Do You Have a Blessing Budget?

I’ve struggled to write about financial matters lately because Russia invaded Ukraine. It doesn’t feel appropriate to discuss wealth or investing while Ukraine is under attack, but I found some inspiration at my church this past Sunday.

Our church recently finished a sermon series called: Are You Ready? Senior Pastor Will Davis led the series. Pastor Will is an avid mountain climber, and this past weekend he talked about carrying extra supplies in your backpack to help other climbers in need. If you have hiked or climbed a mountain, you know things can change quickly, and if you’re not ready for an emergency, it could end badly. One of his topics during these troubling times was creating a blessing budget to help and bless those in need. He added it’s in our DNA to be generous. It was a timely message.

Creating a budget is a crucial ingredient of financial planning. A well-constructed budget can help you save and spend with confidence because it will give you a roadmap of where your money is going. Typical budget line items include groceries, personal care, travel, dining, debt payments, mortgage payments, rent, etc. Budgeting forms include a section for gifts but not giving, but I’ve yet to see one containing a category for blessings.

Giving includes a combination of tithes and offerings. A tithe is 10% of your income, your first fruits, and an offering is an amount you give above and beyond your tithe.

If you include blessings in your budget, you can pay it forward. When you’re getting coffee, pay for the person in line behind you, or leave a big tip for your server after breakfast, lunch, or dinner. A group of men at my church will dine at a restaurant together, where each one leaves a $100 tip. The amount given to the server is about $1,500 to $2,000. Can you help a student with a tuition payment or a neighbor with a medical bill? How about buying a car for someone who relies on public transportation? There is no shortage of serving opportunities to help those in need.

How much should you allocate to your blessing budget? As much as you can. It can be a percentage of your income or a flat dollar amount. Will said, and I agree, that the person who benefits the most from giving is you, and If you’re a giver, you know the joy it brings by blessing others.

But when you give to someone, do not expect anything in return; it’s not a quid pro quo transaction. Don’t anticipate praise or recognition, and do not wait for a thank you note because it probably won’t come. If your sole reason for donating money is to get a tax deduction, you’re missing the point. Give because you want to help others.

People are hurting and need your help. If you own stocks are bonds, you’re in a position to lend a hand. Stocks will eventually recover, so don’t worry if your account bounces around for a bit. It’s a first-world problem. Giving a few dollars to others won’t ruin your financial future, but it could change someone’s life.

Command those who are rich in this present world not to be arrogant nor to put their hope in wealth, which is so uncertain, but to put their hope in God, who richly provides us with everything for our enjoyment. Command them to do good, to be rich in good deeds, and to be generous and willing to share. In this way they will lay up treasure for themselves as a firm foundation for the coming age, so that they may take hold of the life that is truly life. ~ 1 Timothy 6:17-19

Here is a link to Will’s message. https://www.acfellowship.org/sermon/are-you-ready-carrying-extra/

March 2, 2022

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management, located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.

The Giving Season

Thanksgiving marks the beginning of the giving season.  Charities and non-profits will receive much-needed dollars to fund their good works, and the money they receive in the next few weeks will be the bulk of their annual budget because Individuals typically wait until the end of the year to give. Some people give from their wallets, and others from their hearts.  

For where your treasure is, there your heart will be also. ~ Matthew 6:21.

During the financial planning discovery phase, I ask people if they donate money to charities, and  I’m happy to report most people are generous, but not all. I once worked with a young pilot who didn’t believe in giving money away while living, and he planned to donate his money at his death through his estate. I told him part of the joy of giving money away while you’re living is you get to see your gift bear fruit. 

Each one must give as he has decided in his heart, not reluctantly or under compulsion, for God loves a cheerful giver. ~ 2 Corinthians 9:7.

Here are a few ideas and strategies to help you with your charitable donations.

