Easy Wins in Personal Finance (Part 2)

Plan With The Tax Man

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1+ y ago 16:36

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Welcome to part 2 of our discussion on easy wins in personal finance! It’s important to eventually get a comprehensive financial plan for yourself, but sometimes even just a few minor adjustments in your portfolio can make a big difference. Let’s discuss a few more easy places to start...

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Transcript:

Marc Killian 00:00

We're picking up with part two of easy wins and personal finance. With Tony Morrow this week, we're gonna pick up where we left off on our conversation for the prior podcast, going through 10 places where hopefully you can make some adjustments to get you into better shape. So that's the focus of the podcast this week here on playing with the tax man. Look up in the sky. It's a bird.

Announcer 2 00:21

It's a plane. No, it's the tax man. He may not be a superhero. But Tony Morrow has saved many retirement plans with his extreme knowledge of tax planning strategies. It's time for a plan with the tax man.

Marc Killian 00:36

Hey, everybody, welcome into the podcast, Tony and I wrapping up 2023. With our second half of the conversation on easy wins and personal finance. And Tony where you can you know, we're taping this, about two or three days before Christmas. I tried to finish up work this week before we all get out of here and and celebrate the holidays. But can you believe 23 is almost over crazy.

Tony Mauro 00:58

I can't believe it. I know it seems like the older I get, the faster these years go by. And it's interesting, but I you know what, the older I get to though, the more I look forward to the holidays, and spending time with family. So hopefully, everybody can, you know, can relate to that get that done as well, as they can expose? Yeah, well, if

Marc Killian 01:18

you're checking out the podcast, we're dropping this on Thursday, the 21st. So you got just a couple of holiday shopping days left. So hopefully, you've already got that stuff out of the way. And you don't have to run around like a crazy person. But if you do, be safe, and be sane, and all that good kind of stuff out there. And for now, just hang out with us and then listen to a couple more things here. So we're gonna go through six through 10. Tony, on our list of 10 things to work on. So let's let's pick it up with number six, which is certainly right in your wheelhouse. It's the tax efficiency of your investments. So not all investments are tax efficient, right. And so this could be a great place that you could do some tweaks and make some changes, working with your professional, your advisor to you know, really get some good wins.

Tony Mauro 02:03

Yeah, and you know, this time a year, for us, you know, a lot of our clients are asking these these types of questions and tax efficiency. I mean, you know, they get a little confused when they hear it, whether it's, you know, on the news or wherever, and really, it comes down to, you know, being able to analyze what you have, and making sure that, you know, it's not causing you any ill effects tax wise. I mean, and there's a number of ways, you know, that we do that. I mean, for our clients, I mean, we have some, some software and some calculations and whatnot, but you know, you can run it with your advisor, or at least inquire but, you know, not all assets are basically equal in terms of the way that you know, that they're taxed, and how they're treated for taxes. I mean, a lot of times we think, you know, clients will ask us, Well, you know, I've got such and such stock, or sometimes even bonds, you know, that I can sell and take a loss on. But a lot of times, you know, we'll do some tax planning with clients, and then we'll get their statements. And all of a sudden, they'll have some kind of huge capital gain that they didn't tell us about maybe maybe not even unknown about you, and especially in funds. And so then that goes on their tax return, you know, and then all of a sudden, they have a higher tax bill. The other interesting culprits are high dividend paying stocks, which we advocate. And then also interest in bonds and or other types of investments. And those two things are treated differently for taxes. So you got to kind of watch out for that, because bonds and CDs and stuff like that are taxed at normal tax rates, and which is generally higher than stocks. So you've got to make that this this whole thing part of your plan. Like say, if nothing else for taxes. Yeah,

Marc Killian 03:43

and exactly. And this is, I mean, I think outside of having the income plan so that you know how much you've got coming in, you know, each month in retirement, I think this is probably the number two spot, right? I mean, this is where you can truly make or break a strategy. So being tax efficient. And you know, you started out with saying people get a little confused here, and that's exactly why they should turn to professionals in this regard. Because if you've been DIY in it, right, you can, you can grow the wealth. We talked about that all the time, you can grow the wealth a lot easier. You know, certainly over the last number of years, it's a little easier to kind of build up money versus that preservation phase that distribution phase which is retirement and boy being tax efficient could make a big ol big ol swing there so it can over long periods of time especially Yeah. 2530 year retirement that's a long time so so tax efficiency number six number seven, check those beneficiary designations Now we talked about easy wins. So you might guess you could make the argument Mark taxes aren't that easy for me to fix? Okay, fine, fair. So we're cleaning that one up with number seven which is tax or check beneficiary designations. This is an easy win to anybody can get done and should do Tony this. This should not happen like those stories that just about every advisor has about someone getting remarried and then passing away and the ex spouse still being on some accounts on place. and they shouldn't happen, because it's just so easy. You can fix this stuff in like five minutes, you

Tony Mauro 05:04

can, and this, to me needs to be part of everybody's, you know, annual, I guess, review slash plan wherever they do, you need to add this one because it is easy to fix. Now, obviously you got to know where what you have and where it's at. And then you've got to contact, you know, custodians and things like that to, you know, just to double check. It would behoove you, though, to make a list of everything you have, keep it on your own, right what your beneficiaries are, that's what I do. And then it's part of my review process just for my own self. And we do it for every client, as well as, here's the beneficiaries you had last year, anything changed anything, you know, that we need to add? Because, like you say, things do happen. And I think I might have mentioned this on the last show or a while back, I was just checking mine as part of this year, and I found one that I did not have, yeah, you did. Yes, son. Yeah, as a contingent beneficiary. So you know, I just missed it. And, you know, easy change took about 10 minutes did it right online, and fixed it. But if you don't do this bad things can happen. And some of the worst generally are what like, say when a spouse dies? Or a divorce? Yeah. And then it's just a real ugly legal mess.

