About Atwood Financial Planning

How do I choose a financial advisor at AFP?

You can take a look at each planner’s profile here at Our Team. See who makes the most sense for you. If you don’t have a special financial interest that matches one of our planners, you can indicate “no preference” and we will match you as best we can. You can always change planners if the chemistry isn’t right.

What if I want to change planners?

Sure, no problem. We realize sometimes chemistry is not right.  Email Planning@atwoodfinancial.com and let us know you’d like to change. If you know who you want to change to, please indicate that. It’s all confidential and your current planner will not know your reasons unless you want to share them.

What if I want to stop working with AFP?

No problem. We’ll be sorry to see you go, but there are no commitments with AFP and therefore you can stop any time. You will be asked to pay for any meetings that are outstanding and we part as friends. You can stop while you’re in the initial planning phase or years later or never. And, you can always come back whenever you want.

How much will a plan be in total?

We don’t know that yet until we start working with you, but typically it takes 2-4 hours spread over 2-3 meetings. Each meeting is about 1-1.25 hours. You are ONLY charged for the time you are actually meeting with your advisor. You are not charged for prep time and you cannot be charged in advance of a meeting. You pay for each meeting after the meeting ends.

How is AFP regulated?
AFP is regulated by its home state, the District of Columbia, Department of Insurance, Securities and Banking, (the DISB). We are also regulated to do business in CO, CA, NJ, PA, NY, OH, VA, and MD, but our main regulator is the DC DISB. We can take up to 5 clients in states not listed here.
How are planners qualified?
Every planner at AFP has taken and passed their Series 65 exam, the NSAA Investments Advisers Law examination, which allows them to function as an investment advisor representative.  Some planners have their Certified Financial Planner (CFP) certification and that is indicated by their name wherever it appears on the site.
Do I pay in advance?

No, never. You only pay after each meeting is finished and your planner tells you how much time was spent. We will charge down to the quarter hour so if you run a few minutes over an hour, you will only be charged for an hour and a quarter. We cannot take advance payments.

Are there any hidden fees or charges for “prep” time?
There are no hidden fees with AFP. We can ONLY charge for meetings (or mutually agreed Analysis Time) and do not charge for prep time or the time it takes to write your notes. You can also ask specific questions by email and as long as there is no analysis necessary, your planner will respond at no charge. If the question requires analysis, the planner will tell you if you need to meet or if he/she needs to do analysis before responding to your questions by email (Analysis Time) and give you an estimate of how long it will take (e.g. 15-30 minutes). You can then approve the time or not.
How do I cancel my Fearless Finance subscription?
We’re sorry to see you go. If you have a question or comment about Fearless Finance, you can email help@fearlessfinance.com. To cancel your Fearless Finance subscription, simply go to the My Subscription OR Accounts Settings page and click Unsubscribe. You can delete your account on the Account Setting page.
How are AFP planners paid?
AFP planners are paid by the hour only. The planner is responsible for indicating the amount of time and amount owed for the preceding meeting on the Summary Notes provided to the client after each meeting. You can pay for your meeting by Venmo, check, or Zelle.

Financial Fitness

When is the best time to buy or lease a new car?
If you need to replace a car, the best time to buy is between Thanksgiving and New Year’s. Dealers need to move the current model year OFF the lot and out of their inventory, and they usually are very willing to make a deal. Look for deals in advertisements and online and ask for the specific deal shown in the ad. They will inevitably try to up-sell you with a model with one or two extra options that will completely change the price of the deal. When you see a deal that makes sense for you in an ad or online, go in and ask for that exact deal. Do not let them change it on you. By law, they MUST produce a car with that deal if it has been advertised.

If you are not going to take a specifically advertised deal, make sure you go in knowing the price you are willing to pay and don’t deviate. Look for cars that are less popular. They don’t deal on models that everyone wants.
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How should I best use my holiday bonus?
Here’s our priority ladder for bonuses or any excess cash you get during the year. Start with the first step. If you are “secure” on a rung, move to the next step, and wherever you find your first “insecure” rung is where you prioritize those funds. Here’s the ladder:
1) $3k ($1500 if you rent) of cash savings for Rainy Day events like home repairs, root canals, etc.?
2) 3-6 months of expenses saved in cash savings for a total loss of income (Emergency Savings)?
3) Did you contribute at least 15% of your pretax income to a retirement plan? If not, see if you’re eligible to contribute to a Roth IRA for your bonus (or contribute the bonus pre-tax to your 401(k) to avoid that higher tax payment!).
4) Do you have credit card debt? If so, and if rungs 1-3 are secure, pay off credit card debt.
5) Did you contribute to your child’s 529 this year?
6) Did you pay an extra payment to your mortgage this year?
7) Free savings that can be saved into a brokerage account for investment or to fund a project like redoing a bathroom, or saving for a vacation
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What is a fiduciary and why does it matter?

