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July

One surprising question you should ask any financial advisor you might hire

They often manage your life savings. Be smart about who you hire.

Planning your financial life can be a lot to handle on your own. If you’re paying off your debt, how much should you invest into your Roth IRA? Should you buy a house or keep renting while you build up some liquidity? A certified financial planner can help you get organized and formulate a plan for your money, but how do you know who to trust and whether they’ll be right for what you want to accomplish?

When you meet with a certified financial planner, here are the 15 questions you should ask them to make sure they are trustworthy, experienced and have your best interests at heart.

  1. “‘What’s your definition of a financial planner?”

The definition of a financial planner is very broad and can encompass everything the planner helping with everything from investing and retirement, to insurance and taxes. You want to make sure that the financial planner you go with defines their job in a way that aligns with what you will need them to do. Some may only want to deal with your investments, others may take a holistic approach and even get into the nitty gritty with your budget — make sure the planner you hire can do exactly what you need. Use this tool to get matched with a planner who meets your needs.

  1. “What are your qualifications?”

When it comes to planning your financial universe, you likely want a certified financial planner (CFP) or, if you want help with taxes, a certified public accountant (CPA). Just because someone says they’re a financial planner doesn’t mean they’ve taken the exams that qualify them to be a certified financial planner or CFP. They may have other licenses, such as the Series 7, that allow them to sell financial products, but that’s not the same.

“Know the difference between an actual qualification designation and what is a list of tests that a person took in order to sell stocks and bonds,” explains Katie Brewer, a Dallas-based certified financial planner and founder of Your Richest Life.

To become a certified financial planner, you must take financial planning educational courses, pass an exam with a historic pass rate of around 60%, adhere to ethical requirements, have 6,000 hours of professional financial planning experience or 4,000 hours of apprenticeship experience and keep up with continuing education. Becoming a CFA also requires rigorous education, exams and more.

“Don’t be shy about asking your financial planner when they received their CFP® mark and how long they’ve been in the business,” explains Brewer. “Trust me, we’re used to it.” You should also double check a CFP’s credentials at CFP.net.

You should also ask other questions like how long they’ve been practicing, what their typical client looks like, and their personal philosophy around financial planning.

  1. “How do you get paid?”

Ideally, you want a fee-only financial advisor, as they do not get commissions or other payments from the financial institutions whose products they recommend, and instead are paid directly by you, their client. Typically you pay them either an hourly or flat fee, or a percentage of assets under management. “It’s important to know how people are compensated so you can look out for red flags such as self-serving advice (e.g. garnering a commission when they buy or sell certain securities) vs. making the best choice for your situation, “ says Brewer.

  1. “Are you “fee-only” or “fee-based?”

While it may sound the same, they’re actually not. A fee-based planner works off commissions and may have an incentive to recommend or prioritize a product above other actions or items in your plan, such as saving for a rainy day. A fee-only planner gets paid solely on what you pay them for their time, strategy, and money management.

  1. “What’s your fee structure?”

Planners should be upfront about their pricing structure and should never make you feel like you’re playing a game of “how much do you cost” vs. “how much do you have?” Advisors will charge either by an hourly rate, a project rate or flat rate for a plan or a percentage of the assets under management. You have the right to have all of this explained to you and which plan, if options are offered, would best suit your needs and budget.

  1. “How much should I expect to pay you per year?”

Just like a senior hair stylist will charge more for a haircut than a junior stylist, the pricing for financial planners can vary according to the city they’re in, how much experience they have, and the amount of assets you need managing. A typical fee for a planner might be 1% of assets under management, but as you gain wealth, they might lower this fee. At the same time, a financial planner may work on a sliding scale or charge an hourly fee. Depending on what city you live in and the firm, you can expect a fee-only CFA’s hourly rate to start at around $200.

  1. “Will you sign an agreement regarding your compensation?”

No matter what, a fee-only planner should be comfortable sharing and signing an agreement describing their compensation and services that will be provided before you sign on with them.

  1. “Do you receive ongoing fees from any of the mutual funds in the form of 12(b)-1 fees, trailing commissions or other payouts?”

You can also ask if they receive ongoing fees from any of the mutual funds in the form of 12B-1 fees, trailing commissions or other payouts. Sounds too technical? Sure, but that’s kind of the point. But it’s a yes or no question that can help you figure out how this planner gets paid rather than just asking if they’re a fiduciary, which is a person working with your best financial interests in mind

You can also ask if they receive referral fees from attorneys, accountants, insurance
professionals, mortgage brokers, or others and then allow them to explain how it would or wouldn’t impact their advice to you.

