Foguth Financial Group President Michael Foguth offered his expert opinion about the difference between good debt and bad debt in an article published by MortgageLoan.com.
Mortgages: The difference between good debt vs. bad debt You might think that taking on any debt is a bad thing. But the truth is, there is such a thing as good debt vs. bad debt. And when it comes to good debt? Few types of debt are considered as beneficial as mortgage debt. This is good news for future homebuyers who are worried about taking on mortgage debt. This is one kind of debt that meets all the definitions of what financial pros and mortgage lenders term “good debt.” Good debt vs. bad debt Timothy Wiedman, retired associate professor of management and human resources for Doane University in Crete, Nebraska, said that taking on manageable debt to fund the purchase of an asset that will likely appreciate in value each year can be thought of as good debt. But taking on a loan to buy an asset that will likely lose value quickly? That’s bad debt. So is using your credit card to purchase a flat-screen TV or furniture. This debt won’t bring you anything that will rise in value. “Borrowing to buy a quickly-depreciating asset such as a brand-new car, especially if one’s current vehicle is roadworthy, is a good example of bad debt,” Wiedman said. Here’s why: Say your new car costs $30,000. With a 10 percent down payment and 3.4 percent interest on a six-year loan, the total cost of that car, including financing, is almost $33,000. But after owning that car for four years, its value might fall to about $14,700, on average. And you’ll still have two more years left to pay off the loan you took out for it. But there’s even worse debt than car loans, Wiedman said. Say you instead bought a new power boat that you only used on weekends three months of the year. Then you are taking on debt for an asset that not only depreciates but that you rarely use. “That might be called ‘really bad debt,'” Wiedman said. Mortgages are examples of good debt When most people buy a home, they use it all the time. They also hope that its value will increase over time. There’s no guarantee of this, of course. But home values do typically rise if you look at housing prices in seven-year chunks. The odds are good, then, that buyers who plan on living in a home for at least this amount of time will see their homes’ values rise. Mortgages come with low interest rates when compared to credit cards, another reason they are an example of good debt. It’s still possible, as of the writing of this story, to qualify for a 30-year, fixed-rate mortgage with a mortgage rate near 4 percent, a historically low figure for borrowing home-loan dollars.mortgage debt You can also tap into the equity that you build in a home over time with home equity lines of credit or home equity loans. You can then use these loans to help fund home improvements, pay part of your children’s college educations or pay off higher-interest-rate credit-card debt. Owning a home also comes with significant tax breaks. You can write off your property taxes and the amount of interest you pay on your mortgage each year. “Good debt is debt that you can write off on your taxes,” said Michael Foguth, founder of Foguth Financial Group in Brighton, Michigan. “Debt that has an interest rate below 6 percent can also be considered good. Bad debt is debt that you cannot receive a tax deduction for. Also, debt that has an interest rate above 6 percent is considered bad.” Examples of bad debt, according to Foguth? Credit-card debt, unsecured loans and high-interest-rate automobile loans. Got questions?
We’d love to assist with any concerns you may have regarding your retirement strategy. Contact us using the form below!
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Foguth Financial Group President Michael Foguth offered his expert opinion about the difference between good debt and bad debt in an article published by MortgageLoan.com.