In financial planning, “fiduciary” can mean different things to different people. A fiduciary is a person who is a trustee for someone else’s assets (usually, money). A fiduciary planner must act solely in the client’s best interest with regard to financial planning advice. That means a fiduciary is NOT trying to sell you a financial product that he/she collects commission on just to make the commission. It also means that he/she is giving you advice that might mean you have fewer assets for them to manage. It’s hard for anyone to go against their own interest for someone else, that’s why it’s best to have an advisor with NO conflicts that is paid by the hour. 

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How do I find a good bank account or credit card?

Here are some tips to get started: 1) Whatever bank account you choose, MAKE SURE you aren’t paying any fees. There are too many great free options out there to justify a monthly fee. 2) For your savings account, try to get a High Yield Savings Account (HYSA). Traditional bank savings accounts have paltry interest rates. ⠀

For your credit card, you also want a free option–especially for your first card. Keep in mind that you might not be able to get a card with great perks, depending on your age of credit and credit score. If you’re still in school, you could get a student credit card (that usually comes with a low credit max). If you’re out of school and can’t get approved for a normal credit card, consider a Secured Card to help build your credit. ⠀

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What is Net Worth and why does it matter?

Net Worth is a “fancy” term for the difference between your total savings and your total debt. The higher your net worth, the better saved you are for life and the future. Negative net worth means you have a lot of debt.  List all your balances in your savings accounts, retirement accounts, brokerage accounts, and the worth of your property (if you own your home). Then add all those balances up. List all the balances in your debts like your mortgage, student loans, credit cards, and car loans. Add the balances up. Subtract your debt from your Savings and that’s your Net Worth. #networth #positivenetworth #debt #assets #savings #retirement #retirementsavings #emergencyfund #creditcards #creditcarddebt #dfc #debtfreejourney #retirementaccount #retiring #investments #investing #fearlessfinance #financialplanning #financialplanner #personalfinance #money #moneyadvice #moneytips #savingmoney #savemoney #spendingmoney #highnetworth #buildingwealth #wealth #wealthy

Retirement

What are the annual contribution limits for IRAs and Roth IRAs?
For both Roth and Traditional IRAs, the annual contribution limit for 2020 is $6,000. If you are 50 or older, the limit is $7,000. These limits can change annually.
What is the difference between a Roth and a traditional IRA or 401k?
In a Roth IRA or 401k, you’ve already paid the tax on the income, and when you withdraw it, or take a distribution in retirement (after 59.5 years old), you don’t have to pay any tax on it because it’s already been taxed. “Traditional” means that the money goes into your IRA or 401k BEFORE taxes, and when you take a distribution of it after 59.5 years old, you now have to pay income tax on it.

Should I rollover old 401ks?

Many of us have old legacy 401ks from previous employers. Should you roll them over? The answer is twofold.

  1. Are there extra fees that you are paying to administer this old account since you are not employed there anymore? If so, definitely roll over the account to eliminate or reduce those fees.
  2. Is it annoying or confusing to have lots of different accounts? If so, it’s worth reducing that administrative burden to roll over old accounts so that you can manage them in one place together.

Ret How much should I contribute to retirement?
Each case is different, but here are 3 general rules of thumb for contributing to retirement. If you can do the first, move onto the second. If you can do the second move onto the third:

  1. Always make sure you contribute AT LEAST enough to get your match
  2. Make sure you are contributing 15% total (your contribution plus your employer’s match)
  3. Contribute the maximum amount to your retirement plan

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Should my 401k be Roth or traditional?
Some 401k providers offer a Roth option in addition to Traditional 401k. If your income is below the limit ($140k for 2021), we recommend that you split your contributions between Roth and Traditional. This way, when you retire you will have some money that comes out without taxes and some money that went in without taxes. If you can, try to go 50/50 or ⅔ traditional to ⅓ Roth.

Debt/Savings

Should I use a credit card that has a balance on it?