  1. “Will you sign a fiduciary oath?”

Asking someone if they’re a fiduciary isn’t always enough. People can “ice skate” around that terminology and give fuzzy or unclear answers to that question. Instead, you may consider asking them to sign a fiduciary oath.

“If someone is fee-only, they shouldn’t have a problem signing a document stating how they get compensated,” Brewer says. “If someone is, for example, a broker dealer who works on commissions, they probably wouldn’t be allowed to sign it.”

  1. “What kind of people do you normally work with?”

If the answer is “everyone,” that’s a red flag, said Brewer. If they brag about how they work with everyone from freelancers to hedge fund CEOs to athletes, it could mean that they’re really versatile–or they don’t have any kind of specialty at all and are just throwing spaghetti at the wall to gain new clients. “I’d recommend a financial planner who specializes or at least has experience in the life stage where you’re at,” she says.

  1. “Can you repeat that so I can understand it?”

Personal finance can have a lot of jargon, yes. But that doesn’t mean that your advisor should be speaking over your head or creating an atmosphere where you feel like you’re asking a lot of “stupid questions.” “If you walk in and somebody is giving you a bunch of jargon and it’s going right over your head, or you feel like they’re condescending, then like you don’t have to put up with that,” says Brewer.

  1. “Are you a member of any fee-only financial associations?”

Check to see if they’re a member of a financial planning organization like NAPFA: The National Association of Personal Financial Advisors (NAPFA) or XY Planning Network, both of which are well-regarded, fee-only associations of planners. While this isn’t a necessity to hiring someone, it can show a dedication to their field.

  1. “Do you have any limitations?”

This may seem like you’re luring them into a trap but really, you’re asking them if they would refer you to someone if there was an area of financial planning that’s outside of their expertise.

For example, you’d want an advisor who would admit to not being an expert at debt management or complicated estate planning. If they say, “I can do anything” or offer a vague response, such as “I’m sure we can figure it out,” that’s a red flag that the planner may just not want to admit that they’re not an expert at everything.

  1. “How often should we speak to each other?”

This may depend on age, your goals, and the complexity of your financial situation and portfolio of assets. For example, if you’re 35 and need someone to create a plan for you and manage your investments, speaking to them twice a year may be enough. That said, if you need more hand-holding and want to be sure that you can get in touch with questions in between visits, that should be part of the service.

Your planner should get back to you in between set check-ins within a week so you’re never left hanging with a question.

  1. “Can I speak to some of your former or current clients?”

Financial planners should be comfortable giving you references of clients whose money they have managed. If they aren’t, this could be a warning sign.

Questions to ask yourself after meeting with a potential advisor:

Is this person spending enough time to understand my financial goals?
Is this person pushing me to make decisions I don’t feel comfortable with?
Is this person speaking to me in a condescending tone?
Is this person giving me vague answers regarding payment structure?
Is this person giving off a “used car salesman” vibe?


June

2021 2nd Quarter Tax Law Tips

Dominating the financial planning landscape so far in 2021 has been the possibility of changes to tax laws. At this time, no definitive plans to increase taxes on individuals have been introduced. President Biden recently unveiled an infrastructure and climate proposal that included an increase in tax rates on corporations. The plan calls to raise the corporate tax rate from 21% to 28%. In 2017, the corporate tax rate was 35%.

Even though everything is still speculative at this time, we did want to review the individual tax changes that are getting significant media attention and were a focus during President Biden’s campaign.

▪ Estate Tax Laws – Currently, individuals can pass $11.7 million to the next generation without paying estate taxes out-of-pocket. This doubles to $23.4 million for married couples. There has been talk of this threshold being lowered. In 2017, the limit was $5.49 million per individual, $10.98 million per couple.

▪ Capital Gains Taxes – The top capital gains tax rate is 20% for individuals with income above $445,850 and married couples with income above $501,600. There is some support in Washington to change the capital gains rate to ordinary income tax rates for taxpayers making more than $1.0 million per year. The top ordinary income tax rate is currently 37%.

▪ Cost Basis Step-Up at Death – Upon a taxpayer’s death, assets held outside of a tax-deferred investment vehicle receive an update in the cost basis based on the value of the asset on the date of death. For example: an 85-year-old has held shares of XYZ company for 50 years. The cost basis is $0 as it was gifted from an employer. The heirs receive the XYZ stock with the basis adjusted to the stock price on the date of death. The heirs sell the stock with minimal income tax consequences. Another common scenario is a primary residence purchased years ago in an area of the country that has seen rapid real estate appreciation.