Marc Killian 06:15

So don't let that happen. Because this is this is an easy one. Yeah, for sure. Yeah, this one, the one, we don't spend much time on this, just get it done. If you've got a professional you're working with, just ring them up and say, Hey, I'm getting a divorce got a divorce, you're probably talking to them anyway, I need to make some changes, or you know, somebody's passed away, and you want to remove them or whatever the case is, just just take five minutes and do it. So Alright, number eight, rebalance the old portfolio. I feel like I should because it's Christmas time, I should say like rebalance ye portfolio. Yield portfolio. You know, rebalancing, I think some of us kind of feel like this happens automatically. And maybe, depending on how things are set up, it could, but you know, is it rebalancing the way that you really, truly need it to? And how easy is this to do? Tony? Like, I think in today's world, right, with so much stuff on these online portals, you probably can go rebalance some of this stuff yourself pretty easily. If you know what you're

Tony Mauro 07:07

doing. Yeah, yeah, if you know what you're doing, you definitely can, you know, it's, it's wise to, you know, make sure that your your rebalance strategy fits your needs, rather than just a general, you know, 60% or 15%. Yeah, you know, in in each type of fund or investment, because what happens is, again, in the investment, world rebalancing, that's kind of some, some, maybe lingo that people don't understand, but what happens is, if you've got your money, you know, diversified in different types of sectors, or, you know, asset classes, some do very well and others don't. And so then you get out of balance, meaning that you might have too much in one sector or asset class, because it did so well. And you want to rebalance that. So in other words, you know, you've kind of taken advantage of, you know, the old, the real thing, you know, buying high and selling low is, you know, you want to rebalance and keep your same percentages, so that based on, you know, whatever your plan is, it doesn't get too out of whack, because we've had it too, or some people will come in they haven't rebalanced for years, and all of a sudden, they have much, much more exposure to, you know, higher risk type of operator investments. And, and they're nearing retirement. And so, you know, luckily, in the cases I've seen, nothing bad has happened, but it could before you get it rebalanced. Sure.

Marc Killian 08:26

Yeah, definitely. So, again, get it done, you know, talk to your advisor, this is something that can be pretty quick. If you're using an online portal, you probably could go in there and make a couple changes and, or even just look at the automation is there to a lot of times, you know, there's I think there's like even checkboxes to automate for rebate is Yeah, yeah,

Tony Mauro 08:43

a lot. A lot of portfolios now, especially if they're using individual fund managers will rebalance automatically. It's their job to go in and do it, you know, rather than having to have you worry about doing it. So if that's available, it's worth looking at. Okay.

Marc Killian 08:56

All right. Number nine, are you under estimating your proper emergency fund? Now, when we did the one last time, right, we kind of framed the conversation on, the first one was keeping the right amount of cash. And we kind of talked about that from a standpoint of maybe being retired, right, just having some cash on hand, I think the emergency funds side of this conversation, you could kind of maybe make the argument that this is pretty similar. But let's talk about this one, if you're still working if you're a pre retiree, right, so understanding your proper emergency fund balance, if you're a pre retiree, in case you do lose your job, especially with a lot of the things that are happening here as the years winding down, you know, there's still a lot of talk that 2024 is gonna be a fairly rough year and businesses have been cutting, you know, cutting people already, right. So you want to make sure you got that emergency fund set, in case, you know, you got to float yourself for a couple of months.

Tony Mauro 09:43

Yeah. And generally, in the financial planning realm, you know, the ego out and Google things and you're gonna get a lot of different answers, but kind of the standard is, you know, three to six months of your monthly living expenses, and that's a good start, but I Do you think you need to take it a step further as work with your advisor on truly what your, you know, lifestyle is and what your expenses are, because maybe you want to up that a little bit, maybe you've underestimated just how much that really is. So six months, you know, what you thought might have been doable might be Ooh, boy, you know, that's a lot to try to try to get to, I still think you should shoot for it. But like you say, in the corporate world, especially with with cuts and things like that you never know, when you could possibly be out of a job. And you know, how hard it is to find a new one. I mean, generally, these days everybody's looking for looking for employees, but that doesn't mean you know, you're going to just grab something real quick. And so I think it's a lot easier to, you know, to figure this out. And I, we asked everybody at tax time, even our retail tax clients, and very, very few even have one, number one, we talked about that last time, but once you have one, you gotta be able to fund it. And you gotta be able to adjust it as your as your lifestyle changes,

