Bautista Planning and Analytics, LLC – Registered Investment Advisor

Tag: Financial Planning

  • How To Deal With Federal Student Loans In Three Ways

    What’s The Current Situation

    Since the beginning of the pandemic, President Trump suspended federal student loan payments with 0% interest accruing which has provided a lot of relief for borrowers since US student loan debt now exceeds $1.6 trillion. The average loan amount is predicted to be $38,147 for a 2021 high school graduate, and can expect the following average interest rates:

    • 4.60% for undergraduates
    • 6.16% for graduate students
    • 7.20% for parents and graduate students taking out PLUS loans

    Under President Biden, federal loan payments are expected to come back in May after extending the pause on federal loans from February 2022. Student loan borrowers should look at their options now to see the best one to take.

    A Common Scenario For New Federal Loan Borrowers

    The standard term for paying off student loans is ten years, so an undergrad with 4.60% will have a monthly payment of $337.05 if they have $32,371 in federal loans.

    The average salary for a college graduate is $55,260. From my experience, a single person from Oregon would have a budget something like this.

    Gross Income
    $55,260
    Taxes and other deductions
    5% contribution to traditional 401k – $2,763
    Federal Taxes (7.68% effective rate) – $4,245.40
    State Taxes (5.58% effective rate) – $3,083.17
    Health Insurance Premiums (Bronze Plan for 21 year old) – $3,348.00
    Social Security Tax (6.2% rate) – $3,426.12
    Medicare Tax (1.45% rate) – $801.27
    Oregon Worker’s Benefit Fund (2.2 cents per hour worked) – $45.76
    Oregon Transit Tax (0.1% rate) – $55.26

    Tax Savings
    Student Loan Interest Deduction (first year of paying off loans) – $272.55

    Take-home pay
    $37,764.54 for the year or $3,147 a month

    Expenses
    Student loans – $337.05
    Rent, utilities, and internet (with a room mate) – $1000
    Groceries – $300
    Gas – $240
    Cell phone bill – $75
    Car insurance – $90
    Car payment – $250
    Streaming services – $60
    Gym membership – $40
    Savings – $150
    Total expenses – $2,502.05
    Left over – $644.95

    As a rule of thumb, I like to tell clients to save 5% of their take-home income until they reach $10,000 in savings. This will help establish the emergency fund, but more can be saved and should as someone gains more responsibilities. The rest of the take-home pay can be used for entertainment, clothes, gifts, personal development, additional investing, or paying off their student loan debt.

    This is a very simple budget for someone and will change depending on someone’s circumstances. But in this scenario, the student loan borrower has some choices to make and can choose one of the following tracks to get rid of their federal student loans.

    Pay Off Student Loans From Income

    If a borrower has the capabilities to pay off their student loan from their income, they can general do so in the following ways.

    Pay off the student loans over the standard ten year period
    This will cause the borrower to pay back $40,446 over ten years, making $337.05/mo payments

    Pay off the student loans over the standard ten year period with an extra $100/mo payment
    This will cause the borrower to pay back $38,460.40 over 7.41 years

    Pay off the student loans over the standard ten year period with an extra $200/mo payment
    This will cause the borrower to pay back $37,056.45 over 5.83 years

    A borrower could also choose the extended payment plan up to 30 years. This would cause the borrower to have a monthly payment of $165.95/mo but pay $59,742 over 30 years.

    How to Save Money On Paying Down Student Loans

    If someone can afford to make extra payments and has good income security, it might make sense to refinance them with a private lender. A private lender can offer a lower rate or give a bonus of up to $1000 for choosing them as a lender (these bonuses change often).

    Finding multiple lenders that offer a bonus can be an excellent strategy to accumulate the biggest bonus while getting a lower rate with the plan to pay off the student loans early. According to Bankrate, some lenders offer rates as low as 1.99% depending on the amount, person’s credit score, and the length of the refinance.

    A borrower expecting huge pay raises over the next couple of years could be a good candidate for refinancing, but again it all comes to making the financial projections.

    Go For Student Loan Forgiveness

    If a borrower is going to have trouble paying off their student loan, they can get on one of the four repayment plans, which would require the borrower to consolidate their loans and have a new weighted interest rate.

    To make things simple in this scenario, we’ll say the weighted average turns out to be 4.60%. The four repayment plans are based on the type of loan and when the loan was taken, but here are the general guidelines for the four repayment programs.

    • REPAY – pay 10% of income for 25 years
    • PAYE – Pay 10% of income for 20 years
    • Old Income-Based Repayment – Pay 15% of income for 20 years
    • New Income-Based Repayment (for borrowers after 2014) – Pay 10% of income for 20 years
    • Income Contingent Repayment – Pay 20% of income for 20 years

    If a balance is left over after the forgiveness period, the forgiven amount is taxable. So if someone had $50k forgiven, that money would be added to someone’s tax return, and the taxes on this amount in this scenario would roughly be $15k. So it would be wise for the person seeking forgiveness to start saving $30/mo in an investment account to pay for the taxes in 25 years.

    A loan forgiveness payment is based on someone’s Adjusted Gross Income on their tax return. The main ways that someone can lower their AGI for student loans are:

    • File Married Filing Separately.
      • This is mainly done if one spouse makes significantly more than the other spouse and has a lot of student loan
    • Make a contribution to a tax-deferred account like a traditional 401k or traditional IRA
    • Make a contribution to a Health Saving Account or Flexible Savings Account
    • Take Business Deductions

    Then the borrower gets to subtract the poverty guideline level, which is different from state to state. For Oregon, a single person would use $11,770 as their deduction. So if the borrower is on REPAYE, their monthly payment would start at $301, but every year they need to recalculate their monthly payment by submitting their new AGI. Assuming a 2% increase, their final payment would be $383.89 per month, and would have paid off the loan in 10 years.

    So, in this case, it wouldn’t make sense to seek loan forgiveness at this salary and loan amount since they standard payment amount is lower over ten years at $40,446 vs $40,993.34.

    When Seeking Loan Forgiveness Makes Sense

    Let’s say the loan balance was $100k instead. Then the ten-year monthly payment would be $1,041.21, which would make the borrower’s budget tighter. Then getting on REPAYE would make a lot more sense to the borrower because their monthly payment would be $313.33 at a salary of $55,260 and would have $91,688.70 forgiven, which could create a potential tax bill of $20,171.51 and would require someone to save $33.87 for the 25 years.