Instead of adjusting the estate law as we discussed above, changing the cost basis step-up rules could generate additional revenue for the government and has gained ground in recent months. However, this is becoming less likely as administratively it would become much more difficult and time consuming to settle estates.

If you have questions on how potential tax law changes may impact your financial situation, please reach out to your Fee-Only Financial Planner or accounting professional.

GFM Founder Announces Retirement

Founder Greg Galecki

Greg Galecki started the business that became Galecki Financial Management in August 1990. Over the last 30+ years, Greg became a leader in the financial planning industry, a radio personality (on a show that lends our newsletter its name!), and grew GFM into the Fee-Only Wealth Management firm it is today.

Greg was one of the first advisors in the State of Indiana to adopt the Fee-Only approach as opposed to commission-based compensation. That mentality of always putting the best interests of our clients ahead of our own, has been ingrained into every advisor, employee, and intern that has walked through our doors over the years. Under Greg’s leadership, GFM has grown to have the strong reputation it has today.

With that we announce that Greg will be retiring at the end of 2021.

Throughout Greg’s time growing GFM, he always made the succession of GFM a priority. He brought on a team of other Financial Planners to not only help grow the firm, but ensure that his clients would be taken care of well after his retirement.

Today GFM has grown to include six other Financial Planners and Shareholders aside from Greg: AT Kohout, Brady McArdle, Melanie Colwell, Kevin Chandler, Andy Young, and Chloe Blythe. AT became a shareholder in 2006, Brady and Melanie in 2011, and Kevin, Andy, and Chloe in 2019. As of January 1, 2022, the remaining six shareholders will be taking the reigns as full owners of the business.

There is no one quite like Greg Galecki. His leadership, knowledge, humor, and world-class metaphors are one-of kind. We are thrilled for Greg as he transitions to this next stage of his life but will of course miss his quick wit around the office.

AT, Brady, Melanie, Kevin, Andy, and Chloe are all looking forward to carrying the mission and core values that Greg instilled in us for years to come. We will continue growing the legacy and story of Galecki Financial Management for another 30+ years.


April

Help! My parents are getting older and need a lot of assistance. What can I do?

Many of our clients are entering a stage in their life in which they are still parenting their own children, while their parents are also in need of help. This can be a very stressful and expensive time for everyone involved. How do they find balance? Where should they turn?

The first step is to make a list of areas that need addressed and then partner with professionals that have experience in these areas. If you do not have a Fee-Only Financial Planner, call Galecki Financial Management at 260-436-8525. You can also visit www.napfa.org and use the Find My Advisor tool to locate a Certified Financial Planner™ Professional near you. This individual will help you walk through the financial steps and difficulties associated with parents entering this new phase of life. They will know what it will cost, what facilities you should research, and how to move forward.

Depending on the financial situation of your parents, they might need additional help with the cost of long-term care. Your Financial Planner will know a good elder care attorney, but you can also visit www.naela.org to find an elder law attorney near you. This individual will discuss additional payment options available for your parents and how they might be able to qualify for Medicaid assistance.

Working with a Fee-Only Financial Planner and a qualified Elder Law Attorney will get you on the right path. It can be a very difficult journey, both emotionally and financially. But, having experienced partners to walk you through this process will make things much easier than if you attempt everything on our own.


March

Millennials vs. Online Investing


Even if you don’t closely follow the stock market, you likely saw headlines in late January on GameStop and how an army of Reddit users took on Wall Street. The most popular platform these Reddit users used to invest was with the smartphone app, Robinhood. Robinhood is a popular choice for many due to its accessibility, it’s free to use and their array of investment choices such as, stocks, options, ETF’s, and cryptocurrency. We aren’t going to go into too much detail on any one specific investment type, but instead dive into the reason Robinhood and platforms like it are so attractive to new or first-time investors and whether that attraction is good, problematic or a mixture of both.
 
Robinhood has existed since 2013 but gained most of its popularity later in the decade. Millennials have been their primary demographic throughout its existence.  In many of the economic or financial benchmarks (salary/wages, home ownership, etc.), the Millennial generation has been lacking behind their predecessors. However, thanks to the emergence of Robinhood and apps like it, investing could be an area where Millennials and Gen Z make up some ground.
 
