First Time Homebuyer Tips
Buying your first home is one of life’s milestones that everyone should have the opportunity to experience if they choose. Owning a home gives you a feeling of accomplishment and as you make payments a portion is going to your personal net worth rather than a landlord. The process is exciting but one surefire piece of information that I wish I
home buyer tips
Buying your first home is one of life’s milestones that everyone should have the opportunity to experience if they choose. Owning a home gives you a feeling of accomplishment and as you make payments a portion is going to your personal net worth rather than a landlord. The process is exciting but one surefire piece of information that I wish I knew when buying my first home is that you will come across surprises. Whether it be a delay in closing, an issue with financing, or closing costs being higher than expected, it is important to know that you can do all the preparation possible and still be hit in the face with some setbacks.
This article will not only touch on some of the important considerations when buying your first home but will give examples of possible setbacks and how to avoid them.
Know Your Number
The most important piece of information to have when purchasing your home is how much you can spend. The purchase of your home should not be the only goal to consider. All of your other financial objectives such as paying off debt (i.e. college and unsecured) and saving for retirement must be taken into consideration. Also, it is recommended you have an emergency fund in place that would cover at least 4 months of your fixed expenses in case something happens with your job or some other event occurs. Knowing your number does not only include what you can afford today but how much you can afford monthly moving forward. If your monthly cash flow becomes dangerously low or negative with the addition of a mortgage payment (including mortgage/property taxes/homeowners), the house may be too expensive.
NOTE: Just because you are preapproved for a certain amount does not mean you need to spend that amount.
Choose An Agent You Trust
You will be spending a lot of time with your agent so choose them wisely. It should be someone you get along with and someone you can trust will look out for your best interests. If your agent just cares about receiving a commission, they may push you to purchase a home before looking at all of your options or buying a home you can’t afford. Remember, you are the client and therefore should be treated as such.
NOTE: Just because you never physically cut a check to your real estate agent doesn’t mean you aren’t paying them. In a typical transaction the seller will pay the commissions. An agreed upon percentage will come out of the sales proceeds and go to both real estate agents (the buyer’s and the seller’s) and therefore the cost is built into the price you pay.
Use Your Agent As An Asset
Your agent is likely much more knowledgeable about home buying than you so use that knowledge to your benefit. The agent should be able to help you value homes and determine whether the house is fairly priced. Ask them as many questions as possible throughout the entire process.
On The Fence
If you are on the fence whether or not to buy a home then take your time. If you may relocate because of your job or family don’t jump into purchasing a home. It is not worth paying the closing costs and going through the hassle of home buying if you may move in the near future. We typically use the “5 Year Rule” when making the determination. If you don’t see yourself being in the house for at least 5 years you should consider whether or not you will get your money back when you sell.
Compare Lenders
The banking industry is extremely competitive and it is worth shopping around for the best offer when choosing a mortgage provider. If you aren’t comfortable with numbers, don’t be afraid to ask for help. A difference of 0.10% on a 30 year mortgage could be the difference of thousands of dollars wasted on interest.
Don’t Cheap Out On Homeowners
Don’t choose your homeowners policy based on price. Of course price is one of the considerations but it is not the only one. Make sure your policy is the most comprehensive you can comfortably afford as the cost of increased premiums is likely much less than the cost of coming out of pocket for something not covered. Remember, insurance companies, like banks, are in a competitive industry so shop around.
Down Payment
Most lenders require a 20% down payment of the home value to avoid paying additional costs. This means if the value of the home is $200,000, you will have to pay $40,000 out of pocket! Most lenders offer Federal Housing Administration (FHA) loans that allow you to put down as little as 3.5%. If you choose this type of loan you also have to purchase Private Mortgage Insurance (PMI). This will be a cost added to your mortgage payment until the value of your home is adequate enough to remove the PMI. It is important to factor this in as a cost similar to interest because a 5% interest rate could quickly look like 6-7% if you have to pay PMI.
Closing And Other Additional Costs
There are a lot of out of pocket costs to consider when purchasing a home. Examples of these costs are listed below. An important piece of knowing your number is to consider all the costs that may come up during the process.
Loan Origination Fee
Attorney Fees
Property Taxes
Home Owners Insurance
Appraisal Fee
Inspection Fee
Title Insurance
Recording Fee
Government Recording Charges
Credit Report Fee
Flood Determination Fee
How To Help Avoid Certain Complications
Situation: I bought a house at the top of my budget that I thought was move in ready but needs repairs.
