Credit Card Rewards

Let’s talk about credit card rewards. But first, let’s talk about mindset.  It takes a different mindset to make money verse saving money.  Making money is all about adding value to others, while saving money is about making your dollar go further and often delaying instant gratification.  The trick to savings is getting to a point where it is automatic. Making the dollar go further however, is about being creative and using the various tools at your disposal. One of them being credit cards. Credit cards can be one of your best resources for helping your money go further.  To that point I live off my credits cards and try to put absolutely every purchase I make on them.

Credit Card Rewards

Credit card are fantastic because of the rewards they give back.  Every dollar you would spend anyway can go towards enhancing your lifestyle. It could be points for hotel stay, free flights, cash back or much more. What is great about these rewards it that they do not cost you anything extra if you use your credit card correctly.

So here is how I use my credit cards and how I suggest others to do the same.

First things first, if you buy anything on a credit card you must be able to pay it off immediately.  This is by far the most important part of all of this. This isn’t new advice, but it is solid advice. If you cannot pay off the monthly balance every month then this strategy is not for you and you should stick to a debit card or cash.  (Although, credit cards are a much easier way to track spending than using cash).

What I do is set up the payment to come out automatically every month and pay the statement balance in full. Yes, all of it. Every last penny.  This makes it really easy not to forget to take care of it at the end of the month.

Any bills that will allow me to pay with a credit card I will set it up to pay them automatically with the card.  Utility bills, gym memberships, home remodeling projects, business expenses, I even go as far as doing my charitable giving with my credit card when it allows.

The surprising thing is that the more available credit you have and do not use helps improve your credit score.  Some experts believe you should only use 30% of your available credit.  But honestly the more available credit you have the better, so do not hesitate to call your credit card company once or twice a year to ask for a limit increase. Remember, credit card companies compete ferociously with each other, this can really benefit you.

Also, be sure to watch out for companies charging you a processing fee for using a credit card. This is usually a case by case basis, but you need to make sure the points or rewards you are getting are worth any extra fees.  For example, the DMV wanted to charge me 3.25% for using a credit card, but I would have only received 2% cash back… in this case I wrote a check.

Picking the best Credit Card Rewards

Today it seems like there is an unlimited number of types of credit cards you can get and each one has different rewards and benefits.  Some are for travel, some are cash back, and some are store specific rewards. It can be confusing. Luckily, Money did a nice article about which cards are best in a variety of categories, check it out here: The Best Credit Cards of 2020.

Picking a card can be tricky and you need to think about how you spend your money to pick the best one.  I personally like to use the rewards for travel.  Well, when we can travel. (Thanks COVID) It is such a great feeling to stay at 5 Star hotel and not pay for it or get a night in the mountains during peak season ski sea for free.

It is also fun to fly for free.  My family and I usually get a least one free vacation a year.  Currently, I am stock piling my points until some of the travel bans are lifted but plans are in the works.  Ask yourself how you spend money.  I have had clients use their points for new gear at REI, grocery runs at Costco or even Disney World tickets.  Which is going to add the most value to your life.  Keep it simple though, pick 2-3 and stick with it. Too many credit cards can get difficult to manage.

It really is about getting more for your dollar.  Because you pay off the balance each month, you do not incur interest charges or extra expenses. When I buy things on a credit card I am not spending more or buying things I would not normally buy.  These rewards allow me to save more money and still get the lifestyle I want.  It is like the best life hack.  Having the right credit cards can help you live a richer life!

Squeeze even more out of your credit cards

Points and rewards are an obvious no-brainer. However, there are also some other advantages of paying with a credit card that are often overlooked. Some can give you longer warranties and insurance on your purchases. Many have great purchase protection options, far better than any debit cards.  Some can provide trip cancellation insurance and/or car rental insurance. Plus, if you are lucky concierge services. Many services can help you plan your next trip, arrange for concert tickets, or even land a sought-after restaurant reservation. Think of it as your own personal assistant.