Robinhood’s marketing approach, although somewhat controversial, is undeniably successful. Their use of push notifications, graphics and promos make the app feel almost like a game. Many compare the marketing techniques to popular sports betting apps like DraftKings or Fan Duel. This is where the problematic aspect rears its ugly head. Gambling can be addicting and detrimental to one’s financial wellbeing. Combining the risks, accessibility to those risks and the appeal to inexperienced or new investors has already resulted in a deadly outcome.
 
In June 2020, a University of Nebraska student committed suicide when he saw a negative cash balance of over $730k. This balance was a result of option trading, which can be extremely risky. Although it turned out the significant negative balance was just a temporary display until an underlying stock settled. This is an extreme and unfortunate example of how inexperience and lack of knowledge can lead to consequences that the investor may not fully understand or know how to handle.
 
The fact remains, this app and others like it aren’t going to go anywhere anytime soon. They continue to attract new investors, mostly from a generation that is beginning to look for new ways to accumulate capital and build for retirement.
 
The uncertainty surrounding Social Security’s future among Millennials is just another factor that’s driving them to invest within these sorts of apps. The positive in this, is it’s expanding access to the market and allowing more people to have the opportunity to build wealth in a time where the wealth gap is widening at a historic rate.
 
But like the famous quote from Winston Churchill says, “with opportunity comes responsibility.” Which begs the question, where does that responsibility lie? Certainly, the individual investor will take on most of the responsibility for their own choices. But is there a point where the gimmicks and marketing strategies from these apps might be considered predatory? These are questions that will likely continue to come up as these apps expand their userbase and broaden their appeal to a generation starving for financial success and independence.


February

Why You Should Spring Clean Your Finances

The extraordinary global events of 2020 have rocked budgets, sapped savings and frustrated fiscal aspirations. But with the new year comes an opportunity to review personal finances and re-assess savings and spending goals.

Here are 4 tips to help you clean up your finances this spring after a pandemic-tainted year that has shaken many and prompted plenty to re-examine their financial strategies.


Evaluate Your Current Financial Situation

You can’t take action or work to “clean up” your financial situation if you’re unsure of what it actually looks like — from the big picture down to the details.

Start with the basics: ensure you’re operating with a budget, you have a system to track your finances and you’re living within your means.

Take a look at each of these elements in detail. Is your budgeting process one that you like and consistently stick with month after month? If it’s not working for you, it’s time to try something new. Remember, there’s no such thing as one right way to budget your money.

The perfect budgeting system is one that you can stick with and makes sense to you. That said, we do offer broad based financial planning, and in celebration of our 30th year, we’re also offering our Initial Financial Overview for $300 (Regularly $775). Learn more here or schedule an intro meeting.

After you’ve got your monthly budget in line, also take a look at how you manage your money on a daily basis. If things are slipping through the cracks, take time to clean the cobwebs from your financial processes and create systems that actually function for you.

Once you cover the details, check out the big picture. Look at your net worth — your assets minus your liabilities — to get a feel for your overall financial health.

Cut Unnecessary Costs

Lifestyle inflation is a hard thing to avoid, and it’s a trap many of us fall into at one point or another. This spring, take a look at your spending and your expenses. Have any “wants” crept into the “needs” category?

If so, clean ’em out and put them back where they belong. Understand the difference between luxuries and what you truly need to live a comfortable, happy life within your means.

Also take a look at the expenses that you can’t avoid: housing, food transportation. What costs rose over the last year? Call service providers and any company that regularly sends you a bill to ensure you’re not paying for more than you need. You can do some spring cleaning just by trimming those expenses you can’t throw out completely.

Organize Your Financial Life

Do you know the status (open or closed) of every single credit card you’ve ever had? Do you know where you’ve stashed your tax returns from the last seven years? Can you access a credit card statement quickly so you can dispute an incorrect charge in a timely manner?

You can’t manage information you don’t have or know. And you certainly can’t keep track of every aspect of your financial life if you don’t have a clue about parts of it. This sounds simple, but a little organization goes a long way.

Reconnect With Your Financial Goals and Priorities

Much like costs and expenses that sneak up on you, your financial goals and priorities can shift around without you realizing it. It’s always good to take a step back and check in with yourself. Are you still on the right track toward what you want to achieve?