  1. Appreciated Securities. The stock market has produced stellar results this year, and you may own several companies that have performed well. When you donate appreciated securities, you get a deduction, avoid a capital gains tax, and your charity receives the money. Let’s say you purchased Dicks Sporting Goods in January at $56, and today it’s selling for $129 for an unrealized gain of $73 or 130%. You can gift your shares directly to your charity and avoid paying taxes on your profit. The charity can sell the stock and receive the cash, and they, too, will avoid the capital gains tax. To qualify for a tax deduction, donate your securities to a 501c3 organization. 
  2. Qualified Charitable Distribution. The IRS lets you satisfy your required minimum distribution by donating your money directly to a charity from your IRA. This distribution is called a qualified charitable distribution (QCD), and you’re allowed to give up to $100,000. One advantage of the QCD is that you avoid paying income taxes on your gift.
  3. Donor-Advised Fund. If you don’t know which organizations to support but want to make a charitable contribution, consider establishing a donor-advised fund (DAF). You can fund your DAF today and donate to charities at a later date. You will receive the deduction for this calendar year, even though you can defer your payouts. You can also manage and invest the money inside your DAF.
  4. Cash.  Cash is king, and it’s easy to give away. The IRS allows you to give $15,000 per person per year without paying taxes on your gift, nor will your recipients, but you won’t receive a tax deduction. For example, if you have four children and ten grandchildren, you can give $210,000 per year.

There is always a right time to help others, and the end of the year is a wonderful time to give money to those in need. However, to improve your giving, consider a charitable giving strategy. A philanthropic plan can pay huge dividends to you and those you support. 

Do not withhold good from those to whom it is due, when it is in your power to do it. ~ Proverbs 3:37.

November 9, 2021

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.

Are you rich?

Are you rich? It depends, of course, on where you live. In Malawi, the per capita income is $357, Uganda $631, Haiti $766, United States $59,939, and Luxembourg $105,280.

According to the Pew Research Center, 70% of the world’s population, about 5 billion people, live on less than $10 per day.[1] What can you buy for $10? A few low-budget items on Amazon are Super Glue, Uno, Frisbee, and a jumbo muffin pan. If you lived on $10 per day, would you buy a jumbo muffin pan?

How can you help the less fortunate? How can you assist the 70%? Here are a few ideas on how to give.

  • Develop a philanthropic plan. It will focus your charitable efforts on causes and groups you support. It will assist you in determining the most efficient way to distribute your assets. To maximize your giving strategy, incorporate it inside your financial plan.
  • Open a Donor Advised Fund (DAF). A DAF allows you to contribute significant dollars today and distribute the funds to your charities over time. In addition, you can manage the assets inside your DAF to grow the assets and potentially give more money away.
  • Use the Qualified Charitable Deduction (QCD). If you’re 70 or older, the IRS allows you to send up to $100,000 to charities you support from your IRA. The QCD satisfies your required minimum distribution, but you don’t have to report it as income.
  • Donate appreciated assets. If you own taxable assets with unrealized gains, consider donating them to nonprofit organizations. The organization receives your gift, and they can sell it without any tax consequences while you receive the deduction and avoid a capital gains tax.
  • Cash is earning nothing, so you might as well donate it to others. It will benefit your charities, and you will receive a tax deduction.
  • Give as a family. If you have children, involve them in the giving process. Give your children a seat at the table so they can experience the joy of helping others.

I must warn you, however, once you start giving, you won’t be able to stop. You can’t calculate the ROI on your philanthropic activity, but donating money to others will pay huge dividends.

The best definition of wealth I heard was from a fraternity brother.  He said, “I’m a rich man. I’m not rich monetarily but rich with friends, family, and faith.”

We are approaching the giving season, so examine your balance sheet to see how you can best help those in need.

“And the King will say, ‘I tell you the truth, when you did it to one of the least of these my brothers and sisters, you were doing it to me!’ ~ Matthew 25:40

October 19, 2021

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.


[1] https://www.pewresearch.org/fact-tank/2015/09/23/seven-in-ten-people-globally-live-on-10-or-less-per-day/

Giving It Away

My family donates money through tithes and offerings, so I incorporated the practice into my business model when I started my investment firm. Giving is not a budget item because contributions come from the top – 10% of our firm revenue. At the end of each quarter, my wife and I sit down to pray over our offerings before giving any money away. It’s a joyful time, and it’s the best part of my job.