The list is long for the benefits of using credit cards to buy your everyday items and I only scratched the surface of how to maximize them.  Credit cards can be a wonderful tool but use them correctly and responsibly.  With great power comes great responsibility, or something like that! Now go forth and get those rewards.

Money Savings Secrets: Amazon Prime

MONEY SAVINGS SECRETS: AMAZON PRIME

Do you love saving money? Do you love Amazon? If you are anything like 50% the U.S. population, we are guessing you do! A recent statistic showed that nearly half of U.S. households are Amazon Prime subscribers. While the free two day shipping may be enough for many to sign up, Prime offers a ton of other money saving benefits (many of which you may not know about). So we have rounded up our top money saving secrets for Amazon Prime. We hope you and your wallet enjoy!

1. Save on Groceries:

All Prime members already get special in store deals at Whole Foods, but they also now receive an extra 10% on sale items. Make sure you have the Whole Foods app downloaded and linked to your Amazon account for checkout.

2. Get free Books: 

If  your library card gets more of a workout than your ATM you will love this one. Prime members can download a free digital book every month, plus you can also borrow a book each month from Kindle Owner’s Lending Library. This perk is priceless, escpailly when it can be used to get these books.

3. Free Photo Storage: 

This is one of our favorites! Prime Photos gives you unlimited photo storage- yes..unlimited! This is a great way to organize, store and share photos,  plus you can ditch any other service you have been paying for.

4. Earn Shopping Credits:

So you don’t really need your order in two days? Even better…select No-Rush Shipping and get discounts and rewards for future orders.

5. Free Music Streaming: 

Prime members also get Prime Music which includes over 2 million songs. Create your own playlist and take your music with you- your membership gets your music on up to 10 devices.

6. Watch Free Movies and TV: 

Prime Video is more commonly known but certainly still worth mentioning. You literally get thousands of free TV shows and movies, so ditch the Redbox and start saving. Plus their original shows are great (I mean, have you even seen Jack Ryan?! You’re welcome.

7. Free Magazines:

Travel + Leisure, Wired, Money, Good Housekeeping and more…all free with your membership! These digital magazines are availble through the Kindle app on any smartphone, tablet or computer.

8. Free Samples:

Amazon has a samples site that is a lot better than a cart battle at Costco. Some are free, some are not, but even if you pay for a sample you will get a credit towards a future purchase.

9. Get Exclusive Deals: 

As a Prime Member you get special deals and discounts. 25% off dog food, 50% off sunscreen- you name it- make sure to browse through member deals as they change often.

10. Get 2% Rewards with Amazon Reload: 

Amazon Reload offers a 2% rewards every time you reload your Amazon.com Gift Card balance. 

Who knew Prime had so many perks?!

The question, however,  still remains- is the $119 per year worth it? Analysts recently scrutinized all the perks that Prime membership now offers, and estimated that it is worth $785 annually. We’d say that’s a deal!

Have you used any of these Amazon Prime Money Savings Secrets? Any we forgot? Not yet a Prime Member- not to worry, you can sign up here.

Spread the love- Be sure to share this post!

Money Savings Secrets: Amazon Prime

Please note this post includes affiliate ad links -As an Amazon Associate we earn from qualifying purchases.

3 Questions to ask before making any financial decision

Whether it is hiring a financial advisor, picking a mutual fund, or refinancing your mortgage it is a good idea to ask a lot of questions when it comes to your money. However, if you only ask a few, here are our top 3 questions to ask before making any financial decision.

 

What is the investment philosophy?

 

Make sure to ask yourself if the investment make sense to you. It may be great for 99% of the population but is it a fit for you and your current situation. Does it match up with your risk tolerance and time line?  Really take the time to contemplate this.  Further, do you understand it? Or is it too complex? Understanding this will help move you forward in a meaningful way.

 

Do I trust the person giving the advice or offering the investment?

 

Simply put, what is your gut telling you about who is behind this. What is the person’s credibility and credentials? Was it your cousin Eddie spouting off a stock tip at the family reunion? Or a longtime friend and financial advisor who has been in the industry for years? It may seem like a no-brainer to ask this question, but it is sometimes easy to get caught up in the hype of the product and the potential returns.