If you’ve missed a few goals or have gone way off the path, that’s OK. Look at the goals you’re setting and first make sure they’re “SMART”: specific, measurable, actionable, realistic, and timely (which means they have a deadline attached to them). When your goals don’t meet these criteria, you could set yourself up for a rough time in reaching them.

Make it a habit to check in with yourself and what you want so you can ensure your actions take you closer to goals and dreams instead of further away from them.

It feels great to spring clean your home and enjoy the start to a fresh new season. The same can be said when you spring clean your finances. You can replace outdated money management systems and habits, get organized, and rediscover your financial priorities to make the next 12 months even better than the last.

The Devastation of Black Wall Street

Tulsa, Oklahoma. 1921. A wave of racial violence destroys an affluent African-American community, seen as a threat to white-dominated American capitalism.
By Kimberly Fain

In 1921, Tulsa, Oklahoma’s Greenwood District, known as Black Wall Street, was one of the most prosperous African-American communities in the United States. But on May 31 of that year, the Tulsa Tribune reported that a black man, Dick Rowland, attempted to rape a white woman, Sarah Page. Whites in the area refused to wait for the investigative process to play out, sparking two days of unprecedented racial violence. Thirty-five city blocks went up in flames, 300 people died, and 800 were injured. Defense of white female virtue was the expressed motivation for the collective racial violence.

Accounts vary on what happened between Page and Rowland in the elevator of the Drexel Building. Yet as a result of the Tulsa Tribune’s racially inflammatory report, black and white armed mobs arrived at the courthouse. Scuffles broke out, and shots were fired. Since the blacks were outnumbered, they headed back to Greenwood. But the enraged whites were not far behind, looting and burning businesses and homes along the way.

Nine thousand people became homeless, Josie Pickens writes in Ebony. This “modern, majestic, sophisticated, and unapologetically black” community boasted of “banks, hotels, cafés, clothiers, movie theaters, and contemporary homes.” Not to mention luxuries, such as “indoor plumbing and a remarkable school system that superiorly educated black children.” Undoubtedly, less fortunate white neighbors resented their upper-class lifestyle. As a result of a jealous desire “to put progressive, high-achieving African-Americans in their place,” a wave of domestic white terrorism caused black dispossession.

The creation of the powerful black community known as Black Wall Street was intentional. “In 1906, O.W. Gurley, a wealthy African-American from Arkansas, moved to Tulsa and purchased over 40 acres of land that he made sure was only sold to other African-Americans,” writes Christina Montford in the Atlanta Black Star. Gurley provided an opportunity for those migrating “from the harsh oppression of Mississippi.” The average income of black families in the area exceeded “what minimum wage is today.” As a result of segregation, a “dollar circulated 36 to 100 times” and remained in Greenwood “almost a year before leaving.” Even more impressive, at that time, the “state of Oklahoma had only two airports,” yet “six black families owned their own planes.”

These African-Americans’ economic status could not save them from the racial hostility of their day. Greenwood survivors recount disturbing details about what really happened that night. Eyewitnesses claim “the area was bombed with kerosene and/or nitroglycerin,” causing the inferno to rage more aggressively. Official accounts state that private planes “were on reconnaissance missions, they were surveying the area to see what happened.”

Despite all of the economic damage, Hannibal Johnson, author of Black Wall Street: From Riot to Renaissance in Tulsa’s Historic Greenwood District, explains that neither the survivors nor their families ever received the reparations suggested by the Tulsa Race Riot Commission. The commission recommended reparations for “people who lost property” and proposed “the establishment of a scholarship fund—that did happen, for a limited time.” The commission also proposed initiatives for the economic revitalization of the Greenwood community. Despite the tragic events, these grand ideas never manifested into a tangible reality.

Underlying Causes of the Massacre

In “The Tulsa Race Riot of 1921: Toward an Integrative Theory of Collective Violence,” the sociologist Chris M. Messer explores the underlying causes of the massacre. As a result of mass migrations to the area, driven in part by increased job opportunities, Tulsa became the city with the most African-Americans in the state. With a boom in the black population and their demands for equality, “perceptions of discrimination and shared experience among African-Americans…allowed for little time for adaptation among whites.” Tulsa’s rapid change in racial demographics made the city ripe for a riot motivated by white animosity against black economic progress. Whites of the era equated improvements in “wages and working conditions” as communistic threats. In essence, whites were resentful that blacks no longer passively accepted second-class citizenship in their own homeland.