    Whatever choice someone makes, whether making the standard payment or going for loan forgiveness, it’s tough to switch afterward. So it is best to know which is the right path to go down from the beginning. And sometimes, it’s best to go down loan forgiveness than try to pay off the money.

    Someone could save the difference and invest and come out ahead. This is a strategy that many doctors use to pay off student loans. The numbers show that their high salary and high student loans make more sense to go for forgiveness. Psychology, it can be challenging to continue paying the loans for 20 or 25 years, but financially it can be the best decision.

    If someone can get on Public Service Forgiveness, then loans get forgiven after ten years versus the 20 or 25 years, plus whatever is forgiven is not taxable. So this might be someone’s plan for the first ten years of their career before they pivot into the private sector.

    The Last Option But Least Desirable

    The last choice someone can make is not to pay off their student loans, which should be the last resort, and the borrower should call the loan provider to make arrangements to get back on track. If someone can’t pay back their student loans, this will typically happen.

    After 90 days, the account will be labeled as delinquent, where the three credit agencies will be notified, and someone’s credit will take a hit. So borrowing or getting services like a cell phone plan will be difficult or impossible. Renting a home can also be very hard.

    After 270 days, the account will be labeled as default, and the federal government can use its powers to garnish someone’s wages, tax return, or social security in the future.

    Know The Deal Before You Accept The Deal

    As you can see, paying back student loans is not always straightforward, and borrowers should recognize the deal before they accept it. This blog post can’t cover everything so someone should use it as a general guideline to explore what they should do before committing to a particular plan.

    As a rule of thumb, someone shouldn’t borrow more than 50% of their anticipated salary. I understand that specific careers are very competitive, require higher educations and still don’t pay a wage that covers the cost of the education. Realize that if this is the case, being on a loan forgiveness program for 20 or 25 is probably the best-case scenario. Still, if it means they’re in a career they love, then that person made the calculated decision and should be okay with the ramifications.

    As a financial planner, I can help people with these student loan scenarios and let them know the deal related to other financial planning scenarios like retirement. Then it is up to the person to decide the path they want to go down. And as a business consultant and career coach, I can help people navigate their career or business to give them the strategy and plan to help them increase their earning potential.

    Overall, there are tons of ways to make it happen. It starts off by knowing how to make it happen and then doing the work.

    If you think someone can benefit from reading this basic scenario, please share it with them. It could prevent a lot of headaches down the road.

    *Before you make any changes with your financial situation, please do your research or consult a professional to ensure you’re doing what is best for you*

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  • Understanding PGE Employee Benefits

    Highlight of PGE Employee Benefits

    PGE Stock Morningstar Report – Jan 2021


    Download

    Schedule Your Complimentary Discovery Call To Discuss Your Financial Picture


    Disclosure

    This is just general information. This is not an offer to sell a security or advice to purchase a security.

    Please do you research before you make any changes with your financial plan. You can also contact a professional organization like Grow With Joe to assist you.

    “Grow With Joe, LLC is registered as an investment advisor in the state of Oregon and is licensed to do business in any state where registered or otherwise exempt from registration.”

  • Understanding Nike Employee Benefits

    Understanding Nike Employee Benefits

    Highlight of Nike Employee Benefits

    Nike Stock Morningstar Report – Jan 2021


    Download

    Schedule Your Complimentary Discovery Call To Discuss Your Financial Picture


    Disclosure

    This is just general information. This is not an offer to sell a security or advice to purchase a security.

    Please do you research before you make any changes with your financial plan. You can also contact a professional organization like Grow With Joe to assist you.

    “Grow With Joe, LLC is registered as an investment advisor in the state of Oregon and is licensed to do business in any state where registered or otherwise exempt from registration.”

  • What Is An RSU and How To Manage Them

    What Is An RSU and How To Manage Them

    The Basic Concept

    A restricted stock unit is a company benefit that gives an employee company stock. The reason why it is called restricted is that an employee has to wait for the grant to be vested. This vesting period can be tied to an employee’s performance or time with the company. The most common vesting period is time with the company though.

    One great thing about RSUs is that they always carry some type of value. With other types of stock options, the exercise price can be higher than the market value of stock, and then the stock option are not worth anything.

    For example, let’s say Company XYZ offers an employee 100 RSUs on May 15th, 2021. If the price of the stock is worth $25 on Jan 15th, the value of the RSUs are worth $2,500, but the employee can’t exercise the RSU until May 15th. So it doesn’t matter what the price is until the actual vesting date.

    If the price of the stock dips to $20 per share on May 15th, then the value that the employee will get is $2,000.

    Typically, an employee is going to receive a block of RSUs that will be given out gradually over time.

    For example, an employee might receive 400 RSUs that grants 25% of the shares every year. So it might look like this (this will be different from employer to employer):

    • RSU Grant 400 Grants
      • 100 Units on 1/15/2020
      • 100 Units on 1/15/2021
      • 100 Units on 1/15/2022
      • 100 Units on 1/15/2023

    The value of the RSUs will be determined by the price of the stock on the vesting day. A company’s stock can be volatile and the price of a stock can dip, but RSUs always have value associated with them as long as the company is still around.

    If we look at the example above with the following exercise prices, we can see what value a person could receive.

    • RSU Grant 400 Grants
      • $25 on 1/15/2020
      • $30 on 1/15/2021
      • $15 on 1/15/2022
      • $15 on 1/15/2023

    In this case, the person would have $8,500 in compensation. If the person was able to sell all shares at $30, then the person would have $12,000 in compensation. People can’t control the price of the stock, so it’s best not to get our hopes too high on receiving a particular amount.

    Once the RSUs become vested and exercised, typically the best thing to do is to sell the stock and diversify the cash into other investment choices that are more diversified.

    How are RSUs Taxed

    When its comes to taxes, RSUs will be taxed in the following areas:

    • Federal Tax
    • State Tax (Depends on someone’s state)
    • Medicare Tax
    • Social Security Tax

    Whatever value that someone receives from exercising their RSUs, they will get taxed on that amount. If someone received $12,000 in value from exercising their RSUs in a year, they could have a tax situation like this as an example:

    • Federal Tax (24%) – $2,880
    • State Tax (9%) – $1,080
    • Medicare Tax (1.45%) – $174
    • Social Security Tax (6.2%) – $744
    • Total Tax – $4,878
    • Take Home – $7,122

    It’s also important to know that employers typically only withhold 20% for tax purposes. Come tax time, this is going to cause someone to owe taxes, so it’s wise to know what the true tax liability is so they don’t get an unpleasant surprise like owing thousands of dollars in taxes and not being prepared for it.