  • Each of you should give what you have decided in your heart to give, not reluctantly or under compulsion, for God loves a cheerful giver. ~ 2 Corinthians 9:7

Our charitable giving spans the globe from Austin to Africa. We help local groups like Partners in Hope, Candlelight Ranch, The Heart of Texas Pregnancy Resource Center, and International organizations like Arise Africa, Eagle’s Nest International, and the Nicaragua Resource Network. We also support organizations we met through serving and our travels, like Galveston Urban Ministries, Mission Waco, Wellspring Church, and Wind River Ranch. Giving is part of our DNA. It’s what we do, and I can’t imagine a time where we’re not helping others with our resources.

  • Bring the whole tithe into the storehouse, that there may be food in my house. Test me in this,” says the Lord Almighty, “and see if I will not throw open the floodgates of heaven and pour out so much blessing that there will not be room enough to store it. ~ Malachi 3:10

It was easy to commit to a giving program when we had no revenue, but our firm is growing, and so are our donations. My goal is to manage a billion dollars in assets to give more than $500,000 per year. At our current growth rate, we expect to reach this milestone in fourteen years. God willing.

  • Jesus sat down opposite the place where the offerings were put and watched the crowd putting their money into the temple treasury. Many rich people threw in large amounts.But a poor widow came and put in two very small copper coins, worth only a few cents. Calling his disciples to him, Jesus said, “Truly I tell you, this poor widow has put more into the treasury than all the others. They all gave out of their wealth; but she, out of her poverty, put in everything—all she had to live on.” ~ Mark 12:41-44

To be clear, we do not give to get. We’re not looking for quid-pro-quo relationships. Rather, we strive to be humble servants through giving, and it forces us to be sage stewards of our capital. When I launched my firm, industry experts and consultants panned my business model, saying my fees were too low and I can’t give away 10% of our revenue. They foreshadowed doom and gloom. However, five years later, we’re thriving, and we recently moved to the Securities and Exchange Commission (SEC) for regulation – a big deal for a small firm.

  • Give, and it will be given to you. Good measure, pressed down, shaken together, running over, will be put into your lap. For with the measure you use it will be measured back to you.” ~ Luke 6:38

Our giving has increased each year, but I’m not alone, thankfully. Americans gave $449 billion in 2019, and corporations added $21 billion – record amounts.[1] As stocks climb to new highs and real estate prices soar, I expect the amount people donate to charitable organizations will increase substantially this year. The wealth effect is in full force.

  • Do not neglect to do good and to share what you have, for such sacrifices are pleasing to God. ~ Hebrews 13:16

If you’re curious, here is a list of organizations we supported through the years.

https://www.parrottwealth.com/community

Give early, give often, and be well.

June 15, 2021

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.


[1] https://www.nptrust.org/philanthropic-resources/charitable-giving-statistics/

How Can You Help?

It has been a brutal, exhausting year, and people are hurting. COVID-19 and the racial tension has cast a pall on 2020, and people are living with heavy hearts. As a result of the economic, political, and social turmoil, small charities are in a pinch. Local nonprofits are on the ground in your community doing work few people are willing to do, and they need your assistance. What kind of help do they need? Financial support. These vital organizations rely on donations to keep their doors open, and the recent economic trouble is leaving their coffers empty.

Small nonprofits are the original first responders. Local nonprofits know what they are doing because they have spent years cultivating relationships. In a recent Wall Street Journal article about small charities, they wrote, “The coronavirus pandemic has highlighted the importance and the agility of small community-based charities, especially in a crisis. Often these groups don’t get much attention. They are overshadowed and out-funded by big better-known nonprofits like the American Red Cross and the Salvation Army.” They added, “Local charities also often know who most need help.”[1]

If you decide to give, give only your resources, and leave your opinions at home. Nonprofits don’t need your advice on how to improve their organization. Also, don’t tell the organization how to best spend your donation. If you don’t trust them to handle your gift correctly, give it to someone else.

How can you help? Here are a few ideas on how to donate to nonprofits.

