At Prudent Financial Planning, we specialize in advising elite professionals to achieve their financial goals, tackle debt, and build to maintain their wealth. Explore our solutions below!
Frequently Asked Questions:
Q. What is the best way to pay off my Student Loans?
A. Make sure you are familiar with all of your options. The first step is to determine the total amount of your federal and private loans. Once you have all of that information, we can help you analyze it and make recommendations on how to proceed.
Q. What is Student Loan Forgiveness and how do I qualify?
A. There are several types of loan forgiveness available at this time. The main issue to understand is that under the current system Student Loan Forgiveness can be a taxable event. That means that the amount of loans forgiven can be counted as income in the year of forgiveness. You also need to keep in mind that your loan balance(s) can keep increasing while you are working towards forgiveness. For example, if you have $100,000 in Student Loans and you pay $300/month for 20 years, your loan balance(s) may increase to $150,000 (or more) by the time your loan is forgiven. In addition, the amount forgiven ($150,000) can be taxed as ordinary income the year the loans are forgiven. For someone in the 20% tax bracket, that could equate to a tax bill of $30,000.
Q. What is considered a good Credit Score and why do I need good credit?
A. Higher scores represent better credit decisions and can make creditors more confident that you will repay your future debts as agreed. FICO® Scores are the most well-known types of credit score. FICO® Scores are used by many lenders, and often range from 300 to 850. A FICO® Score of 670 or above is considered a good credit score, while a score of 300-579 is Very Poor, 580-669 is Fair, 670-739 is Good, 740-799 is Very Good and 800 or above is considered Exceptional.
Credit scores are used by lenders, including banks, credit card companies, and even car dealerships, to make decisions about whether or not to offer your credit and what the terms of the offer (such as the interest rate or down payment) will be. Borrowers with low credit scores may be required to pay high interest rates and additional fees and may even be denied credit. Those borrowers with high scores usually qualify for the lowest interest rates as they are not seen as a high risk to default on their loans.
What does Fee-Only mean?
Here is a how Fee-Only is defined according to the National Association of Personal Financial Advisors (NAPFA).
“The way in which your financial planner is compensated can make all the difference in the recommendations they make for you. That’s because some advisors work under a standard that requires only that their recommendations be suitable to your particular situation. Other planners work under a fiduciary standard that requires advisors to consider what is in their client’s best interest. You may be wondering why your advisor would make a recommendation that is not in your best interest. That’s where the issue of compensation comes into play.”
“There are three basic ways in which financial advisors are compensated:
Through a commission-based model
Through a commission & fee model
Through a Fee-Only model
Both commissioned and commission & fee advisors receive a compensation based on the specific financial products they sell to you. Because of the conflict of interest inherent in these transactions, these advisors may have difficulty putting the client’s interest above their own.”
“NAPFA’s position is that the Fee-Only method of compensation is the most transparent and objective method available. This model minimizes conflicts and ensures that your financial planner acts as a fiduciary. Fee-Only planners are compensated directly by their clients for advice, plan implementation and for the ongoing management of assets. All NAPFA members are required to work only within the Fee-Only structure, accepting no commissions for their work.”
“Fee-Only financial advisors may be paid hourly, as a retainer, as a percentage of assets (AUM), or as a flat fee, depending upon the planner you choose.”