    It’s also important to review the 1099-B and Form 8949 to ensure that the cost basis is correct if someone decides to hold onto the stock and sell at a later date.

    Don’t assume that the employer or the custodian of the RSUs is going to give accurate numbers to the IRS.

    What To Do With The RSUs Once They Become Vested

    Once someone exercises their RSUs, they can either decide to take the stock, or they can decide to cash out.

    What is the best decision is really based on someone’s goals and how well the company is doing. With my clients, I typically run investment reports to see what is the best option for the client, but here are some other questions that people should think about.

    • Do my stock options make up more than 5% of my net worth?
    • What is the upside of holding onto the company stock?
    • What is the downside of holding onto the company stock?
    • Is there a better option for me outside of holding onto the company stock?
    • Can I use the proceeds to help me fund another goal?
    • If I decide to hold onto the stock, can I keep good records of the cost basis?
    • Am I on track with my retirement goal?

    One way to look at RSUs is just to think about it as a cash bonus that can be used to keep in stock or cash, and should be used as a tool to help reach someone’s financial goals.

    The goal of life is not to accumulate as much as we can, but to live as much as we can. We can ensure that we live as much as possible by having our goals written down, having a plan, and then executing on that plan, while adjusting the goals and plan as needed.

    As always, please do your research before you make any changes with your financial plan, or consult a professional like myself to help you out.

    If you’re interested in complimentary discovery meeting, just click here.

  • Employer Stock Purchase Plans And How To Win With Them

    Employer Stock Purchase Plans And How To Win With Them

    What Is An ESPP?

    An Employer Stock Purchase Plan is an benefit to purchase company stock at a discount. It’s suppose to be an incentive for the employee to work hard for the company and for the employee to benefit from the long-term growth of the company.

    To get started with a ESPP, there is an enrollment period that an employee needs to decide how much of their income they want to have deducted from their paycheck to purchase discounted company stock. It depends on the company on how much stock can be purchased, but it’s typically $25,000 a year or 15% of someone’s salary, whichever is lower.

    Once the amount is selection, then the employee enters the offering period. At Nike, the first offering period starts April 1st, and the purchase date is September 30. Followed by having next the offering period on Oct 1st, and the purchased date on March 30th.This will vary from company to company.

    The discount on purchasing stock is typically 15%, which is the maximum allowed by the IRS. When an employee enters the offering period, they will be able to purchase stock at the lower price of either the offering price, which is the stock price on the first day of the offering period, or at the purchase date, which is the stock price on the last day of the offering period.

    If we look at Nike in 2019 and 2020, this is a hypothetical example of how much stock an employee would have gotten if they contributed $10,000 towards their ESPP.

    Nike Offer Period 10/1/2019 to 3/31/2020
    • Offer Price – $92.28
      • Discount Price – $78.44
    • Purchase Price – $82.74
      • Discount Price – $70.33

    If an employee put $5,000 or $833.33/mo into Nike’s ESPP, they would have purchased 71.09 shares at a price of $70.33, which means the purchase price was used the acquire price. This stock on 3/31/2020 would be worth $5,881.99, which is a 17.65% return on the employee’s investment.

    Nike Offer Period 4/1/2020 to 9/30/2020
    • Offer Price – $79.23
      • Discount Price – $67.35
    • Purchase Price – $125.54
      • Discount Price – $ $106.71

    If an employee put $5,000 into Nike’s ESPP in this scenario, they would have have used the offer price to acquire the Nike stock. The employee would have acquired 74.24 stocks at $67.35. Since the stock appreciated significantly from the offer price, the stocks on 9/30/2020 are worth $9,320.09, which is a 86.41% return for the employee. A pretty good deal for the employee who participated during this period but shows that price of company stock is volatile from year to year.

    An employee who participates in an ESPP program is guaranteed to make 17.65% return (before tax) if they sell the stock as soon they are able to. There is financial risk in holding the stock, but the decision to hold depends on someone’s goal, expectations about the company stock, and risk tolerance.

    How Is An ESPP Taxed?

    Participating in an ESPP is done with after-taxed dollars, so the only thing that is taxed initially is the discount that was received. The only taxes that apply to the discount amount are federal and state taxes. Social Security and Medicare taxes don’t have to be applied to the discount amount. To get an example of tax consequences, let’s look at the projected tax situation for the two scenarios above.

    Nike Offer Period 10/1/2019 to 3/31/2020​
    • Discount Value Received:$881.99
    • Federal Tax (24%) – $211.68
    • State Tax (9.3%) – $82.03
    • Profit – $588.28
    Nike Offer Period 4/1/2020 to 9/30/2020
    • Discount Value Received: $4,320.09
    • Federal Tax (24%) – $1,036.82
    • State Tax (9.3%) – $401.77
    • Profit – $2,881.50

    The savings from the discount will always get taxed as ordinary income (Fed and State Taxes), but if someone wants to hold onto the company stock, then the gain above the acquire price can be taxed at a capital gain rate (0%, 15%, 20%) or it can be taxed as ordinary income. It depends if the sale is a qualifying disposition or disqualifying disposition.

    Qualifying Disposition

    To have the gains of the sale above the discount gain, to get the capital gains rate, it must meet the following conditions:

    • Hold the shares one year after the purchase price and two years after the beginning of the offering period
    Disqualifying Disposition

    If the sale of the stock doesn’t meet the conditions above, then the gain above the discount gain will be taxed as ordinary income.

    If we look at the offering period of 10/1/2019 to 3/31/2020, the stock was acquired when the price of the stock was $82.74, so if someone decides to sell their shares on 9/30/2020 at a price of $125.54, they would have the following situation:

    • Total Value on 9/30/2020 – $8,924.64
    • Cost Basis – $5,881.98
    • Profit – $3,042.66

    Since this sale is a disqualifying disposition, here is what a projected tax calculation would be:

    • Federal Tax (24%) – $730.24
    • State Tax (9.3%) – $282.97
    • Left Over – $2,029.45

    In order for the sale to be qualifying disposition, the sale would need to happen after 10/1/2021. But let’s say the stock ends up selling at the same price of $125.54 just so we can make a comparison.