Another structural factor that played a vital role in the Tulsa race riot was segregation. Ironically, black businesses benefited from self-sufficiency, which held both benefits and drawbacks for entrepreneurship. “Through maintenance of the legal separation of race in sociality, business, education, and residential areas, the structure of segregation encouraged initiative, but also placed parameters by restricting African-American opportunities,” Messer writes. In other words, since it was against the law for blacks to shop at white-owned stores, black businesses flourished. However, even though black businesses profited from how segregation reduced competition for black patrons, segregation also limited blacks’ mobility and opportunities to achieve outside their community.

According to Messer, the police force also contributed to the riot. Due to their ineffective leadership, they allowed mobs to gather at the courthouse for hours before seeking additional assistance. Furthermore, they actively participated in the riot by deputizing whites without discretion, arming them with guns to multiply the police force overnight. The police disregarded due process, arresting blacks and interning them in detention camps; meanwhile, no whites were arrested during the riot.

Both politicians and the media falsely framed the Tulsa riot as an uprising started by lawless blacks. Tulsa newspapers regularly referred to the Greenwood district as “Little Africa” and “n—–town.” African-Americans in the district were labeled “bad n—–s” who drank booze, took dope, and ran around with guns. Perhaps as a result of government officials’ stereotyping rhetoric and the media’s biased reporting, whites and blacks interpreted the racial violence differently. Generally, white politicians and residents perceived the black community “as predisposed to crime and in need of social control,” Messer explains. In other words, due to assumptions of black criminality, whites justified deadly violence on Black Wall Street, because blacks needed to be subjugated.

The Tulsa World newspaper inflamed the tensions between blacks and whites by suggesting that the Ku Klux Klan could “restore order in the community.” Since the KKK asserted white superiority with terroristic acts, such as lynchings, the mere suggestion from a mainstream newspaper that the KKK should intervene demonstrates how white supremacy was not only legitimized but also promoted with legal impunity. In the early 1900s, there was a rise in Black Nationalist organizations that refused to cower in the face of KKK violence or submit to societal subordination.

Whites responded to black pride and demands for equality with “social control, including segregation, lynchings, and pogroms,” Messer writes. In “Mass Media and Governmental Framing of Riots: The Case of Tulsa, 1921,” Messer and his colleague Patricia A. Bell offer further detail about how the media framed the riot, igniting tensions. In essence, blacks’ desire for socioeconomic progress and assertion of their rights was seen as a grave threat to white hegemony. Portraying all blacks as criminals served the black inferiority narrative, maintained Jim Crow segregation, and promoted the violent enforcement of racist ideology.

For instance, the racial framing of blacks as criminals legitimized whites’ congregation “at the courthouse and the subsequent destruction of the Greenwood area.” Consequently, it’s no surprise that blacks perceived the riot started by whites “as a massacre of their community.” The massacre of Black Wall Street primarily occurred due to whites “generalized perception that African-Americans were ‘out of line’” and needed to be put “back in their place.”

Despite racial discrimination and Jim Crow segregation, the Greenwood district offered proof that black entrepreneurs were capable of creating vast wealth. Based on critical analysis of the events, Messer asserts “there is evidence that whites perceived African-Americans as an economic threat to the city.” For those who supported black subjugation, witnessing blacks thrive and defy the stereotypes of black inferiority was too much.

Soon after the riot, Walter F. White of the National Association for the Advancement of Colored People (NAACP) visited Tulsa. According to him, black economic prosperity contributed to the destruction of the Greenwood District. White reported in The Nation how the city prospered under the oil boom. He stated that the town had grown from a population of 18,182 in 1910 to somewhere “between 90,000 to 100,000” residents by 1920. White claimed that the sudden wealth of the townspeople rivaled the “forty-niners” in California. However, when blacks experienced wealth, lower-class whites resented their success.

Many whites believed they were “members of a divinely ordered superior race.” Despite their inflated perceptions of themselves, there were three blacks in Oklahoma “worth a million dollars each.” A man named J.W. Thompson was worth $500,000. There were “a number of men and women worth $100,000; and many whose possessions” were “valued at $25,000 and $50,000 each. This was particularly true of Tulsa, where there were two colored men worth $150,000 each; two worth $100,000; three $50,000; and four who were assessed at $25,000.”