Recommendation: Choose an inspector that has a great reputation and knows the location. There may be issues that are common to the area that one inspector may be more likely to identify. Also, bring a contractor or someone of similar background for a walk through. Repairs can be extremely costly and if you purchased a home at the top end of your budget you may not be able to afford certain fixes. It should be known that all issues cannot be foreseen but taking the necessary steps to diminish these situations will not hurt. Don’t purchase a home that will bankrupt you if repairs need to be done.
Situation: I bought a home I can’t fill.
Recommendation: Closing costs and repairs won’t be the only out of pocket expenses. Complete a summary of items you think you may need to buy after the purchase. This may include furniture, appliances, décor, and fixtures. In these situations it is always better to overestimate.
Situation: My lease is up in a month and I would like to purchase a home.
Recommendation: Purchasing a home is something that requires time and planning. The home will likely be the largest purchase you’ve ever made (depending on the college you choose) so it is not something to rush. If you are thinking of moving after your lease is up or when you relocate jobs, start planning as soon as possible. Feeling forced into purchasing something as important as a home will likely lead to regrets.
About Rob……...
Hi, I’m Rob Mangold. I’m the Chief Operating Officer at Greenbush Financial Group and a contributor to the Money Smart Board blog. We created the blog to provide strategies that will help our readers personally , professionally, and financially. Our blog is meant to be a resource. If there are questions that you need answered, pleas feel free to join in on the discussion or contact me directly.
Stock Options 101: ISO, NQSO, and Restricted Stock
If you are reading this article, your company has probably granted you stock options. Stock options give you the potential share in the growth of your company’s value without any financial risk to you until you exercise the options and buy shares of your company’s stock.
types of stock options
If you are reading this article, your company has probably granted you stock options. Stock options give you the potential share in the growth of your company’s value without any financial risk to you until you exercise the options and buy shares of your company’s stock.
Stock options give you the right to purchase a specific number of shares of the company’s stock at a fixed price. There is typically a vesting schedule attached to option grants that specify when you have the right to exercise your stock options. Companies can offer employees:
Incentive Stock Options (“ISO”)
Nonqualified Stock Options (“NQSO”)
Restricted Stock
It is very important to understand how these different types of options and grants are taxed otherwise it could lead to unfortunate tax surprises down the road.
Non-Qualified Stock Options (NQSO)
A non-qualified stock option (NQSO) is a type of stock option that does not qualify for special favorable tax treatment under the US Internal Revenue Code. Thus the word nonqualified applies to the tax treatment (not to eligibility or any other consideration). NQSOs are the most common form of stock option and may be granted to employees, officers, directors, contractors, and consultants.
You pay taxes on these options at the time of exercise. For tax purposes, the exercise spread is compensation income and is therefore reported on your IRS Form W-2 for the calendar year of exercise.
Example: Your stock options have an exercise price of $30 per share. You exercise them when the price of your company stock is $100 per share. You have a $70 spread ($100 – 30) and thus $70 per share is included in your W2 as ordinary income.
Your company will withhold taxes—income tax, Social Security, and Medicare—when you exercise the options.
When you sell the shares, whether immediately or after a holding period, your proceeds are taxed under the rules for capital gains and losses. You report the stock sale on Form 8949 and Schedule D of your IRS Form 1040 tax return.
Incentive Stock Options (ISO)………..
Incentive stock options (ISOs) qualify for special tax treatment under the Internal Revenue Code and are not subject to Social Security, Medicare, or withholding taxes. However, to qualify they must meet rigid criteria under the tax code. ISOs can be granted only to employees, not to consultants or contractors. There is a $100,000 limit on the aggregate grant value of ISOs that may first become exercisable (i.e. vest) in any calendar year. Also, for an employee to retain the special ISO tax benefits after leaving the company, the ISOs must be exercised within three months after the date of termination.
After you exercise these options, if you hold the acquired shares for at least two years from the date of grant and one year from the date of exercise, you incur favorable long-term capital gains tax (rather than ordinary income tax) on all appreciation over the exercise price. However, the paper gains on shares acquired from ISOs and held beyond the calendar year of exercise can subject you to the alternative minimum tax (AMT). This can be problematic if you are hit with the AMT on theoretical gains but the company's stock price then plummets, leaving you with a big tax bill on income that has evaporated.