    • Capital Gain Tax (15%) – $456.40
    • State Tax (9.3%) – $282.97
    • Left Over – $2,303.29

    If someone chooses to go for the qualifying position, it’s crucial that good records are kept of the their stock discount, the acquire price, and all the dates. Having incomplete information will mean that the IRS will typically just put someone into the disqualifying disposition, or assume that the cost basis (money it took to acquire the stock) is $0, and end up paying more in taxes than necessary.

    How Much Stock Should Be Held On To?

    Most financial advisors would recommend selling the stock as soon possible for the following reasons:

    • Holding on too much company stock can put someone’s eggs all in one basket and increase someone’s financial risk
    • Administratively, it is easy to manage come tax time

    If someone chooses to hold on to the stock, they are betting that the gains of selling later will be much higher then settling for the gains of today. There are no guarantees with investing, so people can lose money if they decide to sell later. So it is wise to look at your options and then see what is the best option to take in your individual situation.

    Overall, participating in an employer’s ESPP is a great option to get a minimum 17.65% return on your money, but this is not really investing if someone decides to sell on the first day possible, because the value is derived from the discount of purchasing the stock. It’s when someone decides to sell later that they are turning into an investor or speculator.

    Before you make any changes with your financial plan or situation, please do your own research, or contact a professional like myself.

    “Grow With Joe, LLC is registered as an investment advisor in the state of Oregon and is licensed to do business in any state where registered or otherwise exempt from registration.”

  • The Blueprint To Become A Millionaire

    In this episode, we discuss the simple strategy of becoming a millionaire. 

    Full Transcript

    Hi Everyone, welcome to the You’re Daily Cup of Joe Podcast, with your host Joe Bautista. In this podcast, my goal is to give you quick lessons on how to grow yourself physically, mentally, emotionally, and spiritually so you can have better careers, better relationships, and better personal finances.
    I’m also the author of the book “More You Know, More You Grow: How to Get Better Every Day”. In this book, I wrote down over 30 tips to help you grow in those four cornerstones. I’m also the founder of Grow With Joe, where I combine self-development coaching and financial planning for Latino Professionals.
    In today’s episode, we’re are going to talk about the blueprint to becoming a millionaire and that is to start saving 20% of your income as fast as you can. There is a book out there called the millionaire next door and the authors studied what caused people to become millionaires and they found out that millionaires saved 20% of their income and they didn’t keep up with the Jones. One reason why I’m moving to Latin America soon is it is so cheap to live there. If I live in Colombia, I can live like a king for about $1,500 a month. I could probably even make it on $1,000 per month.
    I went to Medellin Colombia for a week and I fell in love with the place. The weather was amazing, the food was good, it was cheap, the people were friendly, Spanish improved tremendously there, and they like reggaeton there. I can run my business from there and save a lot of money. I get everything from a big city but at a quarter of the price. This will definitely help me save 20% when I’m in Colombia. So if you want to start saving 20% of your income, you have to be okay with living on 50% of your income since 30% will be dedicated to taxes anyways.
    So if you look at your budget and you realize that you can’t live off of 50% of your income, then you either need to make more money or just accept a lower standard of living. The fastest way though is to accept the lower standard of living. Right now I’m living with my parents until January 2020. I want to save as much money as possible before I head off to Latin America and to keep my expenses low while I start my Grow With Joe business.
    When I was living in DC, it was really easy to live outside your means because it’s such an expensive place to live. Rents were high and entertainment cost could wipe out your monthly budget in one night if you let it. DC is a fun place to live but I believe you can make any place you’re living in, a great place to live but I’m starting my own financial planning business and I don’t have enough revenue to live in a place like DC yet so I moved back to Oregon to live with my parents. I have some clients now. Not enough to live in DC but definitely I have enough to live in Medellin, Colombia.
    If you want your dollars to go even farther, I would recommend you look into creating a career that you can do online. If you’re a computer programmer that can work from home, then I would highly recommend you look into living abroad so you can save a lot of money. This is something that Tim Ferriss wrote about in his book, “The Four Work Week” which is to live abroad so you don’t have to spend so much money. This can be a way to save 20%.
    Now to become a millionaire, it won’t happen overnight, it will come slowly. If you save 20% of your income or more, this is a great strategy for wealth accumulation. When it comes to investing, it takes time, money, and a rate of return. You can’t control the rate of return you get, but you can control how much money you put away and how long you stay invested. A dollar saved in your twenties is like saving forty dollars in your 70s. That’s forty years though and you have to save enough. Most people are not saving enough because they spend their money on other things. If your income is not enough to pay for all of your living expenses, then take a look at the career you’re in or your living choices.
    I know there are circumstances that some people need to take care of that causes them not to save 20% but if you look at the average person, they’re making choices that benefit them the most right now. It’s a lot more fun to spend money now than to wait forty years to get that money back. I would say distract yourself with something that doesn’t cost a lot of money. I spend a lot of time working on my business and I love doing it. It’s easy for me to spend a lot of time on this business and causes me not to spend a lot of time on things that cost money.
    The world is not a fair place if you play by the rules of the majority. If you don’t choose certain things to be important, then you can have more freedom. It when you need to have things certain, then it becomes expensive. You’re a price taker and will take any price that is given. You need to be a price setter and sometimes that requires you not take the deal or find a deal somewhere else. This is what I’m doing and it’s working out for me. I’m so happy now because I’m doing things for me and I’m just following my process.
    If you want to have a higher standard of living, you most likely need to raise your skills in order to get a higher paying job but that could come with trade-offs as well like working for someone that you don’t like or on something that you’re not very passionate on. Or you can just accept a lower standard of living where you’re not getting a new car every other year and not having the finest of everything. It’s like what Ryan Holiday wrote, the two ways to become wealthy is to get everything you want or to be satisfied with everything you have. But to make sure you have a future where don’t have to worry about your standard of living, it’s wise to start saving 20% of your income as fast as you can.
    That’s it for today’s episode, to summarize it, the blueprint to become a millionaire is to save 20% of your income and not to keep up with the Jones. I’ve met people who lived in a place like DC and were saving 20% of their income and they did it because of their lifestyle. They lived in a reasonable place and didn’t spend a lot of money on a car payment and going out. I remember this one guy didn’t drink and just joined a pool league. He was saving so much money. So it’s possible, you just have to make some lifestyle choices. And that is the key, they are choices we make and we choose to live that lifestyle for the most part. You have to realize that a million dollars in retirement will roughly generate $3,300 per month in today’s dollars. So how many millions of dollars will you need in retirement to live? There are some caveats to this claim, but it’s a good benchmark for what you need to up for in retirement.
    To get a free copy of my book “More You Know, More You Grow: How to get better every day” just go to my website growwithjoe.me/book and just pay for shipping and handling.
    I have a quiz on my website that grades your inner circle, so if you want to find out if your inner circle is an A, B, C, D, or F, you can take that quiz at growwithjoe.me/quiz
    I’m also trying to do a feedback Friday episode, so if you have a question that you would like to have my answer on the air, just e-mail me at friday@growwithjoe.me
    I’m also on Instagram at Grow With Joe and Facebook just look up Grow With Joe
    If you’re on ITunes, don’t forget to give me a five-star rating if you liked this episode.
    Thanks for joining me today and remember if you go with Joe, you can grow with Joe, cause Joe knows Dough.
    *Music outro