White concluded that many of the white pioneers in Oklahoma were former residents of “Mississippi, Georgia, Tennessee, [and] Texas.” Unfortunately, they failed to leave their “anti-Negro prejudices” behind in the Deep South. White had no positive words for Oklahoman whites. He considered them “[l]ethargic and unprogressive by nature, it sorely irks them to see Negroes making greater progress than they themselves are achieving.” In one instance, a white worker burned and demolished his black boss’s “printing plant with $25,000 worth of printing machinery in it.” In the process of leading the destructive mob, this disgruntled white employee was killed at the site.

The destruction of this successful African-American community was no accident. Messer asserts that “[t]he destruction of the community was rationalized as a necessary and natural response to put them back in their place.” Evidently, private industry and the state stood to benefit economically from the destruction. Two days after the riot, the mayor wasted no time in establishing the Reconstruction Committee to redesign the Greenwood District for industrial purposes. Blacks were offered below market value for their property. White men who offered “almost any price for their property” perceived survivors as desperate and destitute.

In essence, African-Americans posed a “geographical problem because their community was situated in an ideal location for business expansion.” The government and private industry worked in concert to bring down land prices and maintain white dominance in the Tulsa area. Poor whites’ resentment of successful, landowning blacks allowed elite whites to use them as pawns to obtain more land, wealth, and prosperity. Judging by the legal impunity granted to whites by law enforcement, the state endorsed and, in fact, supported the Tulsa riot for self-serving, capitalistic gains.

Historically, American capitalism has thrived with an elite few maintaining power and wealth. When blacks gain a strong foothold in a community or industry, they have the power to effect meaningful change. Thus, the socioeconomic progress of African-Americans on Black Wall Street threatened the power structure of white-dominated American capitalism. When white people destroyed black business establishments and homes, the façade of white superiority was maintained.

By the 1940s, the Greenwood District was rebuilt, but due to integration during the Civil Rights era, never regained as much prominence. The fate of Black Wall Street illustrates that as long as power remains in the hands of elite, mainly white families, America’s socioeconomic system can be marshalled to support and advance the tenets of white supremacy. Regardless of the progress made by prominent African-Americans, American capitalism is structured to keep a white segment of society ahead of the remaining marginalized many.

#BlackHistoryMonth #WallStreet #BlackWallStreet #FinancialManagement


January

Paycheck Protection Program (PPP) Updates

In late December 2020, Congress passed an additional Coronavirus Relief Package as a part of the Consolidated Appropriations Act of 2021. The bill contained guidance on the original Paycheck Protection Program (PPP) that was made available to small businesses in April 2020 as well as announced an additional round of the loan program for certain eligible businesses.

Businesses who received the PPP loan under the first round finally have guidance on the taxability of their forgiven loans. All forgiven loans are still not subject to income tax. Congress also cleared up that any qualified expenses paid by the loan proceeds are still deductible in 2020.

For any businesses that haven’t used their first round of funds, there are new additional expenses that the loans can be used for: operations expenditures (software that assists with the operations of the business), property damage costs (related to vandalism or looting that occurred in 2020), supplier costs (payments to suppliers of essential goods), and worker protection expenditures (costs associated with meeting CDC guidelines such as masks, sneeze guards, etc.).

If a business missed out on the initial round of PPP loans, additional funds have been allocated to the program and applications should hopefully begin to be processed the week of January 11th.

The second round of PPP loans are available to businesses that have already received and spent the first round. Applications should likewise begin to be accepted in mid-January 2021. The caveat with the second round of PPP is the business must have experienced a drop in revenue of more than 25% in any quarter of 2020 compared to that same quarter in 2019. This second round is also only available to businesses with less than 300 employees (down from 500 employees in round one).


December

2020

How Much Money Do You Need to Retire?

A common guideline is that you should aim to replace 60-80% of your annual pre-retirement income. You can replace it using a combination of savings, investments, Social Security, and any other income sources (part-time work, a pension, rental income, etc.). The Social Security Administration website has a number of calculators to help you estimate your benefits.

It’s important to consider how your expenses will change in retirement. Some, like health care and travel, are likely to increase while some recurring expenditures will go down. You no longer need to dedicate a portion of your income to saving for retirement. You may have paid off your mortgage and other loans. However, you may wish to increase your traveling for the first few years of retirement and then start making gifts to family in later years. This may require you to aim to replace 100% or even 110% of pre-retirement income.

Regarding taxes in retirement, most retirees have been saving for years in their pre-tax 401(k) or 403(b) workplace retirement accounts. One benefit of these plans is that while contributing, you did not pay income tax on any of the income you deferred to your account. The downside to this is in retirement, you will have to pay tax at ordinary income tax rates.