Marc Killian 11:00

for sure. Yeah, I mean, think about the different lessons we've learned over over the last few years, right, with the COVID situation, people getting locked out of work and whatnot, you know, and having to have some money to float and get by. So if you're still working and getting good idea, rule of thumb, sure a three month thing is is a great place to start with the rule of thumb rule of thumb, but just also do some a little bit extra digging, just to make sure that that is the right amount for you. Like you said, you can shoot for six, that's even better. So yeah, absolutely. All right, final one here, number 10. automate your savings. We just talked about automation a little bit with the portfolio, but automating the savings, right? So an easy win to get yourself where you want to be. I just what was this I just saw something the other day, Tony, where somebody said, I am blown away by the fact that, you know that if I over the course of time, if I've saved like $100,000, you know, from from a long, long period of time starting younger, that it can easily turn into a million by the time I'm older due to compounding, right. And so it's the idea of, you know, consistently putting money away all through our life, for our retirement well on all these automated things we have now can really help that along as well. So if you're still working, pre retiree, or even some, you know, share this message in a lot of our audiences, you typically, you know, retirees and pre retirees but share it with your grandkids too, right? Hey, automate those savings, you're out in the workforce now, start automating this stuff, and you'd be surprised what happens when you get older.

Tony Mauro 12:20

Yeah, it really is true. And with with today, especially with the technology to be able to do this fairly easily. And you're never gonna amazes me, you're never gonna never, never miss it, you got to learn to live without it. We're such a society, at least in America, you know, want want want everything. Right, that delayed satisfaction, I

Marc Killian 12:40

just I that was almost like, Charlie is almost like Charlie Brown's teacher, right there, you see, wow,

Tony Mauro 12:45

yeah, we just want want, and I'm reading a book, it has to do with physical activity and whatnot. But it's a great saying, and you can apply it here, really, to any of these, and that is that, you know, when you make hard choices, life becomes easy. When you make easy choices, life's can get very hard, which means, you know, in the text of, you know, you have to be able to do some of these things, which seem hard, they're really not, but it takes some discipline, it takes some delayed satisfaction, which is, you know, saving, number one is that, but automating it will help you learn to live without it. And, you know, you forget about it, you know, and then the next thing you know, you know, 3040 years go by, and all of a sudden life is easy for you. And whereas if you don't do this, and as you know, you know, most of us, you get your paycheck, you've got bills to pay, and then you pay your bills, and then you always pay yourself last. And that's exactly the wrong thing to do. This forces you to pay yourself first. And I can't stress that enough, whether it's through your paycheck with with your retirement plan, or even outside of that, it's pretty easy to set up any type of investment to just go into a bank account or savings and, or whatever you tell it to pull out, you know, and put it in the investment as you go. I mean, nobody's doing it for us, right. And it's right, very few of us have have those, those pension plans anymore, so it's up to us. So we've definitely got to try to take care of

Marc Killian 14:12

And then wonder if you can automate this stuff, and like I said, you're never gonna see it, then great. And most again, most of you're still working 401 K plans and things of that nature. And you can certainly, obviously, automate this stuff. But you know, you can automate some additional savings too, especially if you're still working. And you feel like you're behind and we've talked many times about little things like the ketchup contributions and various different things. So you know, if you're in a position where you can put a little extra way, there's nothing wrong with feathering the nest for later on down the way right,

Tony Mauro 14:39

that's right, especially just like the last one just talk about automate the emergency fund get it got a little money you know, going in every single month, and again, you won't miss it and then all of a sudden that's that's kind of on autopilot and hey, you know, before long then now you have what you need.

Marc Killian 14:54

Exactly. That's a great point to automate that. That urgency fun, good stuff. All right. Well, Tony, thank you, my friend for hanging out with me. Thanks for hanging out with me all year long as we've gone through is hopefully hopefully shared right some useful nuggets of information. Yeah, the listeners. And of course if you haven't subscribed or you have and you know somebody else who might could benefit from you know the podcast and picking up some, you know some useful tidbits along the way, let them know that they can subscribe to plan with a tax man on Apple, Google Spotify and whatever platform you like using, just type that into the search box or have them go by and we'll give them this website right here. You're planning proz.com That's your planning proz.com where you can find a lot of good tools, tips and resources. Stop by there yourself if you're not already working with Tony and check out some things there. And don't forget to subscribe to us on the podcast as well. And that way you can catch future episodes as well as check out some past episodes and we'll be back with new episodes in 2024, which is really weird to say, Tony,

Tony Mauro 15:52

I know Yeah, I'm looking forward to it and hopefully everybody else's to I've enjoyed the year and hope everybody has a great Christmas.

Marc Killian 16:00

Yeah, indeed have a great holiday season all the way across the board. And Tony and I will be back in January here on a plan with the taxman.

Walter Storholt 16:16

Securities offered through a van tax investment services SM Member FINRA SIPC investment advisory services offered through a van tax advisory services insurance services offered through an event tax affiliated Insurance Agency. Investment strategies discussed in this episode may not be suitable for all investors. Please consult with a financial professional.

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