  • Tax Strategies That Latinos Should Know

    When it comes to taxes, we all lives by the same tax rules, but it’s up to us to decide if we take advantage of them, or they take advantage of us. This doesn’t mean we should break rules so that we pay less in taxes but to know the rules so that we can take advantage of them. This could give you more money in your pocket down the road to spend on vacations, family events, and other experiences that you enjoy.

    There are a lot of things you should do with your money before you start to file. I’ve seen people who made hundreds of thousands of dollars in tax mistakes because they took money from the wrong account or just didn’t do the right thing. 

    Here are five tax strategies that you should be thinking about.

    Becoming Tax-Efficient In Retirement

    When it comes to investing, there are three different places that you can put your money. You can put your money in a Tax-Deferred account, an After-Taxed account, or a Taxable account. 

    Each one of these accounts can use the same investment. For example, you can put an S&P 500 index fund in any one of those three buckets, but when you take the money out, it just gets taxed differently.

    Tax-Deferred Account

    With a Tax-Deferred account, you get a tax break now but then have to pay taxes on the money when you take the money out.

    For example, if you’re in the 22% federal tax bracket and have a state tax rate of 5.75%, for every dollar you put into this account, you would save $27.75 in taxes and this money would then grow tax-deferred until you take the money out. 

    Let’s say at retirement, the person falls into the 22% federal tax bracket and have a state tax rate of 5.75%, for every additional dollar you take out of your tax-deferred account, you would pay $27.75 in tax until you reach the next federal tax bracket of 24%. Tax rates could change in the future and the current federal rates are expected to go back to the previous rates in the year 2026. 

    If you’re closer to retirement, a tax-deferred account could make more sense since the account doesn’t have the time to grow to benefit from the Tax-Free bucket.

    Tax-Free Account

    With a tax-free account, you don’t get a tax break now but then you don’t have to pay taxes on when the money is taken out. For example, if a person is in the 22% federal tax bracket and has a state tax rate of 5.75%, for every dollar they put into a tax-free account, they would not save $27.75 in taxes, but then this money would then grow tax-free for as long it is in the account. 

    Let’s say at retirement, the person falls into the 22% federal tax bracket and has a state tax rate of 5.75%, for every additional dollar you take out of your tax-free account, you would pay $0.00 in taxes and all distributions don’t get counted toward Adjusted Gross Income which Medicare Part B premiums are calculated from.

    Taxable Account

    A taxable account is an account that is not designed for retirement but to have you’re money grow more than a checking account or a certificate of deposit. So there is no penalty for taking the money out of before 59 1/2. You just have to pay taxes on the growth if you make a certain amount.

    The tax implications on a taxable account fall into two categories:

    Short-Term Capital Gains: Are investments that are held less than 366 days. Any growth is then taxed at the highest tax bracket you’re in. So if your salary as a single filer is $50k, then you would most like have to pay 22% federal taxes on the growth.

    Long-Term Capital Gains: Are investments that are held for more than 366 days. If you fall into the 12% tax bracket or lower, you pay 0% in tax, if you are between the 22% and 35% tax bracket, you will pay 15%, and Latinos in the 37% tax bracket will pay 20%.

    The idea is that you want to have tax diversification among your investments and you want a certain amount in each pot. This is where tax planning is really helpful so that you can have the lowest effective tax rate and keep more of the money that you earned. 

    Not Rolling Over Your Employer’s Retirement Plan Into Another Account And Just Taking The Money Now

    No one is really staying at their current job until they retire in this new economy. And usually, their old company is telling them that they either need to take the money as a distribution, rollover the money into an IRA, or rollover the money into their new company’s retirement plan. 

    If you decide to take the money as cash, this is going to be considered a distribution, where if you’re under 59 1/2 years old, you then have to pay taxes and a 10% penalty on that distribution.

    If you live in Virginia and are in the 22% federal tax bracket, have a state tax rate of 5.75%, and have $10,000 in an 401k at your previous company and choose to take the money. You’re not going to get the $10,000, you’re going to get $6,225.

    You also lose out on all the future growth of that $10,000, which is supposed to help you with your retirement. 

    If you’re going to rollover the money into a different account. You can choose between your company plan or you can open an IRA. Here are some pros and cons between the two:

    Company Plan Pros:

    • Low Fees
    • Could have access to institutional shares that have low fees
    • Can avoid taking required minimum distributions at age 70 1/2 if you’re still working

    Company Plan Cons:

    • Limited investment choices
    • Can have overlapping investment if you have multiple accounts
    • Limited bond options
    • Less flexibility with withdrawals
    • Estate planning can be difficult to execute

    IRA Pros:

    • Can take advantage of Roth Conversions
    • More access to a vast array of investment choices
    • Estate planning is easy to do with an IRA

    IRA Cons:

    • Have to take an RMD at 70 1/2 for a Traditional IRA
    • Might not be protected in a lawsuit or bankruptcy
    • A broker could convince you to rollover your funds into an inappropriate financial product

    Not Taking Advantage Of A Taxable Account

    With inflation hovering around two percent, any money outside of your emergency fund and your short term goal fund is losing money to inflation. If it’s money that you don’t need for a while but still want to grab the money before retirement, a good option is to open a taxable account.