  1. Cash. Cash is easy to give away – quick and efficient. The IRS generally allows you to deduct 50 percent of your adjusted gross income (AGI) for tax purposes. If you give more than 50 percent of your AGI, the IRS allows you to carry your donation forward for up to five years.
  2. Appreciated Securities. If you own stock with a considerable capital gain, consider donating it to your favorite charity. When you gift your shares directly to your charity, you will avoid paying a capital gains tax, and you can deduct the fair market value of your gift. The charity will sell the stock to receive the cash, and they, too, will avoid a capital gains tax.  For example, if you purchased 100 shares of Amazon ten years ago for $110, you have an unrealized gain of $2,582 per share based on a closing price of $2,692. By donating your shares, you avoid the capital gains tax of $51,640 on your gain of $258,200. The charity receives $269,200.
  3. Qualified Charitable Distribution. The IRS allows you to satisfy your required minimum distribution by donating your money directly to a charity from your IRA. You can donate up to $100,000 with a qualified charitable distribution (QCD). You can avoid paying taxes (legally) with a QCD distribution, and it will satisfy your required minimum distribution for the year.
  4. Donor-Advised Fund. If you want to support several charities, but you’re not sure how much to give, or when to give it away, then consider a donor-advised fund (DAF). You can contribute cash or securities to a donor-advised fund, receive a charitable deduction, and then payout your donation over several years. Once you fund your DAF, you can take your time to decide how much money to give to your charities. You can also sell your assets inside the DAF and reinvest the proceeds into a diversified portfolio of stocks, bonds, or funds.
  5. Charitable Remainder Trust. If you own appreciated stock, land, or some other asset, you can transfer it to a Charitable Remainder Trust (CRT) to generate income. After you transfer the investment to your trust, you can sell it to avoid the capital gains tax. You can deduct your donation from your taxes and reinvest the proceeds. The CRT allows you to withdraw 5% to 8% of your account balance each year. At your death, the assets in the trust will transfer to your charitable beneficiary. The CRT is a great way to avoid a capital gains tax, diversify your portfolio, and benefit your favorite charity.  Your gift to a charitable remainder trust is irrevocable.
  6. Charitable Lead Trust. A Charitable Lead Trust (CLT) is the opposite of a Charitable Remainder Trust in that your charity of choice will receive the income from the trust, and your beneficiary will inherit the asset on your death. If you want to transfer assets to your children, the CLT is an excellent choice because it removes the asset and growth from your estate. The CLT is a limited-term trust, and it is irrevocable.
  7. Private Annuity. A private annuity works well with colleges, universities, and nonprofits. You can donate stock, land, or any asset to your charity, and they can establish a private annuity for you so that you can receive income for life. Your charity can sell your asset tax-free and use the proceeds to fund their operations. They will create an annuity for you and your family based on the size of your gift. You will receive a monthly, quarterly, or annual check for ten or fifteen years along with a tax deduction.
  8. Private Foundation. You can establish your own nonprofit to benefit other nonprofits to create perpetual gifts. Donations to your foundations are limited to a 30 percent deduction for cash and 20 percent for appreciated securities. A private foundation is expensive to maintain, and you will need to create a board of directors.

If you don’t have financial resources to give, donate your time. Small nonprofits are in dire need of helping hands to assist them with a variety of tasks. A Google search for nonprofits in your neighborhood will yield plenty of fruit and give you several choices of groups to serve

Our church serving model is FUN: F stands for flexibility, U stands for useful, and N stands for not about you. When you’re ready to give or serve, don’t forget to have some fun!

When someone has been given much, much will be required in return; and when someone has been entrusted with much, even more, will be required. ~ Luke 12:48

June 27, 2020

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.

 

[1] https://www.wsj.com/articles/how-a-small-charity-pivoted-to-get-food-to-those-hit-by-covid-shutdowns-11593010891?mod=itp_wsj&ru=yahoo, Betsy Morris, June 24, 2020

New Year’s Resolutions

Lose weight. Exercise more. Save money. Take a trip. It’s that time of year again to make New Year’s Resolutions. In January, optimism is high, but by year-end, it fades. According to one study, only 8% of people achieve their goals.[1] My two main 2020 goals are to climb a 14er in Colorado and learn to play guitar. Maybe I can play the guitar on top of a 14er! What are your goals for next year?