#1 tip for getting rid of credit card debt: Don’t use a card that has a revolving balance. Make sure you have a card that you pay down to zero each month, use it if you need to use a credit card, or use a debit card or cash. Don’t use a card that has revolving debt, you’ll never get it paid down.

Does my credit score really matter?
Yes, and No. Yes, it matters a lot when you are trying to get a mortgage, rent a property, or buy a car. Yes, it can be one attribute of many to determine financial health, but NO it is not something that you should spend too much time worrying about. It matters only if you need a loan or are renting something. Your financial well-being is way more important than your credit score, and although your credit score can help determine your financial well-being, it’s not the only way. ⠀

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How much should I have saved?
You need to have a Rainy Day Fund for all of the random expenses that come up that aren’t part of your regular cash flow. If you rent, $1500 and if you own your home, then the minimum is $3000.

For Emergency Savings, caused by a total loss of income you should have 3-6 months of your expenses saved in it. This account should be separate from your main checking and savings accounts; you don’t want to be able to see it on a regular basis. ⠀

And, as a final note, all of this money should be in CASH or CASH EQUIVALENTS. It should NOT be invested in the market where it could lose its value in the short-term.
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Having a Child

How do I set up an allowance system for my child?
When your children are comfortable adding and subtracting (first or second grade, for example), so that they understand what’s going on mathematically. The first reason for allowance is to teach your child how to value things – “is this toy worthwhile or not?” Secondly, this is to teach them how to budget – “If I buy this toy now, I won’t have money left over for the bigger toy that I’ve been saving up for in a few weeks.”

Allowance should NOT be tied to chores. Chores make them a decent human, while allowance teaches how to budget and manage money. If a child does something over and above expectations, such as shoveling the driveway, you can pay them to do that. But in general, for the regular around-the-house chores, those should not be linked to allowance.

Allowance should be split into 3 buckets: Donate, Save, and Spend. You can separate these into different containers.You want your child to make the decision on how much gets spent, saved and donated (with your guidance if necessary). Get your child used to these terms and building these habits – even taking them to the bank to deposit their savings after a few weeks or months.

How much is a new baby going to cost monthly?
Generally I like to tell people to have an extra $300-400/month for the first 6 months of that child’s life – diapers, bouncy seats, all of it – it’s just going to add up. Afterwards, it will start to become more consistent and will reduce.

Marriage/Divorce

What is my tax status if I got married this year?
You are married filing joint if you got married during that tax year. If you got married in June 2020, your 2020 tax filing status is married filing joint. If you got married on December 30th 2020, your 2020 tax filing status is married filing joint.

Should I choose survivor benefits for my spouse?
If you are living with a person with whom you share finances, you want to plan for one of you outliving the other. Make sure any pensions have some survivor benefits. Survivor benefits can range from 25-100% of the benefit and you need to think through the right amount with your financial planner. Know who has the greater social security benefit and whether taking half of your spouse’s (only for married couples) social security may be more than your own social security benefit.
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What should I do first if I’m getting divorced?

Here are our first 3 financial steps when dissolving a marriage to get you set up for your new life:⠀

  1. Open a new checking account and move your direct deposit to it unless your attorney tells you not to do so.⠀
  2. Start an inventory list of your assets like the house, car, computers, furniture, AND bank accounts and debt balances ⠀
  3. Start a list of the expenses you will need to take on as a single person and the expenses attributable to the children (if applicable).⠀

Do not start thinking about how things will be split until you are VERY clear on what assets and debt you have. It’s easy to miss something in the “fog of divorce.” Write it down and get help if you need it. That’ll hopefully help make a painful time fractionally easier.⠀

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Should I have a prenup?

When do prenups make sense? 

  1. If you’re bringing significant assets to the marriage, or if you expect an inheritance. 
  2. If either of you is bringing in significant debts to the marriage. 
  3. If there are dependents involved especially from other unions. 
  4. if you are at all concerned about your assets should there be a divorce.

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What is the difference between Alimony and Child Support?
Alimony and child support are two forms of monetary support that can be mandated in a divorce, but they serve different purposes. Alimony is meant to address potential inequality in assets or income after a divorce. If one partner is the primary “breadwinner,” then they might be required to pay alimony to the other person to help them maintain their lifestyle after the divorce. Alimony is not automatically granted in a divorce; it has to be requested.⠀

Child support is different. It is a parent’s financial responsibility, paid to the custodial parent, for the care of their children. That money is meant to be used solely for the children’s benefit. States have robust enforcement programs to ensure child support is provided as required.⠀

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Buying a Property

How long should I intend to own a property when I buy it?