A quick way to tell if an advisor truly has your best interest in mind is if they are CFP® (Certified Financial Planner)- learn more on that here, but in short it means they are a true fiduciary and must have your best interest in mind regardless of commissions. Trust is so important, don’t take it lightly.

 

What is the down side risk, and can I afford it?

 

What can you stand to lose? Sure, look at what the potential of the investment is, but don’t ignore the risk. Make sure the amount you invest matches your risk tolerance. The old saying stands true here- “Don’t put all your eggs into one basket.”  Before you make an investment decision know the risks.

Short and simple, those are the top 3 Questions to ask before making any financial decision!

Are you considering an investment and aren’t sure if it is right for you? Asked these questions and are still unsure? We are here to help…just give us a call.

 

10 Books for a Better Money Mindset

10 Books for a Better Money Mindset

 

The list of personal finance and investing books is pretty extensive. This is not that list. While those books can be helpful, many get very technical, and if your mindset isn’t in the right place to take in that knowledge – what is the point?  Plus, technical knowledge alone won’t lead you towards a wealthy and rich life (financial or otherwise). A lot of what holds people back from success are their thoughts and beliefs about money.

 

What stories do you tell yourself about money?

 

For some, and as society has come to reinforce, is that money is the root of all evil, or that rich people are greedy, or some other negative belief along those lines. Living with a negative or scarce mindset will never lead you to a positive or abundant life. In fact, research shows that one of the BEST predictors of success in life is one’s mindset.

 

Get your mind right, get your life right!

 

So then, what is this list? This is a list of books for a better money mindset.  Some talk specially about money, others don’t, but all should spark something in your mind and help you view the world, and your money in a different and more positive way.  Let’s get to it!

 

1. Mindset: The New Psychology of Success by Carol Dweck

This is an obvious first choice because, well, this book is THE book about mindset.  There are decades of research behind this book that get translated into specific, actionable and tangible detail. Dweck has a very compelling view of why we should look differently at failure and learning. Further, this book helps you to evaluate if you are approaching your money from a fixed or growth perspective. There is a huge difference, which is why I so recommend this book.

You can pick it up here.

Books for a Better Money Mindset

 

2. Start with Why by Simon Sinek

Simon Sinek is a genius when it comes to getting to the heart of why you should do something, not how.  Why do you want more money? Certainly, it’s not to have more pieces of paper with dead Presidents on them laying around. Defining what is truly behind your financial goals will help propel you in the right direction. You will discover that money is never really the WHY.

The book is here (or audio book). Sinek also has a powerful TED Talk around this concept as well.


Books for a Better Money Mindset

 

 

3. The Power of Broke: by Daymond John

Shark Tank investor and entrepreneur Daymond John was broke with a $40 budget when he was starting his clothing brand FUBU, which today is a $6 billion brand. How is that for bootstrapping?! This book is great for putting money into perspective. It shows that it doesn’t always take money to make money (another disempowering colloquialism that society has)- the book has so many perfect examples of this. Use your lack of financial resources to your advantage. We also recommend this book to those well off because it can reignite a hustle you may have lost along the way.

This is a must read for anyone- get it here or on audio book.


Books for a Better Money Mindset

 

4. The Talent Code by Daniel Coyle

This book is grounded in science. It doesn’t skip straight to the “here’s how it works, go do that”, instead, it helps you understand what influences the development of your skills and as a result helps you become a better learner in all areas. This book has expanded my mind and it is another great perspective builder. The are practical stories and examples of the concepts. Above all, Coyle shows how all of us can achieve our full potential (and the best money mindset) if we set about training our brains in the right way.

Check it out here, or again on audio book.


