When you start searching for financial advisors, you likely heard the terms, fee-based, fee-only and commission based. These are the three ways financial professionals are paid. What does each of these terms mean? Today I’m clearing up the confusion! Fee-only Advisors First, let’s look at fee-only. Basically, you pay the advisor and not someone else. Perhaps you pay them to perform a service, like developing a financial plan for you. You could pay them hourly. If they manage assets for you, their pay is a percentage of those assets. Or maybe you just simply pay them a retainer fee. Fee-based advisors get their money directly from you the client. Fee-based Advisors Next, you have fee-based advisors. That’s a little more tricky. Sometimes their pay is fee-only and sometimes their pay is directly from a company. So when they sell a product, they receive a commission from the product. For example, […]
If you’re a business owner, you’ve likely heard the term EBITDA tossed around before. EBITDA is an acronym which stands for Earnings Before Interest Taxes Depreciation and Amortization. Recently, a client approached me wanting to know what their EBITDA was and how should it be used for valuation purposes? So let’s break that down a little more. Recasting Financial Statements So, when we talk about EBITDA, it’s important to realize that your profit and loss (P&L) statement may or may not be out of whack. In order to find the accurate valuation of your business, you need a normalized EBITDA. That’s where recasting financial statements come in. It is figuring out the true benefit a business owner receives from the business. It is used in calculating the value your business and is often referred to as recasting or normalizing the financial statements. In the past, I have seen business owners […]
One of my all-time favorite quotes is the one about compound interest that’s attributed to Albert Einstien. “Compound interest is the eighth wonder of the world. He who understands it earns it. He who doesn’t, pays it.” You will probably see that quote a million more times on my blog because it is one of the truest concepts ever! Sadly too many fail to understand and grasp it. Here’s an example to help you recognize the importance of compound interest if you don’t.
One thing is true of life…expect the unexpected. That’s why any financial guru around will stress the importance of having an emergency fund. If you’re confused on what exactly an emergency fund should be used for, I can tell you it’s not for that 65” TV you’ve been eyeing at Best Buy when yours bites the dust. While that may seem like a catastrophic event to some, it’s not exactly the type of crisis that you’ll want to dip your fingers into your cash stash for.
Sometimes in life we all hit rough patches. That’s why an emergency fund is imperative to keeping your finances in check. However, there are moments when perhaps your emergency fund isn’t fully funded or won’t cover all you need. You might turn to credit cards, you may consider line of credit, still yet you may choose borrowing from your 401(k). While borrowing from your retirement account may seem like a great idea it’s really not. When you contribute to a 401(k) or other employer sponsored retirement plan they are meant for retirement—not life’s unexpected moments. While there are some moments when it makes sense to choose that option, more often than not you’ll find a better alternative than borrowing from your 401(k). From time to time, employees need access to the funds in their 401(k) plans. However, since the money is meant for retirement Congress created laws to prevent people […]