionals won’t even consider investing in a company unless they’re convinced that the team running it is qualified and has a robust business plan. How to analyze a business plan If this article is your only lesson on how to evalua

What to Do With Your Money at the End of the Year By Douglas Goldstein, CFP® As the fiscal year draws to a close, it’s time to review your financial plan. Here are three important aspects that you need to look at: Savings goals What are your long-term and short-term goals? Are they the same as they were last year? If your goals are both time and dollar specific, it’s easy to tell whether you are on target to meeting them. Take a look at your pension plan. Is the division of funds among its saving and insurance component still relevant to your current stage in life? Asset allocation Apart from saving your money, you also need to grow it. So let’s look at your investments. Are your funds properly invested? Your investments should reflect your risk tolerance, growth objective, and time frame. Recheck your asset allocation to ensure that everything is in order following the movements of the markets over the past year. Often funds can change focus, requiring you to rebalance your portfolio. Furthermore, if a stock

Do You Suffer from “Inheritance Loyalty Syndrome?” by Douglas Goldstein, CFP ® It is common to feel emotional angst after receiving an inheritance. Inheritors may have doubts as to whether they are “allowed” to use the assets as they wish, or whether they somehow have to use them in a way the benefactor would have chosen to use them. There are two ways to approach a sudden influx of money into your control: Spend it on things you would never have been able to afford otherwise. The downside of this is the risk of increasing your overall cost of living and finding yourself none the richer. For example, if you choose to upgrade your car, would you be able to afford higher insurance payments, gas, and upkeep in the future? Incorporate the assets into your overall financial plan. You could use the inheritance to pay off debt (including your mortgage), fund your emergency account, or increase your savings. Other factors to consider are whether you should use the funds for charitable projects or earmark them for an

Don’t Leave Tax-Loss Harvesting to the End of the Year By Douglas Goldstein, CFP® Many investors optimize their portfolio to minimize capital-gains tax. One popular strategy is to do tax-loss harvesting. What is tax-loss harvesting? Tax-loss harvesting is the practice of selling a position at a loss, and matching the loss against a gain of different stock that you sold. By offsetting losses against gains, capital growth taxes are only paid on the net profits. While this may be a tempting tax-savings strategy, there are three reasons to avoid the end-of-the-year market selling frenzy. The wash sale If you sell a security and buy it (or a substantially similar one) back within 30 days of selling it is called a “wash sale.” Wash sales negate any tax-loss selling strategies, and your attempt to harvest a tax-loss would be disallowed by the IRS. Don’t be the short-sighted individual who sells at a loss, and then, the next day when the stock begins creeping up, wants a piece of the action and buys it again. This s

What Should You Do When You Get An Inheritance? By Douglas Goldstein, CFP® Many of my client relationships began as a result of receiving an inheritance. The sudden infusion of money is a good impetus for a review of one’s goals. The first thing to do when you get an inheritance is – nothing. There’s usually no rush to spend or invest the money. Let the pain you may feel at losing a loved one and the excitement of “coming into money” die down. Before you make any decisions about what to do, make sure you’re in a calm frame of mind. Explore your options Once you are ready to make some decisions, the next step is to figure out what you really want. Some people immediately use an inheritance to realize a material dream and buy a house, car, or go on a luxury vacation. The problem is that many of those who rush into spending an inheritance often find that in the flurry of excitement, they end up spending more money than the original bequest. While there may be nothing wrong with spending an inheritance, be wary

How to Help Your Children Become Financially Independent By Douglas Goldstein, CFP® A client told me about her married daughter who is in a financially dysfunctional marriage. The young couple finds it hard to make ends meet, and often applies for help from charitable organizations. Yet despite their lack of funds, they still live a fairly extravagant lifestyle. Occasionally, the daughter asks her mother for money, but the mother refuses. My client realizes that she doesn’t have the means to bail them out – and even if she did, they would never learn to stand on their own two feet. Teaching financial responsibility is one of the toughest lessons a parent faces. Close the Parental Bank Saying no to a child in fiscal trouble is difficult. I know many parents who support an adult child still living at home, or married children who can’t quite make the month. These parents tell me, “What can I do? They’ll starve without my help!” Sadly, these well-intentioned parents don’t realize that rather than helping their

How To Break Your Bad Habits And Get Rich By Douglas Goldstein, CFP® Money woes are generally not due to a market gone awry or a low salary. The number one cause of most money problems is bad financial habits. Do you spend without tracking what is leaving your wallet, neglect to make regular deposits in savings, and overlook regular financial reviews and discussion of financial goals with your partner? If so, you may be guilty of harboring negative financial habits. Bad financial habits can be as deadly as smoking. Some habits are so ingrained that it seems impossible to break them… but it can be done! I spoke with James Clear, an expert in habit creation, on The Goldstein on Gelt Show about how people could improve their finances by replacing negative habits with positive ones. Why stopping cold turkey doesn’t work Stopping a bad habit by simply not doing it anymore doesn’t tend to work since nature hates a void. Instead of just stopping your bad habit, find a good habit to substitute for the negative one. F

Are Bonds a Good Investment for You? By Douglas Goldstein, CFP® Bonds are a very popular investment, but before you buy any, let me tell you what I share with my clients about them. Think of a bond as a loan between you and a company or government. Assuming all goes normally, here’s how it looks: You lend them a sum of money They pay you interest periodically until “maturity.” They return the principal of the loan on a specified date. Why buy bonds? Investors looking for steady current income (perhaps to supplement a pension) and wanting to diversify their portfolios often purchase “fixed income” securities (as bonds are often called). Owning bonds may give the investor a sense of security because the issuer guarantees to pay back the principal of the bond. However, bear in mind that the “guarantee” is only as solid as the guarantor, so if the issuer defaults you could lose money. Government bonds are generally considered to be safe investments, since the government has the ability to raise taxes and print