Mortgages: The difference between good debt vs. bad debt You might think that taking on any debt is a bad thing. But the truth is, there is such a thing as good debt vs. bad debt. And when it comes to good debt? Few types of debt are considered as beneficial as mortgage debt. This is good news for future homebuyers who are worried about taking on mortgage debt. This is one kind of debt that meets all the definitions of what financial pros and mortgage lenders term “good debt.” Good debt vs. bad debt Timothy Wiedman, retired associate professor of management and human resources for Doane University in Crete, Nebraska, said that taking on manageable debt to fund the purchase of an asset that will likely appreciate in value each year can be thought of as good debt. good debt vs bad debtBut taking on a loan to buy an asset that will likely lose value quickly? That’s bad debt. So is using your credit card to purchase a flat-screen TV or furniture. This debt won’t bring you anything that will rise in value. “Borrowing to buy a quickly-depreciating asset such as a brand-new car, especially if one’s current vehicle is roadworthy, is a good example of bad debt,” Wiedman said. Here’s why: Say your new car costs $30,000. With a 10 percent down payment and 3.4 percent interest on a six-year loan, the total cost of that car, including financing, is almost $33,000. But after owning that car for four years, its value might fall to about $14,700, on average. And you’ll still have two more years left to pay off the loan you took out for it. But there’s even worse debt than car loans, Wiedman said. Say you instead bought a new power boat that you only used on weekends three months of the year. Then you are taking on debt for an asset that not only depreciates but that you rarely use. “That might be called ‘really bad debt,'” Wiedman said. Mortgages are examples of good debt When most people buy a home, they use it all the time. They also hope that its value will increase over time. There’s no guarantee of this, of course. But home values do typically rise if you look at housing prices in seven-year chunks. The odds are good, then, that buyers who plan on living in a home for at least this amount of time will see their homes’ values rise. Mortgages come with low interest rates when compared to credit cards, another reason they are an example of good debt. It’s still possible, as of the writing of this story, to qualify for a 30-year, fixed-rate mortgage with a mortgage rate near 4 percent, a historically low figure for borrowing home-loan dollars.mortgage debt You can also tap into the equity that you build in a home over time with home equity lines of credit or home equity loans. You can then use these loans to help fund home improvements, pay part of your children’s college educations or pay off higher-interest-rate credit-card debt. Owning a home also comes with significant tax breaks. You can write off your property taxes and the amount of interest you pay on your mortgage each year. “Good debt is debt that you can write off on your taxes,” said Michael Foguth, founder of Foguth Financial Group in Brighton, Michigan. “Debt that has an interest rate below 6 percent can also be considered good. Bad debt is debt that you cannot receive a tax deduction for. Also, debt that has an interest rate above 6 percent is considered bad.” Examples of bad debt, according to Foguth? Credit-card debt, unsecured loans and high-interest-rate automobile loans. Got questions?
We’d love to assist with any concerns you may have regarding your retirement strategy. Contact us using the form below!
![]() The post Mortgages: The difference between good debt vs. bad debt appeared first on Foguth Financial Group. from http://www.foguthfinancial.com/good-debt-vs-bad-debt/ Foguth Financial Group President Michael Foguth joined Charlie Langton on WJBK Fox 2 to offer helpful tips for paying off student loans.
Read on for a full transcript of the video. Paying back student loansPaying off student loans HOST CHARLIE LANGTON: Paying off student loans can take decades and put a burden on your finances. Michael Foguth is here from the Foguth Financial Group. He’s got some tips on how to pay off student loans. All right, so before we start here, student loans, it affects a lot of people. I thought student loans were the biggest debt that most Americans have more than credit cards. Is that even true? MICHAEL FOGUTH, FOGUTH FINANCIAL: It just surpassed that, so yes. HOST: Oh, wow. Wow! FOGUTH: Yes. HOST: That’s incredible. Do you know the average student loan debt? FOGUTH: I don’t know the average, but I do know that it’s becoming more and more common because more and more people are