Creative Generosity

By
Jeff Motske, CFP®
November 9, 2018
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I personally believe that one of the advantages of doing well financially is to be able to “give back” to causes that are near and dear to your heart. However, when we feel passionate about a cause, the emotional pull can tempt us to financially overextend ourselves. With some forethought, though, you can utilize creative measures that allow you to be generous without breaking the bank.

Your Time

Before you pull out your checkbook, perhaps consider getting your hands a little dirty. Whether it’s cleaning trash from the beach, working at a food pantry or assembling packages for our troops stationed far and wide, nonprofit organizations are powered by people. Even the simplest volunteer work can make a significant impact on an organization in need.

Your Talent

Some of us have specialized talents and skills that can be of value to a charitable organization. If you have an accounting background, perhaps you can offer your services to a nonprofit close to your heart. If you run a landscaping company, you can choose to donate your services to your alma mater. Such specialized services can be of great value to an organization and not make much of a dent in your personal finances.

Your Treasure

Just as there are different types of non-profit or charitable organizations, there are also different ways to financially contribute to them. Many of us are familiar with direct contributions, donations that may qualify to be deducted from your income tax. You could also contribute via donor-advised funds, which allows you to make charitable contributions to specially designated funds at a specific charity, receive a tax benefit from the contribution and recommend grants to be funded by the charitable fund account. Another option is to donate appreciated stock or appreciated real estate, which provides a significant tax deduction. Some choose to leave a charitable donation after they pass via a trust  These gifts in trust can be tricky, so it is advisable to meet with a professional to avoid any issues. Additionally, there are those who prefer to utilize charitable gift annuities, which allows an individual to receive a fixed income after donating money, securities or real estate.

There are as many worthy charitable organizations as there are stars in the sky. When your funds won’t allow you to do more, there are always other ways to “give”. Doing so thoughtfully and creatively can ensure that everyone benefits.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

  1. https://www.nptrust.org/what-is-a-donor-advised-fund

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By
Mike Loo, MBA
August 30, 2018

Whether we attribute it to a decline in marriage rates, poor job prospects, student loan debt, technological improvements, or generational shifts, times have certainly changed for young adults. One major topic which my clients bring up centers around their adult children moving back home. While this was not a common conversation ten years ago, I come across this topic more often nowadays. I’ve heard statistics such as “a third of young people, or 24 million of those aged 18 to 34, lived under their parents’ roof in 2015”, and look at it as my job as an advisor to provide advice on how to best navigate through this new landscape.(1)

Within this topic, a common question that I try to help my clients answer is this: Should I charge my adult children rent if they move back home? What I’ve found is that every situation is different, so what may work for one family, may not work for another. However, in this article, I hope to provide a framework to consider when trying to answer the question.

Setting Expectations

Depending on your own experiences and values as parents, as well as the specific circumstance of your adult child, you may insist that they live at home rent-free. For example, if your adult child is being responsible by saving a good share of his/her paycheck for a house down payment and you want to reward that responsible behavior by letting him/her live at home rent-free, there’s absolutely nothing wrong with that. For other parents, such an assistance for an adult child does not make sense, and no matter what the circumstances, would believe it only right to charge for rent if living at home.

No matter where you fall on this spectrum, it is important to set expectations with your adult child. For instance, if you decide that it is out of your comfort zone to charge your child rent for living at home, then what other mechanisms can you put into place to make sure he/she does not get too comfortable? In my experience, I’ve seen parents create timelines and goals, as well as make it crystal clear that the adult child must still pitch in, in other ways such as chores or errands. While it may be a tough conversation initially, imagine the alternative. What if your child gets too comfortable living at home and would rather stay at your “hotel” rather than spread their wings in the real world!

Whether rent is being paid or not, the adult child will have a particular reason as to why they want to or need to live back at home. If they are simply being lazy and are not making an effort towards adulthood, it is crucially important to provide clear expectations. As parents, you want to always help and support, but you never want to enable. Therefore, in this example of being lazy, a parent could set expectations of applying for X number of jobs per week, or something similar.

How Much To Charge For Rent

If you do decide that it makes sense to charge your adult child rent, how much should you charge? In my experience, parents usually charge well below market rates. As parents, you want to help your child out, but you also want to build up their personal finance awareness. How much you charge will also be highly correlated to what your daughter or son can afford, and could change over their time living with you. By having an open conversation and being clear about why you will be charging them, it should not be hard to fall on a number that makes sense for your family.

Alternatives

There are also other ways in which your adult child could pitch in that could be alternatives to paying rent. Such alternatives could be household chores or errands, cooking meals, or even helping parents with their own work. In addition, it could make more sense to have your adult child pay for other household expenses (instead of rent), such as internet, tv, or groceries.

