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So far Lupe Camargo has created 24 blog entries.

Tax Term ABCs

Lupe CamargoIt’s fall and back-to-school time. As young adults enter their final years of school and begin to make more independent financial decisions, having a firm grasp of the basics will help them stay on a solid path. Several clients have recently asked for my help in educating their college-age kids about essential money matters like tax terminology. Here are some tax term ABCs to share with your kids (or to use as a personal refresher if you’re a little rusty).

Tax Term ABCs

Adjusted Gross Income vs. Taxable Income

Adjusted gross income (AGI) is your total income before any standard or itemized deductions or credits. Taxable income is what is taxed. It’s an important distinction, since many IRS provisions are based on AGI, not taxable income. Your AGI affects the size of your deductions and your eligibility for some types of retirement plan contributions.

Before-Tax vs. After-Tax

After-tax money is taxable now; before-tax (also called pre-tax) money is taxable later. It’s an important difference to understand as you save for retirement. To reduce your lifetime tax burden and make the most of your earnings, you want to shift taxes to your lower income earning years if possible. This can help you determine whether to fund a Roth (which is done with after-tax funds) or a Traditional IRA (funded with pre-tax funds).

Capital Gains vs. Ordinary Income

Capital gains tax-rates are lower than ordinary income rates; they range from zero to 20 percent. A capital gain occurs when a capital asset is sold, such as stocks, mutual funds or a house. Ordinary income comes from your job, business or retirement fund distributions. If you’re in the 32 percent income tax bracket, your ordinary income would be taxed at 32 percent, whereas a capital gain would be taxed at 15 percent.

Tax-Free vs. Tax-Deferred

Tax-free money is simply that; you never have to pay taxes on this money. Distributions from a Roth (both your contributions and earnings) are one example. Tax-deferred means you don’t have to pay taxes on that income right now, but you will in the future.

You can always reach out to your advisor for additional resources and to learn more about money matters. For now, class is dismissed!

By |2021-09-21T11:05:47-07:00September 21st, 2021|Taxes|

Embrace Good Habits Formed During Lockdown

Being locked down for a year, our habits changed dramatically. Some engrained habits were extinguished, and many new habits were formed. For me, going out for a nice dinner every weekend evolved into becoming a more adventurous cook and setting a nice table for dinner. I’ve enjoyed it, and I‘ve saved money. Going forward, I intend to embrace good habits formed during lockdown.

Lupe Camargo - embrace good habits formed during lockdown

Photo by Mark Skalny

What good habits did you develop during the COVID lockdown?

As we slowly return to our pre-COVID lives, let’s make a conscious decision to hold on to those good habits. Here are a few that many people experienced.

  • We found new ways to have fun without spending a lot of money. Vacations were cancelled, dining out decreased, and movie night moved to the couch. We found new ways to entertain ourselves; in many cases we rediscovered more simple, less expensive options to be just as satisfying.
  • We began or renewed a commitment to build an emergency reserve of savings. Few could have anticipated what hit us, including the devastating loss of lives and livelihoods. It was a stark reminder of why we all need a safety net in our unpredictable world. Those who were able began saving more of their income for emergencies.

Americans Save Money Like Never Before

By mid-year 2020, American households were putting a record 33.5 percent of monthly income into savings, according to Commerce Department figures. Before the pandemic, that figure was 7.5 percent. Let’s hope they embrace good habits formed during lockdown and continue to save.

  • We resolved to stay connected to the people in our lives, through whatever mode available. As social beings, we need other people to survive. The pandemic forced us to step out of our comfort zones to reach out. Many of us learned technology is a great way to connect with the essential people in our lives when we can’t do so in person.
  • We learned to focus on self-care. Paying attention to our own wellness is critical. Physical well-being through good nutrition and exercise is important. Protecting our mental and emotional health is vital, as well. Many of us spent more time outdoors, de-stressing and reflecting. Others realized the solace and personal empowerment that comes from reaching out for help during tough times.

Difficult times remind us that we can’t always control the direction life takes. Yet, if we pay attention, such times also help us rediscover what we can control. Embracing that knowledge can have a tremendous impact on our happiness and quality of life, no matter what obstacles arise.

By |2021-03-10T12:42:28-07:00March 15th, 2021|Current Affairs, Financial Planning|

Giving Back in 2020

Lupe CamargoEvery day is a good day to give back to the community. In the economic wake of COVID-19, today is an especially good day to give if you’re able. Giving back in 2020 will help non-profits that have been hit hard by the pandemic. Fundraising events have been cancelled or shifted online, creating a loss of expected income. Communities of faith that were forced to halt in-person services experienced a significant drop in giving. Such challenges impact the individuals, communities and causes these organizations serve, many of whom also have been hard hit by this challenging year. It’s a circular problem, and one I’ve seen firsthand as Board Chair of Girl Scouts.