    These accounts are different from retirement accounts because there is no early withdrawal penalty and you can take advantage of long term capital gain taxes, which can be lower than the current rate you’re paying now. 

    This can be helpful if you expect to be in a higher tax bracket in the future. Plus if there is a loss with one of your investments, you’re able to write that loss off in your taxes while you can’t do that with a retirement account. 

    A taxable account is also very valuable when it comes to obtaining lower interest rates since you can use these accounts for collateral. I’ve seen interest rates cut in half because a taxable account was used collateral for a loan. You have to look at your current situation to see if a collateralized loan is right for you. This is just an option.

    Not taking advantage of Roth Conversions

    Right now with the current tax rates being at their all-time lowest until 2026, you might want to consider moving some of your tax-deferred money into the tax-free bucket.

    If you’re young enough or don’t plan to touch your tax-deferred accounts, plus have money to pay for the conversion, a Roth conversion is something to consider.

    A Roth conversion converts money that is tax-deferred to a tax-free account. The idea is that you have to pay taxes now on any amount that you converted. The mechanics of doing Roth Conversions can be tricky and you should consult a professional to help walk you through the process and to see if it’s the best option for yourself. 

    Taking Social Security Out At The Wrong Time

    When it comes to social security, anywhere from 50% to 85% of your benefit is taxed. If you’re doing something like Roth Conversions, then social security is something that you most likely want to hold off on.

    Most people want to take social security as fast as possible, but if you have other investments, you might want to dip into those accounts first so that you can have more guaranteed money in the future.

    With social security, every year you delay in taking your benefit, you get an 8% increase in your benefit. This is a pretty great return to get and not 100% of the benefit is taxed.

    There are a lot of factors to consider like health and other investments, which would determine the optimal time to start collecting. But if you collect too soon, then it can cost you money down the road. 

    Have A Plan

    One of my favorite lessons is that one minute of planning can save you ten minutes in execution time. This is like getting a 1000 percent return on your time.

    All these strategies require planning to fully maximize the benefits and some strategies you should focus more on than others. I’m so glad that I learned these lessons in my late 20s so that I can maximize my financial resources in the future.

    One of the things that you want to control, is taxes because when you’re retired and not working, an increase in taxes can have a significant impact on your standard of living. To give yourself more security and less uncertainty, have a plan for your tax situation in the future.

    Here are five strategies that you should be thinking about and hopefully they get you moving in the right direction. It is also wise to consult a professional if you’re going to implement any one of these tax strategies as well.

    “Grow With Joe, LLC is registered as an investment advisor in the state of Oregon and is licensed to do business in any state where registered or otherwise exempt from registration.”

  • Monkeys, Bananas, and Money

    In this episode, we discuss the Ja Ma quote about Monkeys, Bananas, and Money, and how you need to choose the option that will give you the most control over your life in the future. 

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    Full Transcript

    Hi Everyone, welcome to the You’re Daily Cup of Joe Podcast, with your host Joe Bautista. In this podcast, my goal is to give you quick lessons on how to grow yourself physically, mentally, emotionally, and spiritually so you can have better careers, better relationships, and better personal finances.
    I’m also the author of the book “More You Know, More You Grow: How to Get Better Every Day”. In this book, I wrote down over 30 tips to help you grow in those four cornerstones. I’m also the founder of Grow With Joe, where I combine self-development coaching and financial planning for Latino Professionals.
    In today’s episode, we’re are going to talk about this one Jack Ma quote. If you don’t know who Jack Ma is, he is the richest man in China who created Alibaba. He has this interesting quote that hits home to me because I’m starting a business and it goes like this.
    “If you put bananas and money in front of monkeys, monkeys will choose bananas because monkeys do not know that money can buy a lot of bananas.
    In reality, if you offer a job and business to people, they would choose a job because most people do not know that business can bring more money than wages. Profit is better than wages, for wages can make you a living but profits can bring you a fortune.”
    As a kid, I thought you wanted a job because that’s what everybody else was doing. Then I got into the real world and realized that having a job sucks. I think I’m unemployable because I want three things in my job, creativity, control, and autonomy.
    I want creativity in my job because I know there is something else that can be implemented in my career to make me better so something in the company to help others out. I also believe that we have to constantly be challenging old ideas because if we don’t, we can be left in the past like so many other businesses and people.
    I want control over my day in how I can pick the technology I want to use to what meetings I want to be apart of. When I was in the Marines and Federal Government, and my last job, I was doing things that I didn’t want to be doing because I thought it didn’t really fit me. Now that I run my own business, I have way more control over my activities. I have to work more because I’m in the start-up phase but I’m someone who loves control. I lose motivation pretty quickly if I feel like I have a lack of control.
    I crave autonomy as well because I don’t want someone to micro-manage me. I want to be able to be free to choose what I think is correct. I don’t want to be forced to do something I don’t want to do. I know I don’t have all the answers as well and when I have employees in the future, I will give them autonomy to come up with solutions to the problems that we are facing in the company. They might know something better than me and I want to make sure they have the autonomy to bring that solution to the table. At my last job, I wanted to get more into social media and blogging but I was told no. So I created my own firm to start getting into digital marketing.
    I feel like digital marketing is the future, and I don’t want to be stuck in the past so I’m going to focus on it one way or another.
    To get everything I want, I pretty much need to focus on growing this business. I will also get profits vs a wage. My profits are low now but in the future, I expect them to be a lot higher. This is not easy and there and been a lot of ups and downs over the past four years and I expect more in the future. I have to choose the profits over the bananas aka wages to get control, autonomy, and creativity over my day.
    You don’t have to start a business to get control, autonomy, and creativity in your day, you just have to be so good that people can’t ignore you. That is another path but both require mastery in the end. So you’re really going to have to really good if you want to succeed in business or to be a level A employee. You can’t take it easy in both but if you play the game right, you can have more freedom in your life.
    So don’t choose the banana, the banana is only a distraction from what is really important. With the banana, you can enjoy it right now, but after it is gone, you’ll be searching for another banana. The same thing with a paycheck, you get it on payday, spend it on your bills and entertainment, then you’re back at your job going through the cycle to get another paycheck. I didn’t enjoy this process because I felt I was limiting my true potential in life and I needed more time to focus on Grow With Joe. There are sacrifices that I had to make to focus on Grow With Joe but I’m fine with them because I know this is required to get the future I want. I’m going after the profits so I can get more bananas and then I can share those bananas with those that need it and hope to teach people to choose profits over bananas.
    That’s it for today’s episode, to summarize it, monkeys will choose bananas over money because that is all a monkey does. If the monkey knew that it could buy more bananas with money, they would choose the money. So if you want to have more control, autonomy, and creativity over your life, you need to choose profits over a paycheck. This is not an easy journey but it is very rewarding to do so. You could also have a business that pays you $50k a year where you work 80 hour weeks, that’s not a system you should play either unless that is temporary for bigger growth down the line. The key thing is that you need profits. You can also have a very high paying job where you save 30%-40% of it. That’s another path to getting profits.
    You are going to want more bananas down the road, so make sure you don’t put yourself in a position where you can only have one banana at a time.
    To get a free copy of my book “More You Know, More You Grow: How to get better every day” just go to my website growwithjoe.me/book and just pay for shipping and handling.
    I have a quiz on my website that grades your inner circle, so if you want to find out if your inner circle is an A, B, C, D, or F, you can take that quiz at growwithjoe.me/quiz
    I’m also trying to do a feedback Friday episode, so if you have a question that you would like to have my answer on the air, just e-mail me at friday@growwithjoe.me
    I’m also on Instagram at Grow With Joe and Facebook just look up Grow With Joe
    If you’re on iTunes, don’t forget to give me a five-star rating if you liked this episode.
    Thanks for joining me today and remember if you go with Joe, you can grow with Joe, cause Joe knows Dough.
    *Music outro