Another alternative could be to make their stay at your home contingent on them depositing money into their own retirement account. This way, you are teaching them how to save and plan for the future.

Finally, if you want to help them grow personally, you can make their stay at your home contingent on community service or volunteering. This is a win-win as well!

Budgeting

This experience can also be thought of as a great teaching moment for your child. Specifically, parents in this situation are in a unique position to extol the virtues of budgeting and personal finance when their child needs it most. If the adult child in your household has to pay you rent and decide how to allocate their small-to-no income, they will quickly learn how to budget. As a parent, you may decide to get creative and instead of using the rent money for expenses, stash it (and maybe even match it) into a savings account for your child. They will be happily surprised with a small nest egg to leave home with!

Other Considerations

Other considerations that I make sure clients consider is their own budget and retirement goals. If your adult child is going to come back home and live there, you’ll want to make sure that adding another adult to the household does not negatively affect your own goals. Because you’d anticipate that household expenses will go up, you must make sure you budget for them, based on your expectations and timeline with your adult child. Again, by having an open conversation with your adult child, I am confident that a reasonable game plan can be implemented with success.

Having this conversation is not always an easy one, but I hope that the considerations above help provide better ways to think about it. If you’d like to discuss your situation further, call my office at (949) 221-8105 x 2128, or email me at michael.loo@lpl.com.

By
David McDonough
July 2, 2019

Words are power, and each word has its own weight and energy. Words have inspired people to stand up for what they believe in or hang their head down in defeat. Therefore, choosing the right words to describe that which you want to manifest is very important.

For example, when speaking of aspirations for the future, there are those who use the words dreams and goals interchangeably. However, they ae distinctively different in definition and performance. A dream is boundless, fueled by your passion and imagination. However, it is akin to fantasy, with no immediate call to bring it to life. When someone tells me they dream of owning a sports car or starting their own business, I know most of the work to make that dream a reality hasn’t taken place and probably won’t for the foreseeable future.

A goal, on the other hand, is the mapwork to that dream, concrete and behavior-driven. When you have a goal, you have markers, measurements and steps to get to the destination. Setting the right goals, especially when it pertains to financial goals, can have a significant effect on how and when you achieve them. In fact, a guide to good goal-setting has long been to make it S.M.A.R.T.1:

Specific: if we are truly making a map towards our goals, telling ourselves to go in a general direction or for an undefined distance is most likely only going to get us lost. Steps towards our dreams have to be detailed and specific.

Measurable: When a goal is measurable, there is a way to track your progress to stay motivated or identify issues that may need problem-solving.

Attainable: It is admirable to be striving for something grand and lofty. However, it’s imperative that we have feasible goals that we can accomplish to keep us motivated and actually accomplish said goal.

Relevant: Having impressive goals are fine and dandy, but if they don’t move you closer to your overall goals or work against other goals you may have, it may be time to rethink them.

Time Bound: Once something has been stated as a goal, the stop watch has started. There is an expectation of completion, which is necessary to keep us moving forward towards that goal. It may not get completed in the expected timeframe, but just by having a deadline, we can stay accountable.

Based on this description of a S.M.A.R.T., you can see that there is a difference between, “I’m going to start saving money for a house,” and “I’m going to put 15% of my paycheck into a savings account specifically designated for my eventual down payment, and I should have enough saved after 3 years.” One expresses a desire while the other one lays out a concrete plan to achieve the goal.

If one seems to be fueling the other, how can a dream inhibit a goal? Well, one way is when your lifestyle fits with your dream rather than your goals. To achieve many financial goals like saving for retirement or buying a home, one needs to save and stick to a budget. However, if you fail to save and incrementally work towards the goals, it will take longer and longer to see results. Worse is if you choose to skip the incremental steps and live your dreamer’s lifestyle by using credit cards. The debt you accumulate will take you farther and farther from your goals and possible put you in an unfortunate and stressful predicament.

Sometimes when we haven’t developed a goal for a dream, it’s vagueness can work against an already established goal. Perhaps a good friend asks you to go into business with them. If you choose to pour funds into this new endeavor without any parameters, you may find yourself taking funds away from saving for retirement or depleting savings you already had. Of course, if you had outlined your goal on how to contribute to your friend’s business, with specific and timely parameters, the situation could be completely different.

Please understand that I’m not asking you to stop dreaming. In fact, quite the opposite. I happen wake up every day saying, “Dream Big! Work Hard! Laugh often!” I sign letters and thank you notes and end employee meetings with those very words. Dreaming is important.

So please know I want you to dream big and bold. At the same time, I want you to buckle down and create some S.M.A.R.T. goals to propel you closer to your dreams.

https://www.mindtools.com/pages/article/smart-goals.htm

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

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