Parsonex Advisory Services, Inc.
Jonathan Miller is the President & CEO of Parsonex Enterprises, Inc. and its affiliates.
Jonathan leads a team of financial advisors who manage over $250 Million for clients across the country. He personally services a select group of clients located near his home in Colorado and brings a breadth and depth of knowledge that few advisors can boast.
Miller is an enthusiastic entrepreneur and executive who specializes in creating and growing businesses and systems, recruiting, training and developing financial advisers and entrepreneurs, creating effective marketing and distribution systems, and building strong management teams.
Miller has built several companies from the ground up, including Parsonex Securities, an independent broker/dealer, which he founded in 2007, Parsonex Advisory Services, an SEC registered investment adviser, an independent insurance agency and a mortgage company which no longer operates. Miller has succeeded in a variety of endeavors and excels at leading people-centric organizations.
Having started several successful companies he brings both industry level investment expertise and entrepreneurial experience to business owners and industry leaders who are seeking financial advice.
Jonathan, his wife Jayme, and their two children live in the front range and are active in the community.
BA, Political Science, Iowa State University
Assets Under Management:
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I am going to answer your question a little differently than what most people consider conventional wisdom. I am basing this on what I wish I had done when younger and assuming that, like myself, you are in a career with a signficant upward income potential but possible periods of volatility.
First, yes, you absolutely want to have an emergency fund. The conventional wisdom on this is to keep the money in "defensive" type strategies. My wife, a few years ago, asked me why our signficant emergency funds were in defensive allocations. She explained that if it was a true emergency fund we really planned to NOT use the funds, so she suggested that we should have the money invested more long term but with liquidity if we needed it. We moved our emergency fund to a diversified stock portfolio (80/20) and have never touched it since. That was good advice.
Next, if you can fund both a Roth IRA and non-IRA investments, of course do both. You should definieltey max out your Roth IRA (or Roth 401k) because the advatnages are so signficant long term. Getting the match is worth it in your employer plan. However, after you have maxed out your company match, I would recommend investing all of it in a 100% diversified portoflio of stocks (you can use an ETF or mutual fund strategy) and building this up over time with consistent savings (not in an IRA.) There are a few reasons for this. 1) Liquid assets won't be penalized if you ever need to access the funds and emergencies do happen. 2) the growth on a tax deferred accout is ultimately taxed as current income, the highest tax instead of capital gains (a Roth IRA is not taxed on the growth after 59 1/2 so this is of course best.) 3) Your ability to leverage or pledge assets or borrow inexpensively through a line of credit for businesses, purchasing real estate or anything else you need to do in life long term depends on your balance sheet and pledgable assets (IRAs usually don't work nor do 401k's.) Of course tax planning is much more comprehensive and depends on lots of factors. But, one of the top secrets of the wealthy is that they have the ability to inexpensively borrow and invest in opportunities without liquidating long term wealth (ownership in stocks/companies). This isn't possible in an IRA.
The conventional wisdom other respondents have provided is correct, however, if I had the ability to advise certain clients over again from 20 years ago, I would have allocated more to non-tax deferred investments.
Congrats on getting a good job and at least you have the most important step right regardless...investing money.
I love that you are so young and thinking about investing. As long as you have a long term time horizon and understand that the market doesn't just go up, you could follow Warren Buffet's instructions for his estate and invest in an S&P 500 index fund. Look at Vanguard - S&P 500 mutual fund or ETF. Again, assuming your timeframe is 10 years+ it would be something to consider. Also, look up the concept of dollar-cost-averaging which is what you would be doing by investing $100 per month consistently. Start early with a discplined investment strategy and you will be way ahead of the curve later in life because of compound interest. Good luck!
I love the question and you are absolutely thinking about an investment property in the right way. The answer does, of course, depend on your objective and tolerance for risk, but my short answer is you are spot on with your thinking.
First of all, the value of the property you own is not dependent on the mortgage balance against it. Meaning, if you have a $200,000 home value, it will increase or decrease, regardless of the mortgage balance against it. If your goal is to own the property over time and you resasonably believe in 10 years it could be worth $250k or $300k, this part of your investment moves independelty from how you structure your financing.
Second, are you in a more financially stable position with additional cash flow. I would say, probably yes. By paying more on the mortgage currently, you are increasing your equity in the home faster, essentially investing in the physical asset of your house but it in no way increases or decreases the appreciation of the atual investment (the hosue.) The additional equity is less liquid than another alternative investment or keeping the money in cash in case you need to access it. Having a higher payment is actually more of a risk to you in the ownership of the home until your mortgage is completley paid off - in any sort of a financial hardship, saving money outside of equity in an emergency fund or other type of inevstment and having a lower payment would be a stronger payment option.
Third, you would actually pay more interest over time, but that also creates more of a tax deduction over time (check with CPA for new tax laws though). People often say on a 15 year vs. 30 year mortgage that on the longer mortgage you will pay more money (i.e. more interest.) However, this looks at the transaction on a nominal dollars basis. Given inflation, a dollar you spend on interest 10 or 15 years from now is worth significantly less than it is worth today, so the interest you pay far off in the future is less costly than money spent today. Of course, you have to be smart and utilize the additional cash flow wisely, but I personally would say if you are a savvy and discipined business person and investor (which your questions indicates you are) the opportuniy cost of the lower cash flow today (not to mention debt-to-income ratios for loan qulaifiations) is greater than accelerating your mortgage - especially when your after tax borrowing cost is so low.
The concept is called "mortgage leveraging" and is nothing more than corproate finance 101 on a smaller or personal investor level. But, you have to execute it properly and make smart business decisions.
On another side note: don't listen to any of the people who tell you to invest the equity or cash flow in any sort of insurance product - that would be dumb. Just improve your cash flow position, invest in other great assets that can provide better liquidity. (Dang it - I thought this would be a short answer but I guess I was more opinionated on the matter than I thought.)
I have no idea how much money you will make in your business or how much money they are talking about giving you. If you are giving up a percentage of your profits, you are basically selling equity, not getting a loan. You just need to look at the value the money you are receiving, how much more money you and your business can earn as a result, and compare that to the future value of the 5% of profits.
Great question and common issue. I actually had exactly the same thing happen when I switched firms years ago as I also personally contribute to a Roth 401k and received a match. Based on your description, I think what you are describing as your Roth 401k, is the entire account. In reality, in this sort of a situation, you actually have both a Roth IRA portfion and a traditional IRA portion in your 401k (at least this is how it would rollover.) The Roth 401k, i.e. the contribtributions that you made, will transfer over into a Roth IRA. The match that your employer gave you, would have gone into a tax-deffered part of your 401k (since you never paid income tax on the money) and therefore is "pre-tax" dollars. The simplest solution for you is to setup both a Roth IRA and Traditional IRA and roll over your contributions (Roth portion) into the Roth account and the company match (tax-deferred portion) into a traditional account. If you want to convert your IRA into a Roth IRA, you can do that, and there are plenty of calculators online where you can calculate this (or call your financial advisor or one you trust) and they can help you do this.