Very Important: If you have been granted ISOs, it’s important to understand how the alternative minimum tax can affect you prior to exercising your stock options.
Restricted Stock……………….
Your company may no longer be granting you stock options, or may be granting fewer than before. Instead, you may be receiving restricted stock. While these grants don't give you the same potentially life-altering, wealth-building upside as stock options, they do have additional benefits compared to ISO’s and NQSO’s.
The value of stock options, such as ISO’s and NQSO’s, depend on how much (or whether) your company's stock price rises above the price on the grant date. By contrast, restricted stock has value at vesting even if the stock price has not moved or even dropped since grant.
Depending on your attitude toward risk and your experience with swings in your company's stock price, the certainty of your restricted stock's value can be appealing. By contrast, stock options (ISO & NQSO) have great upside potential but can be "underwater" (i.e. having a market price lower than the exercise price). This is why restricted stock is often granted to a newly hired executive. It may be awarded as a hiring bonus or to make up for compensation and benefits, including in-the-money options and nonqualified retirement benefits, forfeited by leaving a prior employer.
Of course, the very essence of restricted stock is that you must remain employed until the shares vest to receive its value. While you may have between 30 and 90 days to exercise stock options after voluntary termination, unvested grants of restricted stock are often forfeited immediately. Thus, it is an extremely effective “golden handcuff” to keep you at your company.
Fewer Decisions
Unlike a stock option, which requires you to decide when to exercise and what exercise method to use, restricted stock involves fewer decisions. When you receive the shares at vesting—which can be based simply on the passage of time or the achievement of performance goals—you may have a choice of tax-withholding methods (e.g. cash, sell shares for taxes), or your company may automatically withhold enough vested shares to cover the tax withholding. Restricted stock is considered "supplemental" wages, following the same tax rules and W-2 reporting that apply to grants of nonqualified stock options.
Tax Decisions
The most meaningful decision with restricted stock grants is whether to make a Section 83(b) election to be taxed on the value of the shares at grant instead of at vesting. Whether to make this election, named after the section of the Internal Revenue Code that authorizes it, is up to you. (It is not available for Restricted Stock Units (RSUs), which are not "property" within the meaning of Internal Revenue Code Section 83)
If a valid 83(b) election is made within 30 days from the date of grant, you will recognize as of that date ordinary income based on the value of the stock at grant instead of recognizing income at vesting. As a result, any appreciation in the stock price above the grant date value is taxed at capital gains rates when you sell the stock after vesting.
While this can appear to provide an advantage, you face significant disadvantages should the stock never vest and you forfeit it because of job loss or other reasons. You cannot recover the taxes you paid on the forfeited stock. For this reason, and the earlier payment date of required taxes on the grant date value, you usually do better by not making the election. However, this election does provide one of the few opportunities for compensation to be taxed at capital gains rates. In addition, if you work for a startup pre-IPO company, it can be very attractive for stock received as compensation when the stock has a very small current value and is subject to a substantial risk of forfeiture. Here, the downside risk is relatively small.
Dividends
Unlike stock options, which rarely carry dividend equivalent rights, restricted stock typically entitles you to receive dividends when they are paid to shareholders.
However, unlike actual dividends, the dividends on restricted stock are reported on your W-2 as wages (unless you made a Section 83(b) election at grant) and are not eligible for the lower tax rate on qualified dividends until after vesting.
Comparison Chart
stock option comparison chart
Disclosure: The information listed above is for educational purposes only. Greenbush Financial Group, LLC does not provide tax advice. For tax advice, please consult your accountant.
Michael Ruger
About Michael……...
Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.
How Is Child Support & Alimony Calculated In New York?
For purposes of child support, either parent can be named the custodial parent by a Court. For the purposes of this article we will assume that the mother is the custodial parent and will be receiving the child support and alimony payments. However, fathers who have custody can also use this as a guide.
child support and alimony calculation in New York
For purposes of child support, either parent can be named the custodial parent by a Court. For the purposes of this article we will assume that the mother is the custodial parent and will be receiving the child support and alimony payments. However, fathers who have custody can also use this as a guide.
How do I apply for child support?
Usually, you ask for child support in Family Court in the county where you and the child live. You can also go for child support in the county where the father lives. You are not required to have a lawyer to apply for child support but it is recommended that you consult with a divorce attorney prior to filing for support.
How is the dollar amount of child support calculated?