The great news for most retirees is that their post-retirement tax brackets are typically lower than their tax brackets during their working years. This makes saving while working into a pre-tax account like a 401(k) or IRA a great option. However, if you have a substantial pension benefits or a large Required Minimum IRA Distribution, you could end up in a higher tax bracket post-retirement.

If you weren’t aware, pre-tax retirement accounts like 401(k)s and IRAs have an IRS mandate to begin taking distributions by age 72. These Required Minimum Distributions (RMDs) can be quite the surprise for folks that will not need the full distribution but will be required to take them anyway.

If this sounds like it could be you, there are a number of tax planning techniques that can be implemented to help lower your taxes in retirement. We recommend working with a financial planner that specializes in tax planning in conjunction with your tax professional to help you plan for future tax consequences.

Cash Flow Planning

A great place to start with determining how much you’ll need to retire is by creating a written cash flow plan.

The best place to start with determining your ability to retire is to create a detailed record of your required expenses. We like to break up these expenses into two main categories: living expenses and variable/periodic expenses.

Living expenses should be expenses that aren’t expected to change drastically on an annual basis and are required for your standard of living. Utilities, gas, groceries, and personal care are common examples of living expenses. Periodic/variable expenses are items you are planning to include in your spending, but may be more flexible in the amount you spend. Examples may include vacations, dining out, and other lifestyle spending. You would also want to include any future expenses such as roof replacement and vehicle purchases.

Once you have a clear list of your required monthly/annual expenses you will know what your income need will be in retirement. (Pro tip: the first time you create a cash flow plan, leave a bit of wiggle room as most people miss a few things)

Once you know how much income you’ll need, you can start creating a plan to strategically liquidate savings in retirement. This is where is gets a bit more tricky.

Many people are great at the initial creation of their cash flow plan but forget the silent killer of long-term planning: inflation. Inflation is defined as: “A general increase in prices and fall in the purchasing value of money.” In simple terms, a dollar today will not be able to purchase the same amount of goods as a dollar in the future as prices for goods increase over time. The average cost of a loaf of bread in 1990 was 75 cents whereas today it’s over three dollars.

General inflation has been about 2-3% on average over time. The cost of healthcare has increased higher than average inflation (typically 8.5%). The average cost of college has increased by 7%. Accounting for inflation is one big missing variable many folks planning retirement on their own often overlook.

We use a real rate of return in our clients’ Financial Plans so that we can accurately understand the purchasing power of future dollars. We use real rate of return by removing inflation from income and expenses (except for medical and college expenses) and the rate of return on investments.

For medical expenses, we assume a 5.5% inflation rate. For college costs we assume a 4% inflation rate. For your investments, we use a real rate of return of 4% (based on a 60% equity/40% fixed portfolio). This is an 7% rate of return – less an inflation rate of 3%. (The historical rate of return for stocks is 10% and bonds is 6%).

Once you have your cash flow plan and have accounted for inflation, you can now start to determine how much you will actually need for retirement.

Our hope is not to frighten you but to help you think through all the potential costs of retiring before you make the leap. If planning for retirement is making your head spin, we are here to help. If you are considering retirement in the next 10 years or less or are just wanting to ensure you are saving for retirement in the right ways, we would love to speak to you on a complimentary introduction call to see if our services may be right for you.

In celebration of our 30 -year anniversary, we are also offering our Initial Financial Overview at a reduced cost of $300 (normally $775).

This service is a personalized 2-hour review of your entire financial situation. From this meeting, we will provide you with specific recommendations in written form. Since we do not sell any products or accept commissions, our recommendations will always be objective and free from bias. Our ultimate goal is to help you get clarity on your current situation and provide you with steps on how to transition successfully and confidently into retirement.

If this sounds like something you would be interested in, or if you would like to schedule a complimentary introduction call, you can schedule a time using the link below:

Schedule an Appointment


November

2020

How to shop safely on Black Friday

While the biggest shopping day of the year is this week and Christmas is right around the corner, this article talks about ways that you can shop this Friday while Covid cases have been on the rise. Normal Black Friday’s have shoppers in massive crowds and in close proximity to each other – most likely not this year! With Covid deaths averaging 1,300 per day, public health officials have issue bold warnings not only about shopping, but getting together for Thanksgiving day itself. The ideas that this article explores are as simple as spreading your shopping out over several days versus just one day and doing more of your shopping online. Be safe and happy shopping.