Joseph Kapp and Nicholas Burkholder are the featured Money columnists in The Advocate magazine and are nationally recognized thought-leaders in the area of gay, lesbian, same-sex couple financial and estate planning. Joe and Nick also own a financial planning practice, which caters to a largely gay and lesbian clientele including couples, executives, and professionals.
Joe and Nick are also frequent guest lecturers, having spoken at diverse forums including Bar Associations, the World Bank, the Department of Commerce, the Department of State, the Environmental Protection Agency, as well as to various corporate groups and Fortune 500 companies. I asked them a few questions about the core value of money in relation to life events; gay, straight and otherwise. Enjoy!
1. Financial planning encompasses so much more than just money management. What are some of the emotional issues about wealth that influence investing decisions?
Joe: There is an emerging field of economics which studies the impact of emotion on how we make financial decisions. One of the areas where we see this manifest in particular is that many people often accelerate payments of their mortgage because it makes them feel better. Often, this is the exact opposite of what they should be doing especially if they have a low interest rate mortgage. If you have long-term goals, paying down a mortgage that has an interest rate of 6%, when over a long term the market returns double digits, means that you are losing money with each accelerated principal payment. As financial advisors, our job in part is to help clients remove emotion from their financial decisions so they make prudent financial decisions that are in alignment with their long-term goals.
Nick: We all have many emotions linked to money including greed, frugality, generosity and fear (of not accumulating sufficient wealth or losing accumulated wealth) to name a few. All of these emotions can cloud our ability to make competent and logical decisions regarding our finances and often steer us in a direction that will do us more harm than good. What we need to understand is why we’re feeling the way they way we are and how we separate ourselves when making decisions about money . The key here is to have a good understanding of what we want from a goals standpoint and what it is going to take to either get there or if you’ve reached financial independence, preserve that wealth as long as you live. Once you know where you are going, you can enjoy the ride.
2. What is your most significant memory about money?
Joe: My most significant memory was opening up my first savings account with my grandmother when I was ten years old. In fact, I still own the original passbook from the bank. At that age, I did not really quite understand how it worked when you put some money in a savings account and you came back a month later, you had more money from the interest it accumulated. It seemed to me like magic and I wanted to learn more about it. I ended up studying economics and economic development as a result.
Nick: My most significant memory about money is something my father said to me when I was young and continues to say to me today. He said that one of his jobs as a parent is to provide his children with a life more opportunity than he had growing up and hopefully every generation down the family line does the same. My father worked for Bell Telephone as a Splicing Technician for 35 years often working Saturdays and Sundays while my mom worked full time as an Executive Assistant to the Superintendent for the local school district. My parents never had a lot of money but they worked hard never lived above their means. They provided me (and my siblings) with an amazing childhood and still saved enough money to put three of us through college when they never had the opportunity themselves.
3. What is your worst habit around finances?
Joe: I spend a significant amount of time visiting clients at their offices or businesses that they own. As a result, I often run out of change for the parking meters. I have racked up more than my share of parking tickets. Sometimes I feel like I single handedly supported a team of meter readers across the country.
Nick: I would say my worst habit is not carrying enough cash on hand. I find myself going to ATMs a lot and often ones that are not my bank so I end up paying the withdrawal fee.
4. What is the typical life event that prompts most queers to get serious about their finances?
Joe: It usually involves a big life change, a merging of finances, a separation or possibly the death of a close friend who has difficulties with a hostile family. It is a shame that people need this experience to create a sense of urgency and get their planning done. Many people also postpone planning because they think that it will reduce their options and create confines.
Nick: The most common life event we come across is couples joining finances to jointly plan as a financial couple. Most same sex partners keep their financial lives separate and often look at their retirement finances in a vacuum as a result. When a decision is made to join these assets to plan together for retirement there are many obstacles same-sex couples face and the process can be daunting without direction from someone who knows the rules and how to use them to their advantage.
5. Do you and your partner see eye-to-eye on money?
Joe: Seeing eye-to-eye on money comes down to having congruent financial goals. Most couples do not know what their goals are, either as individuals or jointly. Therefore, when one person is a saver and one a spender, there is likely going to be an issue. When my partner Carlos and I first met, we were in high school. We have been together for 15 years now. When we moved in together, we definitely did not see eye-to-eye. I was more of a saver and Carlos more of a spender. Neither extreme is good. We brought each other closer to the center. Once we quantified our goals, determined when we wanted to reach financial independence and where we wanted to be financially, our decisions to spend or not spend became transparent and easy. Either a purchase is or is not in alignment with our goals.
Nick: I am not currently seeing anyone at this time.
6. Can you explain some of the financial dilemmas unique to same-sex couples?
Joe: There are a whole host of issues from hospital visitation, to transfer taxes, burial rights, medical care and even purchasing life insurance. It really runs the gamut. With regards to Federal benefits alone, there are over 1,000 benefits affecting same-sex couples including estate taxes, domestic partnership benefits, and social security benefits, etc. Our regular column in the Advocate highlights a number of these issues.
Nick: There is a variety of topics that we continually write and speak about. Two of the most significant dilemmas include no survivor pensions for non-spouses and the inability to transfer sizeable pieces of property free of taxation between partners.