The Child Support Standard Act (CSSA) is the law in NYS and tells the amount of child support the father must pay. The CSSA applies to parental income up to a maximum of $181,000 (2021 limit) and the Court can apply it to income in excess of $148,000 based on certain factors. Examples of these factors are: the financial ability of the father, the lifestyle the child would have enjoyed if the parents stayed living together, and any special needs the child may have. The maximum can be adjusted periodically by the New York State legislature. The amount you get depends on what the father’s income is, what your income is, how many children you have together, and what your children’s basic needs are
The Support Magistrate will look at the information in your financial disclosure affidavit and the father’s financial disclosure affidavit, if he supplies one. The Support Magistrate might also ask you and the father to answer questions. And you and he might be asked to give the Support Magistrate other evidence of your income and expenses, such as a paystub or a W-2 statement.
Both parents’ incomes are used to figure out how much child support the father has to pay because both parents have to support their children.
This is how it is calculated:
Deduct (subtract) these things from each parent’s income:
spousal maintenance paid to a former husband or wife by court order
child support paid to other children by court order
public assistance and supplemental security income (SSI)
city taxes
social security and Medicare taxes (FICA)
Combine (add) the incomes of both parents after making those deductions, and multiply the total you get by the correct percentage:
17% for one child
25% for two children
29% for three children
31% for four children
Not less than 35% for five children or more
Divide the figure you get between both parents according to both your incomes (on a “pro rata” basis). This means that if the father earns twice as much as you, he must pay twice as much child support.
The father may also have to pay additional amounts for:
child care, if you are working or going to school.
medical care not covered by insurance
the child’s educational expenses
The parent who has health insurance must also (if reasonable) continue providing health insurance for your children. The cost of providing health insurance will be shared between yourself and the father, in proportion to your respective incomes. If neither of you has health insurance, the court will order the custodial parent (the parent with the greatest amount of custody) to apply for the state’s child health insurance plan.
When do child support payments stop?
Child support payments typically end when the child reaches age 21 or becomes emancipated. Emancipation means a child is living separately and independently from a parent, or is self –supporting. Some things that show that a child is emancipated are:
Child has completed 4 years of college education
Child has gotten married
Child is living away from home (except for living at school or college)
Child has gone into the military
Child is 17 years old and working full-time (except for summer vacation jobs)
Child willingly and fro no good reason has ended the relationship with both parents
alimony calc
In New York, alimony is referred to in three different ways: as alimony, spousal support, and maintenance. “Temporary maintenance” is an order that one spouse must financially support the other while the divorce is being finalized. Once the divorce is finalized, the temporary maintenance stops and the judge decides whether permanent alimony is appropriate.
How is the amount of alimony payments determined?
Unlike child support payments there really are no set guidelines for the amount and duration of alimony payments. To decide whether spousal support is appropriate, the judge will look at the needs of the spouse asking for support and whether the other spouse has the financial ability to provide financial help. For example, if your income is lower than your spouse’s but you are able to support yourself, you may not be entitled to alimony. The court will also look at other factors when making a decision about support:
the length of the marriage
each spouse’s age and health status
each spouse’s present and future earning capacity
the need of one spouse to incur education or training expenses
whether the spouse seeking maintenance is able to become self-supporting
whether caring for children inhibited one spouse’s earning capacity
equitable distribution of marital property, and
the contributions that one spouse has made as a homemaker in order to help enhance the other spouse’s earning capacity.
The court will also look to see whether the acts of one spouse have inhibited or continue to inhibit the other spouse’s earning capacity or ability to obtain employment. The most common example of this would be domestic violence. If one spouse’s abuse of the other affected that abused spouse’s ability to maintain or to get a job, the court might consider those actions in making its order. Disclosure: The information listed above is for educational purposes only. Greenbush Financial Group, LLC does not provide legal advice. For legal advice, please consult your attorney.
Michael Ruger
About Michael……...
Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.
How To Prepare Financially For A Divorce
Divorce can stain finances as well as emotions. Both parties are trying to determine financially what life is going to look like after the divorce is finalized. It is also more common than not that in a marriage one of the spouses assumes the role of paying the bills and managing the family's finances. In this arrangement the "non-financial spouse" is now
divorce financial planner
Divorce can stain finances as well as emotions. Both parties are trying to determine financially what life is going to look like after the divorce is finalized. It is also more common than not that in a marriage one of the spouses assumes the role of paying the bills and managing the family's finances. In this arrangement the "non-financial spouse" is now forced very quickly into the role of understanding their total financial picture.