At the same time, those who’ve been able to give have been generous. Charitable giving in many areas has reached historic levels in 2020. During this season of gratitude, we certainly can give thanks for that.

Tax-Wise Charitable Giving

As 2020 draws to a close and you consider your charitable giving options, here are a few things you should know:

  • The Corona-virus Aid, Relief and Economic Security (CARES) Act created additional incentives to give this year. It allows 100 percent of itemized donations to go toward adjusted gross income versus the typical 60 percent. CARES also allows an above-the-line deduction for donations up to $300 (in addition to the standard deduction for non-itemizers).
  • You can “bunch” donations into one year. That means itemizing 2020 taxes and taking the standard deduction in 2021. Your income, tax-filing status and donation amount are variables to consider with this approach. A Donor Advised Fund (DAF) can be useful for bunching donations; DAF contributions can be made in one year and distributed to charities over several years.
  • Those age 70 ½ years and older can deduct up to $100,000 per year tax-free from their IRAs through a Qualified Charitable Distribution, which presents an opportunity to reduce future taxable income and limit beneficiary tax liability.
  • If you decide to do a Roth Conversion, the additional tax liability could be offset with a charitable contribution.

If you’d like to further explore and plan tax-smart giving to increase the impact of your gifts, call or email your advisor.

By |2020-11-16T15:55:30-07:00November 18th, 2020|Charitable Giving, Current Affairs, Taxes|

Understand Your Money Script

Do you know and understand your money script? Our beliefs about money begin taking shape early in life. Unpacking stories from our youth can help us decipher why we make the decisions we make as adults. Identifying unconscious influences may reveal what we tell ourselves when it comes to money, and why we continue to make decisions that harm us.

A Kansas State University study published in the Journal of Financial Therapy identified four money beliefs, or “money scripts,” that can drive our behavior.

Money scripts are neither right nor wrong. They are simply the financial lens through which we view the world. That’s why it is important to understand your money script.

  1. Money Avoidance: Common thinking here is that good people should not care about money; you tell yourself that living with less money is a virtue. Taken too far, money becomes a source of anxiety, fear or disgust.
  2. Money Worship: Money worshipers believe money is the route to happiness and fulfillment. This script says you can never have enough; it’s impossible to be poor and happy. This may lead to compulsive shopping and the pursuit of wealth above all else.
  3. Money Status: Similar to worshipers, those with a status belief equate net-worth and self-worth. This is where “keeping up with the Joneses” comes into play, and it can lead to hefty debt.
  4. Money Vigilance: This belief drives cautious and careful spending. At its extreme, it can create anxiety and prevent you from enjoying the money you worked so hard to save.

Do any of these money scripts sound like your internal dialogue? Do they support your life goals, or create roadblocks on your path? If it’s the latter, take comfort in knowing these scripts are not set in stone. You can rewrite them.

Intentionally creating better habits is the first step in rewriting your money scripts and getting closer to your goals.

By |2020-07-16T16:04:38-07:00July 27th, 2020|Financial Planning|

Thinking About Legacy

thinking about legacyOur energy and passions are often focused on personal achievement, financial success and building a life during our 20s, 30s and 40s. Though we also spend time giving back to our families and our community in different ways, something seems to happen when we reach our 50s and 60s. We begin thinking about legacy.

Author David Brooks calls this the second mountain in his latest book titled the same. He explains how early in our lives we spend our time climbing the first mountain, expending most of our time and energy striving for professional and financial success.

Sometimes, we fall down the mountain, into the valley.  In that space, we may experience isolation and sadness. Perhaps we lose a loved one, or feel a lack of purpose or connection to others. Once we discover what we believe to be missing, we begin to think about ascending that second mountain.

“Here we can discover greater fulfillment and joy very different from that First Mountain,” Brooks writes. “We begin contemplating the legacy we want to leave our loved ones and our community, by making the world a better place in a small or big way.”

If you find yourself in that place and want to begin climbing that second mountain, make time for some self-reflection.

Here are questions to ask yourself when thinking about legacy:

  • Who are the people most important to me? How am I showing up in their lives?  Am I supporting them and sharing what I’ve learned to improve their lives?
  • What stirs my passions? What experiences, both personally and professionally, have motivated me to help, support and connect with others? What talents can I share?
  • How do I want to be remembered? How can I align my time and resources to what reflect who I am and what matters most to me? How do I want to be remembered? How can I align my time and resources to what reflect who I am and what matters most to me?

There’s no better way to enable our legacy to live on, than to spend time and resources on the people and causes closest to our hearts.

By |2020-02-13T13:01:57-07:00February 24th, 2020|Books, Estate Planning|