going to school now. HOST: Yeah. FOGUTH: And they’re rolling that debt up and they’re graduating. And then they’re getting their job and they’re saying, oh, big surprise. What do we do now? HOST: The day after graduation, when do you have to start paying after graduation? FOGUTH: Well, it depends on who is going to be your borrower, but typically you have six months and then you’ve got to get right on it. And now it becomes real debt. Because all of those years leading up when you’re in school, you can defer the payments. HOST: Yeah. FOGUTH: But once you graduate, now it’s time to pay the bills. HOST: So you’re going to be graduating from under-grad $30,000, $40,000, $50,000, $100,000? FOGUTH: Yeah, $100,000 is not uncommon to see a six figure. Yeah, school’s not cheap anymore. HOST: Oh, I know. Yes, I know about that. Yes, I do. Okay, so give me a tip. What’s the number one tip about paying the student loan off? FOGUTH: I want to say consolidate it, simplify it. So if you have multiple loans out there – maybe throughout each and every year you’ve picked up a different debt or a different year, consolidate it. So get it down to one low monthly payment. So once you consolidate it, you can also shop it around. HOST: Are banks willing to consolidate it? FOGUTH: Absolutely are, yes. HOST: Because you have your college degree now? FOGUTH: Because you have a college degree, they know you’re going to pay it. But it’s not only banks, but there’s other financial institutions out there that want to buy that debt. So they’ll buy that debt from other of these places, consolidate it down into one payment at a low interest rate. HOST: What’s the delinquency rate on a student loan that people don’t pay? FOGUTH: I don’t think it’s that high because what you can do is – if you get into real bad trouble – you can defer your payments. HOST: Oh, okay. FOGUTH: Now, I’m not going to advise to do that. HOST: No, don’t do that. FOGUTH: But you can. If you’re in a hard spot, maybe you’ve lost a job or you’re not getting paid as much as you thought you would out of school, you can defer those payments. HOST: Now you said don’t pay off the debt too soon. FOGUTH: Yeah, don’t pay it off too fast. HOST: Why is that? FOGUTH: This is what I call good debt. This is debt that – student loans – a lot of people don’t realize this – it’s tax-free. So what I mean by that is you get to write off the interest that you’ve paying on your student loan. So every year when you’re paying that, you just get to write off the interest, so it’s good debt because you get to write it off on your taxes. Two, it’s typically lower interest rates. So if it’s low interest rates, if you have other debt out there, pay that debt off first before you pay off this low-interest student loan stuff. HOST: They’re lower than a – yeah, they’re actually pretty low. Do you worry, though, with all this new tax talk we’re hearing coming out of Washington that maybe student loan write-off debt may be eliminated? FOGUTH: It could be. Absolutely could be. Right now it’s not, so we’ve got to plan for what we have, not plan for the ‘what ifs.” HOST: And what about the other financial institutions? Should you go around and take a look at other banks and what they’re offering? FOGUTH: Yes, other banks plus there’s a lot of places online because student loans it’s becoming more and more common, like we were talking about. A lot of these online financial institutions will buy them. So you can go out there and you don’t even have to have a brick and mortar. It’s not banks anymore. It’s anybody and everybody because they know that this student loan debt is so common. We’re talking trillions and trillions of dollars of debt. People want a piece of the action. HOST: Maybe you can use that debt because you’re college degreed now, you’ve had a good record paying off your loan. Then you can get your house loan or whatever else you want. Right? FOGUTH: Yes, that’s exactly right. HOST: We’re going to put some information about you on our website and student debt. FOGUTH: Perfect. HOST: Don’t wait. Continue it. Interest rates are good. FOGUTH: Yes. HOST: Thank you. I appreciate that. Good advice. FOGUTH: Appreciate it. Good to see you again. HOST: All right. Very good. Got questions?
We’d love to assist with any concerns you may have regarding your retirement strategy. Contact us using the form below!
![]() The post Tips for Paying Off Student Loans on WJBK Fox 2 appeared first on Foguth Financial Group. from http://www.foguthfinancial.com/tips-for-paying-off-student-loans-on-wjbk-fox-2-detroit/ Foguth Financial Group President Michael Foguth joined Flint’s ABC 12 to offer some great tips for paying off student loans.