How much income do they need to meet their living expenses?
Where are all of the marital assets located?
How much debt do they have?
How much should they expect to receive or pay in child support / alimony?
Who is responsible for paying the bills while the divorce process is ongoing?
Step 1: Establish a team of professionals........
Since so many important financial decisions are being made in such a short window of time, we strongly recommend that each spouse surround themselves with a team of professionals that they like and trust. That team of professionals usually consists of an attorney /mediator, accountant, therapist, and a financial planner. Even though the divorce process can be stressful and sometimes scary, surrounding yourself with a knowledgeable team of advisors will help you to better understand your current situation, the options available to you, and to help you better prepare for life after the divorce is final.
Step 2: Identify your assets and debts.............
You need to fully understand your current financial situation before you can begin to plan for your income and expenses going forward. First, make a list of all of your assets, their values, where they are located, and how they are owned (jointly or separately). This can usually be accomplished by gathering statements on all of your accounts.
You will also need a list of all of your debts, the name of each creditor, outstanding balances, monthly payments, interest rates, and how each debt is owned (jointly or separately). This information can typically be obtained by requesting a credit report for both you and your spouse.
Step 3: Create a new budget...............
Before you can figure out how much income/support you will need going forward you need to know what your estimated monthly expenses are going to be once the divorce is finalized. We recommend listing all of your monthly expenses and list separately large one-time expenses that are expected to be incurred in the future such as college expense for the kids or a down payment on a house. Once you know your estimated monthly expenses you can work with your financial professionals to determine how much income/support you will need each month to meet those expenses taking into account taxes, inflation, and an assumed rate of return on your assets. Please feel free to utilize our GFG Expense Planner which is located in the Resource section of our newsroom.
Step 4: Develop financial projections............
Remember, the financial decisions that you are making now during the divorce process will most likely have a dramatic impact on what your financial future will look like. Not all assets are treated equally. Some assets are taxable while others are not. Likewise, you may have access to certain assets now to meet current expense while others assets may not be available until retirement.
The goal of these financial projections is to determine what your financial future may look like next year, 3 years, 10 years, and 20 years from now given the financial decisions that are being made today. There are a lot of variables that need to be considered when creating these projections such as assumed rates of return on current assets, annual contribution amounts, taxes, social security, inflation, and debt. We strongly recommend that individuals work with financial planners that specialize in divorce planning to develop these projections.
Having formal income and expense projections in place will also allow you determine how changes to what is being offered during the negotiation process will impact your financial future.
Step 5: Crossing emotional and financial decisions
It is not uncommon for individuals to have an emotional attachment to a specific marital asset. The two most commons assets that we see that fall into this category are the primary residence and pensions.
We see many situations where one spouse has a strong emotional attachment to the house and they become completely focused on doing whatever it takes to "keep the house". But there are certain circumstances where from a financial standpoint that keeping the house is just not a viable financial option. Couples can underestimate the financial impact of divorce. While married, a couple's total income was being used to maintain a single household. Now that same level of income will need to be used to maintain two separate households which usually comes at a greater overall cost. If projections can be produced early on in the divorce process showing that keeping the current house is just not a viable option, it may remove that addition stress of fighting over an asset that cannot be financially maintain by either spouse.
Disclosure: The information listed above is for educational purposes only. Greenbush Financial Group, LLC does not provide legal advice. For legal advice, please consult your attorney.
Michael Ruger
About Michael.........
Hi, I'm Michael Ruger. I'm the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.
Sample Business Plan
The business plan for a startup business provides entrepreneurs with a guide in creating a business plan and items to consider when starting a new business.
Sample Business Plan
The business plan for a startup business provides entrepreneurs with a guide in creating a business plan and items to consider when starting a new business.
Click on the PDF link in the green box below.
Types of Retirement Plans
The comparing retirement plans chart gives business owners the ability to compare different types of plans available to their company.
Types of Retirement Plans
RC2
The comparing retirement plans chart gives business owners the ability to compare different types of plans available to their company.
Click on the PDF link in the green box below.
Rollover Chart
Provides individuals with clarification on the rollover rules for retirement accounts and IRA’s.
Rollover Chart
RC
Provides individuals with clarification on the rollover rules for retirement accounts and IRA’s.
Click on the PDF link in the green box below.
Expense Planner
The expense planner is used to determine your annual after tax expenses both now and in retirement.