Books for a Better Money Mindset

 

5. Think and Grow Rich by Napoleon Hill

This is a classic and one of those books I revisit at least once a year. It is that good. If you haven’t read it, stop what you are doing and read it already.  In fact, I believe this should be required reading for high school students. In the book Napoleon Hill recounts his research of more than 500 self-made millionaires (keep in mind the book was originally published in 1937) and then he boils down the “secret” to building wealth into 13 principles and reveals “major causes of failure” that hold many of us back from getting rich.This should really be on every list of books for a better money mindset, or self improvement book list in general.

If you haven’t read it, do yourself a favor and pick up a copy today. Get one for your and two more as gifts for a recent grad.


Books for a Better Money Mindset

 

6. The Inner Game of Tennis by W. Timothy Gallwey and Zach Kleiman

I had to convince my wife to read this because she isn’t a huge Tennis fan, she read it and loved it. So, if you are not a  big Tennis Fan either, simply ignore the title and read on.  This book is about how to master your inner dialog. The inner game of tennis theory states that two opposing mindsets are always battling. The first, the “teller” mind which is filled with self-judgments and criticism. This mindset wants to over-control your performance.  The second “doer” mindset is the best mindset for peak performance and happens when you are free and react with your game. You must master both.  Again, master your mind- master your money.

Definitely worth a read. You can pick it up here.


Books for a Better Money Mindset

7. The Millionaire Next Door by Thomas J. Stanley Ph.D.

This book examines the lives of unlikely, unexpected millionaires. It goes into the habits, careers, and relationship that shape these people. Some of the material is dated to the 90’s but the concept is still applicable today- especially the principle that wealth is more common than you would think, actually it that might be even more relevant today. There is lots of practical advice in this classic book and one worth checking out.

Available in paperback or audio book.

Books for a Better Money Mindset

 

8. The Other 90% by Robert K. Cooper

I believe there are two main problems with the majority of self-help and leadership books. First, the vast majority of self-improvement books don’t seem to challenge conventional thinking in any meaningful way, nor do they bring about fresh insights. Second, they tend offer over simplified platitudes about success. The other 90% goes in the opposite direction.  Dr. Robert Cooper, a neuroscience pioneer, urges us to take a radically different view of human capacity. We are mostly unused potential, he says, employing less than 10 percent of our brilliance or hidden talents. This book provides action steps to develop your full potential in all areas of your life.


Books for a Better Money Mindset

9. Unfu*k Yourself by Gary John Bishop

I love this book because it offers a no-BS, tough-love approach to help you move past self-imposed limitations. It is a great alternative to cozy, everything is rainbows, self-help books. Beyond the catchy title, it offers practical insights on fostering the will for change, changing your language to serve you and overcoming analysis-paralysis. It drives home the point, quite bluntly, that you currently have the life (and the money mindset) that you are willing to put up with. It is certainly a refreshing read and why it made our list of books for a better money mindset.

Pickup the paperback or audio book here.

 

10. The Power of Habit by Charles Duhigg

Habits around money can either be the most empowering or the most detrimental. This book walks you though everything you need to know about breaking and forming habits that will transform your life, and of course your money mindset. This book is a fascinating account on recent research into habit and worth the time to read it. What cues some of you current money habits? What rewards do you have in place for your good habits? Do you have a plan in place to create better habits around money? This book dives into it all. Change might not be fast and it isn’t always easy. But with time and effort, almost any habit can be reshaped.

The paperback or the audio book are great!


The Power of Habit - Books for a Better Money Mindset

 

There you have it! Our top Ten Books for a Better Money Mindset. Have you read any of these already? Are there others you would add to the list? We hope you find value in these and that at least one resonates with you in a way that makes you want to intentionally improve your mindset,  because if you improve your mindset- you improve your life!

 

Books for a Better Money Mindset

Please note this post includes affiliate ad links -As an Amazon Associate we earn from qualifying purchases.

 

Insurance is not an investment

You don’t view car insurance as an investment, so why would life insurance be?

 

If insurance is not an investment, why do we have insurance?  It is for protecting your assets and for protecting your love ones.

Think about this… You have car insurance and home owner’s insurance, but why?  It’s so you will be covered if you get into an accident, or stuck in an unreal hail storm, or if the water heater breaks and floods the basement, or in the unlikely event your house catches fire.