  • What Should I Do Now?

    In this episode, we discuss ways to figure out what you should be doing with your life. 

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    Full Transcript

    Hi Everyone, welcome to the You’re Daily Cup of Joe Podcast, with your host Joe Bautista. In this podcast, my goal is to give you quick lessons on how to grow yourself physically, mentally, emotionally, and spiritually so you can have better careers, better relationships, and better personal finances.
    I’m also the author of the book “More You Know, More You Grow: How to Get Better Every Day”. In this book, I wrote down over 30 tips to help you grow in those four cornerstones. I’m also the founder of Grow With Joe, where I combine self-development coaching and financial planning for Latino Professionals.
    In today’s episode, we’re are going to talk about how to get over feelings of aimlessness. I’ve been lucky over the past five years, but there hasn’t been a moment where I asked myself, “What should I be doing now?”
    If you have had to ask yourself this, then the goal is too quickly figure it out as fast as you can. You might not know where exactly you should go but if you have to travel to California from New York, then the general idea is that you should travel West, and not East, North, or South.
    I spent my teenage years and 20s trying to figure out where I should go and what helped me find my passion, is that I just focused on doing important things and I learned as much as possible through listening to podcasts and reading books.
    When I was in the Marines, I went to night school. After I graduated from college, I kept reading books and listening to podcasts. I started a personal training business. I became a financial advisor, I wrote a book. I created a podcast.
    I might not know where I want to go, but I just keep doing stuff and it shows me where I need to go. I think a great way to know if you heading in the general location is to ask yourself, “Is this important work?”
    If you spend time learning a skill or improving one, then that is something important that could be used in the future. What is not important, is doing an activity that will cause you to decay as a person. This is excessive partying, excessive Netflix, excessive drinking, excessive mindless scrolling through social media. Especially social media because all you see is the best side of everyone and that just might cause you to feel even more unmotivated.
    So look at your day and ask yourself if you’re doing important things. I would recommend that you read at least 20 pages in a book, workout, write three things you’re grateful for, and write down what you learned from reading. Plus go volunteer or join a professional networking group. When I was in DC, I joined Prospanica, ALPFA, and the Hispanic Bar Association just so I could meet different people. I met a lot of great folks and it helped shaped how I should move forward with my life.
    If you just stay as a hermit crab, then nothing will change. Even you start doing these things like learn a new skill or meet new people, you might not get a lot of clarity on your life until a couple of years later. So don’t give up after the first couple of tries, just keep going. It really took me until I was 32 to figure out what I wanted to do with my life. This reminds me of the quote, “Your 20s are for learning and your 30s are for earning.” I’m still working on the earning part but I have absolute clarity on what I should be doing with my life and I don’t ask myself, “What should I do now?”
    I heard a great saying that the meaning of life is to figure out what you should do with your life, and the purpose of life is to give away your talent as much as possible. If you know these two things, then you won’t be asking yourself, “What should I do now?” I feel so fulfilled because I know I need to be a financial planner and now my purpose in life is to share my talent with as many people as possible. This is why I write blog posts, create podcasts, do Facebook lives, and go on another podcast because I’m trying to spread what I do as much as possible so people come to me for financial planning.
    Financial planning is important to me because money can cause a lot of problems and grow up I saw how financial insecurity could cause a lot of stress with my parents. So I want to make sure that Latinos understand the language of money and the power of self-development so that they can live their best life.
    Your meaning in life is most likely going to be very different than mine but your mission in life is to figure it out. I would recommend that you just take a personality test like DISC and Meyers-Brigg to figure out what you like to do as a person and then from there, start doing things that fit your personality. You’re probably going to have to do some experimenting, but going through the trial and errors is necessary for our development and you should do it as fast as possible since today is the oldest you’ve ever been in your life, and today is the youngest you’ll be for the rest of your life. So you don’t have much time to slack off. You can, but just realize that you’re giving up your youth on the wrong thing. Go take a break when you need it but don’t overdo it. I read that the perfect break is 8 days so make sure that you do this at least once a year if you can. The idea is that when it’s time to rest, rest. When it is time to work, work.
    When you’re going through your day today, are you doing the things necessary to live your life? If not, then figure it out.
    That’s it for today’s episode, to summarize it if you have to ask yourself, “What should I do now?” then your mission in life is to quickly answer that question as soon as possible. It might take a while to answer that question, like years, to get an absolute grasp on what you should do in life, but just focus on doing important things. If you do this for a long enough, the answer will come a lot faster than doing things that are not important. And once you figure it out, you’ll live a very fulfilling life. I feel like that if I got hit by a bus tomorrow, I would be fine with it because I lived my life to the best of my ability with the time I was given. I was the least wasteful of my life. Can you say the same thing about your life?
    To get a free copy of my book “More You Know, More You Grow: How to get better every day” just go to my website growwithjoe.me/book and just pay for shipping and handling.
    I have a quiz on my website that grades your inner circle, so if you want to find out if your inner circle is an A, B, C, D, or F, you can take that quiz at growwithjoe.me/quiz
    I’m also trying to do a feedback Friday episode, so if you have a question that you would like to have my answer on the air, just e-mail me at friday@growwithjoe.me
    I’m also on Instagram at Grow With Joe and Facebook just look up Grow With Joe
    If you’re on iTunes, don’t forget to give me a five-star rating if you liked this episode.
    Thanks for joining me today and remember if you go with Joe, you can grow with Joe, cause Joe knows Dough.
    *Music outro