Most goals fail because they aren’t specific. Saving money is a good goal, but how much? You’re more likely to hit, or come close, to your goal if you say, “I want to save $10,000 by December 30, 2020.” Details matter when setting goals.

Financial planning works because it requires specific data. Retiring at 65 is a tangible target, retiring someday is not.  Hoping to pay for college is not as powerful as saving $500 per month towards tuition in a 529 account.

Of course, health and wealth are important goals. But what if this year you set goals to give more, serve more, and love more? Bob Goff said, “Plans work, or they don’t. Love always works. Go with the sure thing.” He adds, “Make your life about people, and you won’t regret it.”

If you’re setting financial goals, you probably have money to give. What if you changed your focus to serve others? For example, can you give away 10% of your income to groups or organizations you support? Giving money to those in need has a multiplier effect. Your gift will benefit many, but most importantly, it will benefit you and your family.

What if you can’t give away 10% of your income? Give 5%. Give your time. Can you donate 10% of your time to serve? A Google search will yield a bounty of non-profit opportunities. Serving others is powerful. Several years ago we downsized our house, and I was feeling down because I had to give up the swimming pool. A few months after we moved, I went on a mission trip to Nicaragua and served those living in homes built with cinder blocks and plywood. I don’t miss my pool anymore.

Love always works, as Bob Goff said. Loving others sounds simple, but it’s hard to do. Jesus said in Mark 12:31, “Love your neighbor as yourself.” A simple command. Can it be quantified? Probably not, but do it anyway. Spend time with friends and family. Listen more; be present. Also, men, you don’t have to solve every problem.

Give, serve, and love are resolutions that cost you little, but they’ll pay huge dividends to those who benefit from your kindness.

Give often, serve early, and love always.

Happy New Year!

 In the same way, let your light shine before others, that they may see your good deeds and glorify your Father in heaven. ~ Matthew 5:16

December 31, 2019

Bill Parrott, CFP®, CKA®, is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.

 

 

 

 

 

[1] https://nypost.com/2018/12/21/new-years-resolutions-last-exactly-this-long/, Shireen Khali, December 21, 2018

Fifteen Year-End Tips

The end of the year is quickly approaching, and what a year it’s been. The S&P 500 is up more than 25%, and unemployment is near historic lows. It’s been a great year to make some money and do some good.

As we approach the end of the year, here are fifteen tips you can incorporate today.

  1. Contribute the maximum to your 401(k) or 403(b). You’re allowed to contribute $19,000 and if you’re 50 or older, you can add another $6,000.
  2. Contribute the maximum to your IRA. You’re allowed to contribute $6,000 and add another $1,000 if you’re 50 or older.
  3. Spend the money in your flexible spending account (FSA). The FSA is a “use it or lose it” plan, so make sure you spend it.
  4. The stock market has done well, but you may own a loser or two. If you are sitting on losses, sell them to offset your gains. The IRS will allow you to offset your gains dollar for dollar. If you have realized gains of $15,000, then you can realize losses of $15,000 to offset your gain. If you don’t have any realized gains, you can write off $3,000 per year until your loss is absorbed.
  5. If you have significant gains in a stock, consider gifting it to your favorite charity. You can send your shares in-kind directly to your charity to avoid capital gains. You’ll be able to deduct the fair market value of your gift. The charity can sell the shares, free of taxation, and use the proceeds for good.
  6. Review your asset allocation. With the increase in the stock market, your equity exposure might be too high relative to your risk level. If your alignment is off-kilter, consider rebalancing your account.
  7. Sell some of your investments to pay off your debt. Debt is a four-letter word, and the less debt you owe, the better off you’ll be.
  8. Take a trip. If you’ve done well this year, then reward yourself and take your family on a journey. It’s okay to spend money on experiences and enjoy the fruits of your labor.
  9. Update your beneficiaries. Review your beneficiaries on your retirement accounts and insurance policies. It only takes a few minutes to make the changes.
  10. Start, finish, or update your will. Have you been putting off contemplating your mortality? If so, use the holiday season to complete your will.
  11. Review your spending. Download your checking, savings, or credit card statements to Excel to review your spending habits.
  12. Start your budget to get ready for 2020. Apps like everydollar.com or mint.com can help you improve your budgeting.
  13. The IRS allows you to give away $15,000 per person. It’s a tax-free transfer, and there are no limits to how many people can benefit from your generosity.
  14. Donate cash to your favorite charity.
  15. Be an anonymous angel. Can you pay off someone’s debt? Do your local schools have children with student lunch debt? Are there families that need money for groceries or transportation? If you’re not sure, contact your local church or school because they usually have a list of people in need.