In all these cases people purchase insurance to make sure that they are not going to have to pay the full amount to get back to whole after something terrible happens. That’s it.

We have yet to meet a person that bought car or home owners insurance as investment thinking they were going to make money or get returns off the insurance.

 

So, why is life insurance different?

 

Why do you buy life insurance products?  It’s so that your loved ones are taken care of if something happens to you.  If you are no longer here, who or what is going to replicate the income you generate? Most people say that if they pass on early or unexpectedly they want their family to be able to maintain the same quality of life.

 

So, the questions to ask here are:

 

  1. How much do I need to achieve the goal?
  2. What is the most effective and inexpensive way to achieve that goal?

 

There are certain factors to think about that will help determine what kind of insurance to buy and how much. These factors include your time frame, health and resources (other investable assets).

When you ask these questions you are looking at insurance from a needs-based approach. It helps you find a solution that fits your particular situation.  When acting from this point of view, very rarely does a whole life or universal life product make sense.  Term life insurance normally gives you greatest amount of coverage for the least amount of money.

 

So, what about the stories we hear that tout life insurance as investment?

 

Well, have you ever gone to see a movie and walked out a little disgruntled saying “Man, the best parts were in the trailer, why did I even go?!”  That is the feeling most people get when they buy insurance as an investment. The story or sales pitch was better than the product and the only winner was the one selling the insurance.

At the end people often say “my advisor said it would be like a forced savings that I can borrow against, but I have no idea what it is” or “they said it grows tax free or something like that” It is one thing to waste your money on a $15 movie, it is another thing to waste thousands of dollars on an insurance you think is an investment but in reality doesn’t meet your needs.

If your financial advisor has tried to pitch you insurance as an investment, you don’t have a financial advisor, you have a salesperson. 

Insurance is not an investment.

 

Here are some facts on whole life insurance, universal life insurance, portfolio or permanent life products that should help bring some perspective:

 

  • They cost a lot more to get the same amount of coverage as a term policy.
  • There are hidden fees.  You can find them buried in the 8 pt. font 20+ page contract. Are you are up for some “light” reading?
  • These products pay big commissions to the insurance salesmen, of which they do not have to disclose to you.
  • If you borrow against it, your death benefit will be reduced, and your love ones will be left with less.
  • If you do mix investment with insurance, i.e. you ‘invest’ in insurance products like endowment or money back plans, your returns are bad, limited at best. Usually less than 3 or 5%.
  • When you die with a cash value, they only pay out the face amount, not the extra money you’ve put into it. Your extra investment vanishes- they keep it.
  • And finally, you are borrowing the money so there is interest to be paid, which means you pay even more.

 

These products have many moving parts and are quite convoluted. Many clients come to us asking for help to understand what they bought from someone else and how it works.

In most cases we end up having to call the insurance company to get full indoctrination of the product so that we can understand that if this happens, that happens and so forth and so on. Whole life and universal life products simply have too many variables.

 

Insurance unfortunately is unnecessarily complicated, but it doesn’t need to be.

 

If you understand that insurance is not an investment, the picture can comes into focus. Term life is more than often the best solution for the lowest cost. The best way to buy it is through a broker or advisor that shops several companies to get you the best deal. Which, by the way, is what we do.

We’d love to discuss this more with you and truly find a solution that meets your needs, so give us a call and join us around the fire.

 

4 Reasons to Hire a CFP ®

At Bonfire Financial we pride ourselves on having a team of CERTIFIED FINANCIAL PLANNERs™ (CFP ®). We often get asked what is a CFP ®, how are they different from other financial advisors and the reasons to hire a CFP ®. First, its more than just an acronym. Unlike some designations that are worth little more than the paper they’re printed on, the CFP ® is one of the most esteemed financial certificates around.  Each CFP ® is held to an extremely high standard and requires an immense amount of work. Typically nine months to two years of study.