7. What did your parents teach you about money?
Joe: As I mentioned before, much of what I learned came from my grandmother. She grew up during the depression and so that had a significant impact on how she managed money. She used to tell me, “That any fool can spend money, but it takes a smart person to save.” That clearly had an impact on me. My parents taught me that with five kids in my family, it’s not how much you make, but how much you keep that’s important. My mother taught me to put money away regularly for retirement. My Dad was the entrepreneur in the family, which is where I got the desire to form my own financial planning firm with Nick.
Nick: My parents taught me a lot about money. They were great savers. Most importantly, they taught me that I do not need to make a ton of money to have enough for today and tomorrow and also that spending a lot of money doesn’t bring happiness. Balance in spending and budgeting and living within your means are key components to providing for yourself and your family.
8. What are your personal plans for retirement?
Joe: I plan to be doing exactly what I am doing right now. I love what I do and cannot imagine retiring. I may slow down a bit, volunteer more, or travel more often, but I feel fortunate because I love what I do. For me, these days, there is little distinction between work and play.
Nick: I think I’d like to work in some capacity most of my retirement years. I’d like to spend more time with my family and would probably work part time. I’ve always wanted to be a teacher in some capacity and realize the need for financial education surrounding investing and money management for young children is a necessity.
9. Do you lease or own your car and why?
Joe: I own a 1997 Acura 3.0 CL. I spend a lot of time in my car traveling to clients and airports. I am not the type of person who wants to worry about scratches or dents on my car. Therefore, I plan to run it into the ground before I get my next car.
Nick: I lease my car. I don’t want a large car payment for a depreciating asset and am not sure whether I want to purchase a vehicle. By leasing, I have the option to buy at the end of the lease term if I choose. In addition, because I’m self-employed and use my car largely for business activities, I can partially deduct the lease payments against my business income.
10. What is the secret to wealth accumulation?
Joe: First is to determine your life’s goal. We don’t espouse the accumulation of assets for its own sake. Most people don’t know what their goals are. Without clear goals, it is difficult to understand what the purpose of saving even is. People should take some time to identify their true goals. Turn off the TV, disconnect from the world for a little bit. Even if it is only for a weekend and spend time just thinking about where you want to be financially, about what your life’s goals are. I personally took four months traveling alone through Asia to determine what my goals were. It’s what I needed to do. Spending (or not spending) becomes clear when you know what your goal is. I learned on that trip from people who may never earn in a lifetime as much as we earn in a year that it’s definitely not about how much you make. Rather it’s what you do with what you got.
Nick: It doesn’t matter how much you make. What matters is how much you keep and how you make the excess work for you. Disciplined savings, a goal oriented investment strategy and time in the market (not timing the market) are the keys to success. The sooner you start saving excess income and investing the better. You obviously must live within your means and not accumulate bad debt (like credit cards). It is important to determine how much you spend through a monthly budget then go back and see if you can cut out the miscellaneous expenses and save more without it affecting your lifestyle. It is important to start small and set aside excess savings monthly ideally through direct deposit, so it is automatic. Then ratchet it up. You probably won’t even miss the money. Start by maxing out your retirement plans, then to deductible and non-deductible IRAs, and lastly taxable brokerage accounts. Have some sort of plan, even if it’s basic in nature.
More about Joseph Kapp
Joseph M. Kapp is a featured columnist for The Advocate magazine, writing about gay and lesbian financial and estate planning. Mr. Kapp and his business partner Nicholas Burkholder are recognized nationally thought leaders in the area of gay, lesbian, same-sex couple financial planning. Kapp also owns a private wealth management firm which caters to a largely gay, lesbian, and same-sex couple clientele. Kapp is a frequent guest lecturer having taught college level financial planning courses at Southeastern University’s Center for Entrepreneurship as well as classes focusing on Gay and Lesbian financial planning.
They have spoken at diverse forums including legal bar associations, the World Bank, the Department of Commerce, the Department of State, the Environmental Protection Agency, as well as to various corporate groups and Fortune 500 companies including KPMG and Discovery Communications, Inc. Kapp has his undergraduate degree in economics from Florida State University and his Master’s degree in Government Administration from the University of Pennsylvania where he concentrated in economic development. Kapp also serves as President of PEN -Washington DC’s Gay, Lesbian, Bisexual and Transgender Chamber of Commerce.
More about Nicholas Burkholder
Nicholas Burkholder is a featured columnist for The Advocate magazine, writing about gay and lesbian financial and estate planning. Mr. Burkholder and his business partner Joe Kapp are recognized nationally thought leaders in the area of gay, lesbian, same-sex couple financial planning. Burkholder also owns a private wealth management firm which caters to a largely gay, lesbian, and same-sex couple clientele.
Burkholder is a frequent guest lecturer, having taught financial planning courses at Southeastern University’s Center for Entrepreneurship and have spoken at diverse forums including legal bar associations, the World Bank, the Department of Commerce, the Department of State, the Environmental Protection Agency, as well as to various corporate groups and Fortune 500 companies including KPMG and Discovery Communications, Inc. Burkholder earned his bachelor’s degree from the Robert H. Smith School of Business at the University of Maryland.
Read other Queercents interviews in the Ten Money Questions archive.