“His master replied, ‘Well done, good and faithful servant! You have been faithful with a few things; I will put you in charge of many things. Come and share your master’s happiness!’ ~ Matthew 25:21

November 29, 2019

Bill Parrott, CFP®, CKA®, is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.

 

 

The Giving Season

November is the beginning of the giving season. From now until the end of the year, charities and non-profits will receive much-needed dollars to help fund their mission. For several organizations, the money they receive in the next few weeks will subsidize most of their annual budget. Individuals typically wait until the end of the year before they give because they don’t have a giving or philanthropic plan.

For where your treasure is, there your heart will be also. ~ Matthew 6:21.

During my financial planning meetings, I ask people if they have a charitable giving strategy or if they donate money regularly; thankfully, most people are generous. I once worked with an individual who didn’t believe in giving money away while he was living. He was going to donate his money at his death through his estate. He was missing an opportunity to see his gifts bear fruit.  I didn’t tell him that people who don’t give today won’t give tomorrow.

Each one must give as he has decided in his heart, not reluctantly or under compulsion, for God loves a cheerful giver. ~ 2 Corinthians 9:7.

Most individuals don’t have a coordinated giving plan, and as a result, they wait until the last minute to make donations. Without a strategy, you may be missing valuable deductions, so here are a few ideas to help you with your charitable contributions.

Appreciated Securities.  The stock market has done well, so you probably have stocks with unrealized capital gains. When you donate appreciated securities to a charity, you get the deduction, avoid a capital gains tax, and your charity receives the money. Let’s say you purchased YETI Holdings in January at $14.84, and today it’s selling for $31.90 for an unrealized gain of $17.06 or 115%. You can gift your shares directly to your charity and avoid paying taxes on the appreciation. The charity will sell the shares on the open market to receive the cash, and they, too, will avoid a capital gains tax. You must donate your securities to a 501c3 organization to receive a deduction

Qualified Charitable Distribution.  The IRS allows you to satisfy your required minimum distribution by giving your money directly to a charity from your IRA. It’s called a qualified charitable distribution (QCD), and you’re allowed to donate up to $100,000 per year. The QCD will enable you to avoid paying taxes on the distribution, and it will satisfy your required minimum distribution.

Donor-Advised Fund (DAF). A Donor Advised Fund allows you to transfer appreciated shares to the fund. Once inside the DAF, you can sell your shares and purchase new investments without realizing a capital gain. You can deduct the contribution from your taxes, and it occurs in the year of your gift, not in the year of distribution. You don’t have to distribute the proceeds immediately, so if you’re not sure which charities to support, you can defer the payment until you identify the organizations. For example,  you can transfer $100,000 worth of ABC Inc. stock to your Donor Advised Fund, sell it, reinvest the proceeds, and then send a portion of the funds to your favorite charity. The funds that remain inside your DAF will grow tax-free.

Charitable Remainder Trust (CRT). This trust allows you to transfer your shares to a Charitable Remainder Trust, sell your holdings, diversify your assets, and receive income from the proceeds. At your death, your charity will receive the remainder of the trust assets. The stock, once transferred, can be sold free of taxation and the proceeds reinvested into a diversified portfolio of stocks, bonds or funds. Your contribution to the trust qualifies for a charitable deduction. The amount of income you can receive from the trust is between 5% and 8% of the portfolio value. You will pay ordinary income tax on the income you receive.