In the US there are only 81,109 CFPs ® and only 2,274 in the state of Colorado, according to the CFP® Board professional demographics.  The exam itself is a grueling 7-hour test that assess the financial advisor’s ability to apply principles of financial planning. It covers all areas of insurance, investments, income taxes, retirement, estate planning, ethics and conduct, and financial plan development, among many other skills.

Beyond the test there is so much more that goes into the certification. We have condensed it down to the top 4 Reasons to Hire a CFP ®

Fiduciary Standard:

Currently the SEC has NO uniform fiduciary standard that applies to all financial professionals who provide personalized investment advice. This means there is no oversight to protect consumers and clients from paying excessive commissions or receiving substandard performance. Consumers are exposed to even greater and unnecessary risks from products that may be deemed suitable (more on that here) for them but are inferior to other available options and not necessarily in their best interests.

The CFP ® Board has Code and Fiduciary Standards that requires CFP ® professionals to act in the best interest of the client at all times when providing financial advice. So as a CFP ® we are legally required to act in your best interest, all the time. In addition to this standard, Bonfire Financial is also a Registered Investment Advisor which furthers this obligation.

 

Ethics Code:

All CFP ® practitioners agree to abide by a strict code of professional conduct, known as CFP ® Board’s Code of Ethics and Professional Responsibility, that sets forth ethical responsibilities to the public and clients. This ensures we act with honesty, integrity, competence, diligence, and offer services objectively.

It’s a pledge to protect the confidentiality of all client information, avoid or disclose and manage conflicts of interest and always act in the client’s best interests.

 

Fitness Standards:

The CFP ® Board has also established specific character and fitness standards for the CFP ® certification. This ensures that an individual’s prior conduct would not reflect adversely upon the profession or the CFP ® certification marks. This helps you know that if you hire a CFP ® you won’t find out later that they have a:

– Felony conviction for theft, embezzlement or other financially-based crimes.

– Felony conviction for tax fraud or other tax-related crimes.

– Revocation of a financial license (e.g. registered securities representative, broker/dealer, insurance, investment advisor) .

– Felony conviction for any degree of murder or rape.

– Conviction for any other violent crime within the last five years.

– Felony conviction for non-violent crimes (including perjury) within the last five years.

– Personal or business bankruptcies.

 

Experienced Life Long Learners:

CFP ® professionals are required to complete 3 years of experience related to delivering financial planning services to clients. They also must have a bachelors degree prior to earning the right to be a CFP ®. This real-life experience means that CFP ® professionals have practical financial planning knowledge. They can truly help you create a realistic financial plan that fits your individual needs.

Once certified, CFP ® professionals are required to maintain technical competence and fulfill ethical obligations. Every two years, they must complete a minimum 30 hours of continuing education to stay current with developments in the financial planning profession and better serve clients.

Need more reasons to hire a CFP ®? We’d love to answer any other questions on what it means to have a CFP ® working for you, feel free to contact us.

4 Reasons to Hire a CFP

 

Differences Between an IRA and 401k

There are some common misconceptions about the differences between an IRA and a 401k. While these two are very similar there are some distinct differences that make each unique.

Before we tackle the differences between an IRA and a 401k its important to note that these are not investments.  They are accounts.  Just because you have an account open does not mean you have investment that will grow and help fund your retirement.  Much the same way that just because you own a refrigerator doesn’t mean you actually have any food in it.

To continue with this analogy…  in your fridge you can have a variety of different types of food (juice, pickles, eggs, beer, and anchovies- if you’re into that sort of a thing). In an IRA and 401k you can have different investments too.  Such as stocks, bonds, mutual funds, etfs, commodities, real estate, and more. You can also change or “throw out” the Investments in your IRA or 401k if you’ve left them in that back of the fridge for too long. You know like that 3lb. jar of mayo you bought for that party that one time.

Now that you are hungry, lets get to the meat of it,  how they are similar?