Read on for a full transcript of the video. Paying back student loansWJRT-TV CH 12 FLINT-SAGINAW ANNOUNCER: This is ABC-12 News Saturday morning. HOST MARK BULLION: It’s that time of year. Many college students walking across the stage to get that diploma, but what’s next may not be so exciting. We have Michael Foguth here with Foguth Financial to talk about some great tips on paying back your student loans. It’s a biggie. MICHAEL FOGUTH, FOGUTH FINANCIAL: It’s that time. HOST: What are the first steps people should take, you know, right after graduation? FOGUTH: I think you need to assess everything that’s happened. Right? So four or five years that have lead up to this point. Now that you’ve graduated and you’ve accepted your first job – hopefully. Right? And now we say, okay, we have to pay this back. And we were just chatting that it’s almost like a second mortgage, if you will. Right? If you’re going to buy a home and now you have this – HOST: It’s a lot of money. FOGUTH: It’s a lot of money. So assess what you have. I really want to tell people to consolidate. Focus on keeping it simple. So if you have multiple loans throughout the year, consolidate them down into one account if you can do that. HOST: Okay. Now, one fixed rate is better than several. Why is that? FOGUTH: Because I look at it as competition. Right? So if you have these companies out there and they’re all vying for your business, if you will, because they want that interest payment to go to them, no to multiple places. So you can consolidate your debt into one. More importantly, I think it’s simple. So when you get your deductions every year – because you can write off the interest that you pay on your student loans. That’s a big one – off their taxes. So a lot of people don’t realize that. You get to write off that interest that you pay. So then simplify it. You can consolidate down to one and you get one tax slip, you make one payment every single month. It’s a lot easier for these people to really consolidate down into one. HOST: Now, obviously, when you graduate, some might have that mindset, you know, I want to pay it down as quickly as possible. FOGUTH: Yes. HOST: But you’re saying hold off. FOGUTH: Hold off, yeah. It is something that you do want to get rid of, that debt lingering over your heard. But I look at interest rates a lot of times. And with interest rates being so low right now, when you’re paying this money back, you’re better off to take that money that you would have extra to pay and save it. Because, again, we’re talking about interest rates. They’re very low. You’ve getting tax deductions on the interest. If you have additional money, save it and then save it into the right tax-effective way so that you can do that along the way. HOST: Okay. Now, what’s important to know about tax – or you just obviously answered that question. Any last bit of advice, though, for recent grads, you know, with all this? Dealing with, you know, it can be like a mountain to climb. You know, you’re excited, but at the same, too, it’s like, oh my gosh, you’re very overwhelmed. FOGUTH: Simplify it, like I said. Get it down into one account. Let them go out there and vie for your business. You know, make sure that you have your credit score and all your ducks in a row. Because if you have a bad credit score, you’re going to get a higher interest rate if you go out there and try to consolidate it. So make sure you have all your ducks in a row. Simply it. Get into that one account and let them kind of go out and say, okay, who’s going to give me the lowest interest rate, the longest period of time to pay it back, and then just kind of set it and forget it. Put it on autopilot. Auto deduct it every single month. Make sure it’s getting done. And, again, it’s really going to help you long-term not to pay it back too aggressively and save that money in other places. HOST: Maybe some other little tips that, you know, you can kind of accumulate here and there to throw toward that, you know, just to kind of offset it. You know, if you are, you know, a little bit more financially savvy. FOGUTH: Yeah, yeah. And, again, look at your taxes. Right? So if you’re paying back big lump sums, you’re going to lose that tax deduction at the end of the year. So, again, to me it’s all about if you’re going to save or you have additional, focus on taxes. So either, you know, talk with your financial advisor or talk to your tax preparer and say, look, I have this additional money. What’s going to be the most effective way for me to save or to pay this down? HOST: Awesome. Michael Foguth, thank you so much for being here. Always a pleasure having you on the show. FOGUTH: Thanks. HOST: And, again, here’s some great tips when it comes to paying back those loans. Consolidate the loans. One fixed interest rate is better than several. Don’t pay off those loans quickly. Save the extra money. Research other institutions for lower interest rates. And student loan interest is a tax write-off. Got questions?
We’d love to assist with any concerns you may have regarding your retirement strategy. Contact us using the form below!