Cash.  Cash is king, and it’s easy to give away. The IRS allows you to give away $15,000 per person per year without having to pay taxes. However, you won’t receive a tax deduction, but you’ll be able to help the next generation. For example, if you have four children and ten grandchildren, you can give away $210,000 this year. You can also give $15,000 to friends and strangers if you want.

The end of the year is a great time to give money to those in need, and it’s always the right time to help others.  However, an annual charitable giving strategy may be beneficial to your long-term planning and budgeting needs.  A philanthropic plan can pay huge dividends to you and those you support.

Do not withhold good from those to whom it is due, when it is in your power to do it. ~ Proverbs 3:37.

November 5, 2019

Bill Parrott, CFP®, CKA®, is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.

 

 

 

 

Morehouse College

The graduating class of Morehouse College received an unexpected gift from their commencement speaker.  Mr. Robert F. Smith offered to forgive all the student loans for the class of 2019. Mr. Smith is a billionaire, philanthropist, investor, and fellow Austinite who announced his generous offer to the students this past Sunday. He said, “My family is going to create a grant to eliminate your student loans!”

The announced figure was $40 million. There are about 400 men graduating from Morehouse College so the average debt per student is $100,000. Quite an offer.

The beauty of his gift is that he can watch these young men bear fruit. He will witness firsthand how it will multiply many times over for generations to come. He added, “Now, I know my class will make sure they pay this forward.”

Individuals often wait until they die to give their money away for fear of it running out while they’re still living. Is one strategy better than the other? It’s a personal choice, of course, but giving your money away while you’re alive will allow you to observe the joy of helping others.

Do not withhold good from those to whom it is due, when it is in your power to do it. ~ Proverbs 3:27.

Are you blessed with financial resources? If so, here are a few ways you can help others.

Loan Forgiveness. You might not have $40 million sitting in your bank account but if someone owes you money, you can forgive their debt. A generous offer to those in debt, for sure. However, let them know it will likely be reported as taxable income. For example, if someone owes you $100,000 and you forgive their note, they’ll owe taxes on this amount.

At the end of every seven years you must cancel debts.” ~ Deuteronomy 15:1-2.

Private Annuity. Do you want to help your alma mater in other ways besides paying off the entire debt for this year’s graduating class? A private annuity may be an option. It will allow you to donate appreciated property like real estate or equities in exchange for an income stream. Let’s say you own a $500,000 piece of property with a low-cost basis. If you donate the land to the school, they will send you monthly income for a certain period. In addition to the fixed income, you’ll receive a tax deduction for the fair market value of your land.

Charitable Remainder Trust. This trust, like the private annuity, works well with appreciated assets. When you transfer assets to the trust, you’ll be able to sell them and diversify your holdings while avoiding a capital gains tax. Let’s assume you own $1 million worth of Amazon stock – your only investment. After the shares are transferred to the trust, you’ll be able to sell the stock, buy new investments, receive monthly income, avoid the capital gains tax and get a tax deduction. The charity will receive your assets after you die, thus the term “remainder.”

Donor Advised Fund. Establishing a Donor Advised Fund (DAF) will allow you to contribute cash or securities to your account and then distribute your donations over time and as you see fit. If you’re not sure who should receive your gifts, this is an excellent vehicle because you can bunch, or consolidate, your donations to receive a tax deduction and defer your distributions. The contributions are irrevocable, but you’ll be able to invest the assets inside the fund allowing you to control your investments and distributions.

Direct Gift. If you know the who, what, when and why for your donation, then a direct gift makes sense. If you want to give $100,000 to your favorite charity, you can create a direct link to the institution and bypass setting up a new account, trust or foundation. You’ll be able to deduct the fair market value of your donation.