 

Similarities:
  • Both allow you put money in on a tax deferred basis. Meaning that taxes are not due at the time when you add money. For example, if you make $50,000 and decide to invest $2,000 of it into your IRA or 401k, the $2,000 is not going to be part of your taxable income.
  • Your money within an IRA or 401k can be invested in a variety of ways.
  • The money that is invested is allowed to grow tax deferred. You do not have to pay taxes on the gains from your investments until you take the money out.  If you make $1,000 off of your $2,000 investment, you now have $3,000 in your account and you will not have to pay taxes on that gain until you withdrawal the money.
  • When you do withdrawal the money for whatever amount it will be considered part of your taxable income. You will own taxes on the withdrawal amount. Let’s say you withdrawal the $2,000 and your current annual income is $50,000 after the withdrawal your taxable income will be $52,000.
  • Since an IRA and 401k are designed for retirement the money that you invest is not supposed to withdrawn until after the age of 59 ½. You read that correctly -the government added in a half, well, because your inner 6-year-old knows it’s that important. If you withdrawal the money prior to 59 ½ you will pay a 10% penalty on the money plus the amount withdrawn is now part of your taxable income.
  • Also, the government mandates that at age 71 ½ (again the half) you have to take out a Required Minimum Distribution (RMD).  Basically, they tell you the amount that you must pay taxes on.  Quick note, if you are still employed at age 71 ½ and not the owner you can delay your RMDs.

 

Differences:

While an IRA and a 401k have many similarities, they do differ is a few very key areas.  The main one being that an IRA is Individual Retirement Account, so it is your and yours alone. And anyone can have one. While a 401k is company sponsored, so you can only participate in it if your employer offers one. Or, if you are the owner and created one.  Some other key differences are:



Differences between an IRA and a 401k

So, which is right for you?  It depends. If you have the option of putting your money into an employer-sponsored 401k or an IRA you should do both. Max them out if possible. We recommend prioritizing the 401k first and then adding to the IRA if you are within the income limits.

This hopefully gives you a good overview of the differences between an IRA and 401k. While there are many factors to consider, the most important thing to remember is that both are great tools to use to help achieve your retirement goals.

We’ll plan to discuss how Roth IRA’s and various other types of 401k options might work for you soon, but in the meantime if you’d like a personalized recommendation please reach out to us as we are always happy to help!

 

How Financial Advisors Get Paid

 HOW DO FINANCIAL ADVISORS GET PAID?

This should be simple enough…you go to them for advice, you pay your fees and commission and believe they have your best interest in mind when they invest your money. You go happily on your way. Sadly, it’s not that straightforward. How Financial Advisors get paid can be confusing, we are here to break it down.

There are three different types of advisors you could choose to work with, and it’s important to know that each type gets paid differently.

 

HERE ARE THE OPTIONS:

 

  1. They could be a broker
  2. They could be a hybrid or dually register advisor
  3. Or, they could be a register investment advisor

 

LET’S TAKE A LOOK AT WHAT THIS ALL MEANS.

 

Brokers:

First, if an advisor is a broker, which most advisors are, they receive a commission for the products that they sell and the investments they recommend. The commission can be upfront (they get paid when you buy), it can be on the back end (they get paid if you sell), or it can be trailing (they get paid a portion annually).  The problem is that with most of them you “should” read the prospectus (the gigantic legal document you get when you buy  or get sold a product and throw away when it arrives in the mail) to find out what you are really paying.

Moreover, there is an even bigger problem with brokers which has to do with what is in your best interest.  They only follow the “suitability” standard, which says the product or recommendation only needs to be “suitable” for the client. Who even knows what that means? It is ambiguous. The standard is easier to achieve and the bar is set way, way low.

In other words, they could recommend a Mutual Fund that is ten times more expensive to own than a comparable Exchange Trade Fund, and that is acceptable because its “suitable” for the investor.  This obviously raises questions as to why a broker would prefer one investment over the other, quick side note…more often than not Mutual Funds have higher commissions or fees to the broker.  To us, this is a huge conflict of interest and why Bonfire Financial is not a broker.