![]() The post Tips for Paying Off Student Loans on Flint’s WJRT ABC 12 appeared first on Foguth Financial Group. from http://www.foguthfinancial.com/michael-foguths-pay-off-student-loans-flints-wjrt-abc-12/ Teacher Retirement Planning Is A Unique Challenge
Retirement Planners: Go To The Pros Retirement planning for educators can be confusing. If you don’t fully understand all of your retirement options along with the changing landscape as it pertains to state laws governing pensions and retirement health care, consider bringing a professional to your team. For Michigan educators, it’s important to find a retirement expert who understands the specifics of Michigan’s teacher retirement pension and health care system. State laws as they pertain to pensions and retirement health care are constantly up for debate and change. In fact, some Michigan lawmakers currently working on the 2018 budget would like to make closing the Michigan pension system to new teachers a priority in an effort to save money. These developments should be watched closely and if your financial planner isn’t discussing these issues with you and thinking proactively about your options, find someone who will. Supplement Your Understanding: Tap into Online State Resources If you’re in the state pension system, make sure you understand how much your pension may be worth when you retire and when you’ll qualify for that pension. In Michigan, you can calculate your pension by visiting the Michigan Office of Retirement Services website. That website also offers important information about when you’re eligible to retire and what considerations to take into account before deciding to retire. What will you pay in health care costs when you retire? Again, the Michigan Office of Retirement Services website can help you calculate those costs. You’ll want to think about your health, dental and vision coverage options. You’ll need to consider such things as your age upon retirement, whether you’ll qualify for Medicare when you retire, or whether you might be covered by a spouse’s health care plan. Again, if you’re confused, get expert help from a professional that answers these questions every day. Ideally, you can arm yourself with critical information from the state and meet with a retirement expert who can offer a deeper level of advice and planning. Whatever you do, don’t procrastinate. Your retirement savings success depends on you learning how your state teacher retirement system works and how to get the most from your pension and other benefits. Build A Multifaceted Plan As in any profession, it’s not wise to depend solely on one savings plan to fund your years in retirement. Even if you’ve taken the proper steps to maximize your pension, you need to have a supplemental plan. Understand your employer’s retirement plans. You may have the option of contributing to a 403(b) or 457(b) account. Understand the pros and cons of these types of savings accounts and how they might fit in to your big picture retirement plan. Also consider options outside of workplace accounts including Roth IRAs and traditional IRAs. And you must know if you’re eligible for Social Security. Whether teachers pay into Social Security varies and if you’re not sure if you’ll receive Social Security in retirement, check with a retirement professional who can look at your personal situation and let you know exactly where you stand. Life After Teaching Just because you decide to leave the classroom doesn’t mean you have to leave the workforce completely. If you plan to keep a part-time job, consider that when calculating your retirement needs. Early retirement isn’t possible for everyone; you may need to consider prolonging your work life to give you more time to save for retirement. A teacher’s retirement plan is different than those who work in the private sector. Working to maximize your pension, developing a plan with your retirement advisor, and knowing which part-time jobs you can keep into retirement without taking away from your retirement benefits from teaching will offer a strong plan for your financial future. Michigan Teacher Retirement Planning The Foguth Financial team appreciate the hard work and devotion of our teachers. We would like to extend an invitation to a free consultation to review your retirement package and create a plan that will allow you to have the retirement you dream off. Call us today!