Only buy a property if you intend to live in it, or own it, for at least 5 years. Otherwise, it doesn’t make sense as you’ll need to pay transaction costs, moving costs, and all kinds of other fees. Make sure you really love a property before you buy it.

Paying for College

When should I refinance my student loans?

You MIGHT be a good candidate for refinancing your student loans if:

? Your loans are private student loans OR you’re secure in your income so you don’t need the privileges that come with federal student loans

? You AREN’T working toward student loan forgiveness. If you consolidate or refinance your student loans, that can make you ineligible for forgiveness programs!

? Your student loan rates average over 5%.

 

If these don’t all fit your situation, refinancing your student loans is probably not the right choice for you. 

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What is a 529 and what are the basic rules?
A tax-sheltered 529 Savings Plan allows you to save after-tax money in an account that compounds tax-free until your child needs it for school:

  • Deposits are not deductible on your federal income tax, but many states do offer tax incentives for 529 savings.⠀
  • You can deposit at any time during your child’s life, or even before they’re born. You could also create a 529 plan for yourself!⠀
  • The beneficiary does not need to be your child. You can change the beneficiary on the account.⠀
  • When you withdraw the funds to pay for post-secondary education of the beneficiary, the funds are not taxed in most states⠀
  • Education Savings Plans can be used to pay for tuition, books, fees, equipment, student special needs or room/board⠀
  • You can enroll in a 529 plan in any state. However, some states have tax benefits for their plan ONLY if you reside in that state.⠀
  • If you don’t use the funds for the beneficiary’s schooling, the amount you earned over the life of the account is subject to 10% penalty and is taxed as income.⠀
  • Assets in a 529 plan are counted as parental assets when applying for financial aid and therefore part of the Expected Family Contribution (EFC).⠀

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How do I save for college?

Save as soon as you can into a 529 college savings account or some other savings vehicle. It may NOT be possible to save while you’re also paying for childcare, especially in some areas of the country. This is normal, but as soon as your child is in public school, you have to double down on savings. Try to save HALF of a college degree (adjust for private or public college as you see fit) by high school graduation. You should try to pay for the remainder with current income (income you generate when the child is in college). 

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Small Business & Gig Work

How does Unemployment Insurance work?

Typically, you will not receive unemployment benefits if you quit your job, are self-employed, or if you are fired for cause. However, some of those guidelines were tweaked for COVID-19 relief efforts (more on that tomorrow). The benefits are primarily paid out by state governments and funded by specific payroll taxes collected for that purpose.⠀Each state maintains its own system, with its own quirks and hoops to jump through. If you need to apply for unemployment benefits, look for information about your state’s program to figure out your eligibility and options. ⠀

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How do I handle taxes as a gig worker?

If you’re fully self- employed (you don’t have a full-time job on top of your gig work), then you must pay quarterly estimated taxes to both the federal government AND your state, if applicable. ⠀

If your gig work is a side hustle, then you don’t need to worry about quarterly estimated taxes. You SHOULD make sure that you’re withholding enough; if you’re under-withheld significantly, you could be charged a fine by the IRS at tax time. Your employer will typically withhold part of your paycheck for taxes, but they’ll base that on your salary with them. ⠀

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Investing

How do index funds work?

A mutual fund is an investment sold as a unit of an underlying fund. That fund is made up of a group of individual stocks. A mutual fund can be either passively or actively managed. An INDEX fund is a passively managed mutual fund. Index funds hold stocks exactly as they appear on the index the mutual fund is mirroring. That could be the S&P 500, the Russell 3000, etc. Because someone doesn’t have to do the research and legwork to pick stocks for these funds, the expenses are usually much lower than they are for actively managed funds.

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What’s the difference between an ETF and a mutual fund?

A mutual fund is an investment sold as a UNIT of the underlying fund. The underlying fund could be an index fund (holdings reflect a typical index like the S&P 500) or it could be an actively managed fund where a fund manager buys holdings he/she believes will do well over time. An ETF (Exchange-Traded Fund) is a SHARE of an underlying mutual fund. Typically, an ETF reflects an underlying index fund, but it does not have to.  ETFs (shares) allow you to trade during the time the market is open. They typically cost less than a mutual fund, too. Mutual Funds (units) are priced at the close of the trading day and settle overnight before the open of the market the next day. You won’t know what price you are getting until the close.⠀

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