 

Dually registered or a hybrid advisor:

Next, let’s look at advisors that are dually registered or a hybrid advisor.  There are some nuances between to a hybrid/dual registered advisor,  but for the purposes of this discussion let’s focus on the fact the that they are registered investment advisors AND licensed through FINRA (the Financial Industry Regulatory Authority, Inc. which is a private corporation that acts as a self-regulatory organization).  While that sounds good on the surface there are issues with this format.  As a registered investment advisor, they act as fiduciaries and  do what is in the best interest of the clients. Great news, but they are also registered with FINRA to sell products as a broker. What? Yes, they can sell investment products and collect a commission.

These advisors can wear two hats with the same client.  They can have accounts which they are acting as fiduciaries on and then have another account with the same client in which they act as brokers and only follow the suitably standard.  How can someone be a fiduciary to a client but not on all their accounts or money?  I am still scratching my head on this one.  In my opinion a client would never really know if the recommendations were in their best interest or not! This was a pass for Bonfire; we are not dually registered and will never be.

 

Registered Investment Advisor:

Finally, there is the Registered Investment Advisor (RIA). These advisors have a legal obligation to act as fiduciaries.  Meaning that they have to act in your best interest at all time.  They must explain upfront how they are compensated and must disclose any conflicts of interest.  While this may seem like a no-brainer there are very few advisors that are acting full time in this capacity, less than 13,000 total in the US, surprising, right? Why aren’t there more?  I let you read into that one.

 

In conclusion:

I have always strived to be upfront and honest with people and my clients.  At a young age, I started my career at a big wire house and thought I was fiduciary for my clients and that I could act in their best interest.  However, the more I learned, the more I realized the cards were against me and decisions made at the top made it difficult to truly act in the manner.  I was a vegan in butcher shop, a sheep in wolves clothing.

So, I made a switch and I started Bonfire Financial, a Registered Investment Advisor.  Now my core values are in line with the company I am with and I can be a true fiduciary all the time.

If you have any other questions on how Financial Advisors get paid, or if you are curious what category your advisor falls in, feel free to give us a call. 

 

Why Bonfire Financial?

A BONFIRE IS A FIRE OF CELEBRATION.

 

As I look back on my life some of the best memories and conversations have happened sitting around the fire.  I have been pumped up at a homecoming bonfire. Inspired by having deep conversations with friends about the future around the fire. I have felt close to my family on camping trips roasting marshmallows on the fire. And I have felt at peace sitting at a fire and staring at the stars.  Fire is life and all of these are moments are cherished.  At the core of it all, life is meant to be experienced.

 

That sounds good an all but I am a financial advisor and what does that have to do with our business?

 

I say everything!  Or at least it should.  Money is a vehicle to those experiences and the time to enjoy those moments.  The more money you have, the more experiences you can afford to have with your family and friends. You can give more to the causes you care about. The more peace of mind you can have.

 

I wanted to create a company that focused on that outcome, not just dollar figures.

 

Everyone has different goals and dreams and how they want to spend their life, and what Bonfire Financial does is focuses on those and comes up with solutions to meet them as efficiently and as quickly as possible. My hope is that our clients will enjoy even more moments sitting around the proverbial bonfire celebrating their lives.

In the many years I have spent in the financial industry I have seen that most financial companies only focus on the bottom line. They priorities their shareholders’ value.  This means that the decisions made about the company are not necessarily about how to add more value to the client. They are often about how to improve the share price.  A good share price is nice but it comes at the expense of the client, and the employees of the company.

 

So why is Bonfire different?

 

We created Bonfire Financial as a registered investment advisory firm (RIA) so that we could be true fiduciaries to our clients. As such, we must do what’s in their best interest always.  In effect, putting our client first, which is where we think they should be. We have a belief that if we add more value to our clients than anyone else, not only will they be happy, the company will thrive.

So, to drive this home we came up with a name that reminds us to focus on the client’s outcome everyday so that hopefully soon we will all be sitting around the fire celebrating!

All the best,

Brian

President & CEO | Bonfire Financial

 

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