  • Discipline Creates Freedom

    In this episode, we discuss the importance of being disciplined with your life and how it can give you freedom.

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    Full Transcript

    Hi Everyone, welcome to the You’re Daily Cup of Joe Podcast, with your host Joe Bautista. In this podcast, my goal is to give you quick lessons on how to grow yourself physically, mentally, emotionally, and spiritually so you can have better careers, better relationships, and better personal finances.
    I’m also the author of the book “More You Know, More You Grow: How to Get Better Every Day”. In this book, I wrote down over 30 tips to help you grow in those four cornerstones. I’m also the founder of Grow With Joe, where I combine self-development coaching and financial planning for Latino Professionals.
    In today’s episode, we’re are going to talk about discipline creates freedom. Think about it, the more you’re disciplined with your health with you’re younger, the more freedom you will have in the future. You’ll be less likely to have medical problems and medical problems are expensive. They cost you time and money. Getting a heart attack could cause you not to go to work and you might have a lot of medical expenses to deal with.
    I know when I’m in my golden years, I don’t want to be stuck in a hospital all the time so I’m going to make sure that I’m working out and eating well now so that I don’t have to worry about having that future. Since this is ingrain in my head, I stay disciplined with my workouts.
    The same thing applies to my personal finances. The more I am disciplined with saving and investing while managing my debt, the more options that I will have in the future. The last thing I want for my future self is to be stuck. When you’re stuck, that is when feelings of stress and hopelessness creep in and it just causes you to become miserable.
    There are a lot of other things that I need to stay disciplined and I do that because I want freedom. I don’t want to be a slave to my circumstances. If I want to do something, then I go out and do it.
    There are some sacrifices that I have to make now, but the price of going to the gym is so much cheaper than dealing with a health issue in the future.
    Right now I work a lot of hours on this Grow With Joe Business because I want the financial and time freedom of having my own business in the future. I work 60-70 hour weeks because I know that is required to give me the future that I want. Once I get my client based established and I get better at running the business, then I can do anything I want. One of the things that made me want to start my own business is the freedom to choose my day. Right now I work from a Co-worker space but I choose my hours but I can pretty much work from anywhere.
    I’m about to go spend a month in Chicago visiting my sister and to go to a financial planning conference. Since I work for myself, I have that flexibility. My goal is to also go live in Latin America for two years to go learn Spanish by Jan 2020.
    In order to have this flexibility over my life, I have to stay disciplined with my Grow With Joe business. I have to make sure I’m doing things to generate revenue and not get distracted by the other things in life. If I can do this, then I can go live in Latin America and see a different part of life.
    You don’t have to live the same life as to be but you need to be disciplined with your career, your mind, and your career so you have had freedom in the future. To be discipline requires hard choices and like I’ve said in the past, hard choices, easy life; easy choices, hard life.
    It is so easy to skip the gym to sleep in, or to watch television. It’s easy not to work on that project at work to clear out your inbox. It’s easy to get take out instead of making your healthy lunch. It is so easy to do all of these things, but if you do for long enough, you will get a future that won’t have freedom in it. You’ll be stuck with what life gives you and most likely you won’t like what life gives you. This is a future that I don’t want.
    One of the biggest fears for me is to go to state-run long term care facilities. Long-term care is a big concern for a lot of people, where about 70% of people will need it in retirement. To get on long term care provided by the government, you basically have to get rid of all of your assets and you might not like the facility you’re in but since you don’t have any other options, then you’re stuck. I know I have to take control over my future and to get the control I have to stay disciplined with my actions today.
    This doesn’t mean I’m a robot at all times but you have to find the balance between work and play. I eat hamburgers and fries occasionally and some days I don’t go to the gym, but the idea is that I don’t make the same mistake twice in a row. There are still some great things to enjoy today and you want to make sure take some time to enjoy it because once the time is gone it’s gone forever. As I said, it’s a balancing act between enjoying today and preparing for the future.
    So make sure you have your goals written down and that you know who you want to be as a person and that you’re actually being that person you want to be. Know your identity as a person and stay disciplined in being that person. I know I want to be healthy and be a successful financial planner in the future, so I’m going to do things today that help me be that person. I don’t want to wake up one day and regret the life I lived because you’ll never get that time back, so live life the way you want to live and be disciplined about it. Not everything is important in this world, you just have to decide what things actually are.
    That’s it for today’s episode, to summarize it, discipline creates freedom. Every action that you take today will help you either get closer to the life you want to live or will create more distance to the life you want to live. So every day when you do the activities that will make you a stronger person physically, mentally, emotionally, and spiritually, you’ll get one percent closer to absolute freedom for yourself. When you don’t, you’ll get one percent farther from absolute freedom. The choice is yours, just make sure you’re making the right choice.
    To get a free copy of my book “More You Know, More You Grow: How to get better every day” just go to my website growwithjoe.me/book and just pay for shipping and handling.
    I have a quiz on my website that grades your inner circle, so if you want to find out if your inner circle is an A, B, C, D, or F, you can take that quiz at growwithjoe.me/quiz
    I’m also trying to do a feedback Friday episode, so if you have a question that you would like to have my answer on the air, just e-mail me at friday@growwithjoe.me
    I’m also on Instagram at Grow With Joe and Facebook just look up Grow With Joe
    If you’re on iTunes, don’t forget to give me a five-star rating if you liked this episode.
    Thanks for joining me today and remember if you go with Joe, you can grow with Joe, cause Joe knows Dough.
    *Music outro