The post Teacher Retirement Tips appeared first on Foguth Financial Group. from http://www.foguthfinancial.com/teacher-retirement-tips/ How might President Trump’s tax reform plan affect your retirement? The question isn’t easily answered as the one page plan proposed last week was more about broad strokes than a serious, detailed policy document. But at least some of what he wants may come true and if that happens, you’ll be affected. Let’s break down provisions that you and your retirement planner should be watching. President Trump is looking to simplify tax rates by taking seven tax brackets and boiling them down to only three- 35%, 25% and 10%. We know that this lowers the top tax bracket for the wealthiest tax payers from nearly 40% to 35% which is a significant savings. For all others, we can’t be sure who will save and who may not since the document did not lay out the proposed income cutoffs that would trigger these rates. So if you’re reading this and have a typical middle class income, you could have no idea at this point if your income would put you in a 10% bracket or 25%. But one thing that has been mentioned by the Trump White House is a doubling of the standard deduction. What does this mean? Currently, before exemptions and deductions, a couple owes 10% in taxes on the first dollar they earn, assuming they are not one of the 44% of taxpayers who earn too little to pay federal income tax. But this tax reform proposal would see a couple filing jointly paying no tax on the first $24,000 in income they earn. Combine that with the current tax benefits of workplace retirement plans and it could be a major savings for some. To illustrate the point, think about this example: If a couple each contribute the maximum $18,000 annually to their workplace retirement plans while earning $75,000 per year total, they would only pay taxes on $15,000 of income. Why? Because the $36,000 they contributed as a couple would not be counted as taxable income, and either would that $24,000. So they would only pay tax on $15,000 in income. But of course, it may not be that simple. First, there have been conflicting comments out of the White House about whether contributions to workplace retirement plans like 401Ks would be treated as they are now. Currently, these contributions are treated as pre-tax contributions that are only taxed when withdrawn. But there could be changes that would result in those contributions being taxed the same year as they are made, like a Roth IRA. The same questions abound for traditional IRA contributions. If people are taxed the same year those contributions are made rather than when they expect to withdraw the money during retirement, it might change how people save for the future. And if taxes are paid when the contributions are made, would the penalties change for early withdrawal? Anything and everything could be on the table. Moreover, for couples that currently itemize and take deductions, all of their current deductions with the exception of charitable contributions and mortgage interest would go away in an effort to simplify the tax process. For some couples, they would come out ahead if even with itemized deductions, they don’t reach that $24,000 threshold. But for others, they might lose in this scenario. Health care costs for the sick along with health savings account contributions, home office deductions, and other big ticket deductions would be eliminated. Deductions for childcare are a question mark as is the standard deduction for dependents, deductions that can really add up for big families. The state and local income tax deduction would also be eliminated. If you currently live or are planning to move to a high tax state like New York, this change would be a potentially huge loss for you, especially if you earn a lot of money and pay a lot of local tax. Small business owners should be watching tax reform developments carefully. President Trump has proposed dropping the top tax rate for small business owners from 39.6% to 15%. Successful business owners would save big money under this proposal, money that could be used for expansion, capital improvements, and more. Finally, President Trump would like to eliminate the 40% estate tax. Unless you have an estate worth at least $11 million, you won’t have to think about this potential change. And if you’re expecting to inherit money, you should only consider this change if you’re expecting to inherit from the very wealthy. Either way, with the White House releasing a broad one-page plan and the tax reform process in its infancy, you might not see much change for 2017. Discuss these developments with your retirement planner. Make sure they’re watching Washington D.C. carefully. If they’re not focused on your taxes, give Michael Foguth and Foguth Financial a call and set up a free consultation. They’ll help you look for ways to not only save more of your earnings today, but show you how changes in Washington, with the right proactive action, might result in tax savings tomorrow when you’re ready to say goodbye to your office and hello to retirement. No matter what proposals actually become law, Foguth Financial is monitoring the changes every day, helping their clients strategize and plan for the future.
The post Trump Tax Reform And Retirement Planning appeared first on Foguth Financial Group. from http://www.foguthfinancial.com/trump-tax-reform-retirement-impact/ Talking to millennials about retirement almost seems counterintuitive but if you browse the Internet, the majority of retirement blogs and articles are targeted to this younger, working generation. Financial experts and writers focus the majority of their efforts to 20 and 30-somethings who presumably still have decades before it’s time to consider leaving the work force. But what about the Baby Boomers – people between the ages of 53 and 71 who have worked their entire lives and may not have enough to show for it come retirement? For the workers who no longer have time on their side, there are still solutions to building a retirement portfolio.
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ABOUT USAt Foguth Financial, retirement planning is their specialty. From Social Security income planning to asset management, the Foguth Financial Group team takes a bird’s eye view of their client needs and goals in retirement to ensure that safety and growth are two foundations of every plan. ArchivesNo Archives Categories |