Bring the whole tithe into the storehouse, that there may be food in my house. Test me in this,” says the Lord Almighty, “and see if I will not throw open the floodgates of heaven and pour out so much blessing that there will not be room enough to store it. ~ Malachi 3:10

Mr. Smith’s gift is breathtaking and monumental. It will allow these young men to hit the ground running unencumbered by debt with an opportunity to make an impact from day one. Morehouse College has some notable alumni like Martin Luther King, Jr., Edwin Moses, Spike Lee, Samuel L. Jackson and Herman Cain. Who knows, maybe a few men from the class of ’19 will join these legendary graduates as a result of their good deeds and works.

Et Facta Est Lux (And there was light) ~ Morehouse College Motto

May 20, 2019

Bill Parrott, CFP®, CKA® is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose.

Note: Investments are not guaranteed and do involve risk. Your returns may differ than those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation.

Are You Maximizing Your Giving?

We are entering the giving season. It’s the time of year when churches and non-profits raise most of their funds because individuals wait until the last minute to give a donation. In other words, most people give from their last fruits, not their first fruits.

Money has a stronghold over people, especially those who have never given any away. In 2017, Americans gave away $410 billion, which sounds like a lot, but it’s only 2% of GDP. Giving has floated around 2% of GDP for the past forty years.[1]  What if giving jumped to 20%? Can you imagine giving away $4.1 trillion? If people let loose of their purse strings, it could happen. According to Ron Blue, “Giving breaks the power of money.”

Maximizing your giving has several benefits. It will benefit the organization, the end user, and you. When you realize your dollar impacts lives, you’ll be motivated to give more.

Are you a cheerful giver? Do you maximize your giving? I was once told to give until it hurts and then give a little more. How can you maximize your giving and become a generous giver? Here are a few suggestions.

Plan. A financial plan will help you identify assets and resources to earmark for giving. It will align your investments to your mission.

Spend. Spending less than you earn will free up money so you can give more of it away. A quick run through your credit card and bank statements will identify several opportunities. Can you find a few items to eliminate or reduce? Your spending habits will also reveal what’s on your heart.

Debt. How much money do you owe others? Can you pay off your mortgage? Student loans? Auto loans?  The less you owe, the more you can give. Big banks and credit card companies don’t need your resources, but local non-profits do.

Stocks. The stock market has soared 290% from March 2009. If you’ve been investing for some time, you may be sitting on substantial capital gains. You can donate your appreciated securities to your favorite organization and avoid (legally) paying a capital gains tax. They’ll receive your shares free of taxation as well. You’ll also be able to write off your donation. The only one that loses in this scenario is the IRS.

Land. Do you own raw land? A vacation home? Rental property? Donating real estate is an excellent way to help non-profits. Some groups will set up a private annuity for you allowing you to receive income for several years because of your gift.

Stuff. Do you have an attic or basement bursting at the seams with stuff you no longer want? If your city is like mine, you probably have a storage facility on every corner. I’m positive the stuff in those units can be put to good use if it were given away.

Not Sure. If you’re ready to give, but you’re not sure who should receive your donation then establish a donor advised fund. It will allow you to make donations, receive a tax deduction, invest the assets, and eventually give the money away. It can be funded with cash or stock.

Time. If you’re tapped out financially, but want to help others, give your time. Organizations welcome volunteers. Can you give your time to your local church, hospital, school, homeless shelter, animal shelter, park, or library? A quick Google search for volunteer will give you numerous opportunities.

Are you ready for your giving test? Identify the amount of money you gave away on line 19 from schedule A of your tax return and divide it by the amount on line 22 from your 1040 form. What was the dollar amount you gave away in 2017? What was the percentage?

Can you maximize your giving this year? I believe you can.

“Bring the whole tithe into the storehouse, that there may be food in my house. Test me in this,” says the Lord Almighty, “and see if I will not throw open the floodgates of heaven and pour out so much blessing that there will not be room enough to store it.” ~ Malachi 3:10

10/10/18

Bill Parrott is the President and CEO of Parrott Wealth Management firm located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process.

Note: Investments are not guaranteed and do involve risk. Your returns may differ than those posted in this blog.

 

 

 

[1] https://www.charitynavigator.org/index.cfm?bay=content.view&cpid=42