Tag Archives: planning

Your 2014 Financial Checklist – Part 2

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This time I have two simple issues for you to review.

First, update your will. Estate Tax Law is changing all of the time. If you have not updated your Will, Living Will, Florida Medical Surrogate, or beneficiary designations, now is the time to do so.

Second, check your credit report. There are a number of free annual services that will provide one –time to look at your credit picture at no charge. Please look at everything carefully to make sure the information reported is accurate.

One more installment of your Financial Checklist is in the wings.

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Your financial checklist for 2014

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Over the next few blogs I will be giving you points that should be on your Financial Checklist for 2014. Let’s get started!

Look at your taxes:
In January make sure all of your receipts are in order. Over the month you will be receiving your W-2, 1099, statements from non-profit organizations of donations, and mortgage interest paid. If you have everything in order early you can get your refund early. Why lend the money to the Government when you can be using it.

Budget:
If it has been a while since you have created a budget, now is the time to update it. Many of our regular expenses, such as cable, change their rates in January. You don’t want to be caught off guard. Now is also a great time to review your budget from last year. Were you too conservative? Not conservative enough? Did you have enough of an emergency fund? Are there home improvements that need to be added? These are issues to address now.

I have given you two points to think of, more financial checklist points are coming!

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Can you believe there are only 8 weeks left?

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That’s right, only 8 weeks left in 2013. Visions of holiday dinners and gift buying pop into our minds, but what about our taxes? Yes, I said taxes. It is not too late to make sure you have done all you can for yourself to avoid paying too much in taxes.

Have you fully funded your retirement plan? Have you used your flexible spending account? Have you paid your Property Tax? Have you made all of the charitable deduction(s) you wanted to? These are all important issues and you do not want to leave money on the tax table that can be left in your pocket.

One thing I have done with a couple of my clients is a “mock” tax return. We have gone to www.irs.gov, printed off a blank 2012 1040, applied what we know of the 2013 tax code, and processed a “mock” return. In one case, we were able to see how much could be pulled from the IRA account and not push the client into a higher tax bracket. Another client wanted to pay off their mortgage. We discovered that they could do this and not pay more in tax even though they no longer would have their mortgage interest as a deduction.

So go ahead, do the return. Confirm to yourself that you have done everything you can to lower your own tax picture, and then get to planning for your holidays. After all, there are only 8 weeks left!

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“I was told that Planners only talk to people with a lot of money”.

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“Not true, and “a lot” means different things to different people”. Was my response to the above comment to a caller. Comprehensive financial planning can benefit everyone. Here are just a few of the things we can help you do:

We can help you define your financial goals. Right now I am helping a couple determine if buying or renting is the best financial decision for them. This seems to be a short term decision, however, it will impact their longer retirement plans.

We can help you see if your timeframe is realistic. Many people say they want to retire early, through planning, we can see if that is do-able or not.

We can look at how you are spending and how that impacts your goals. When I hand someone our expense summary worksheet, they are not happy with me. It is the worst, yet most important part of data gathering. I need to know how you are living your life, plus taxes and inflation, to see if you can make that retirement goal at the time that you wish.

Financial planning is for everyone.

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You are never too young to start.

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Recently, two of my friends asked if I would meet with their 20 something kids. One is getting ready to graduate from college; the other is just starting their first job. These Parents want their kids to start off on the right foot. While this is far from my normal client, I am more than happy to meet with them.

Having money is a big deal, learning how to use it is an even bigger deal. What I hope to show them is how important it is for them to save for emergencies as well as for retirement. They need to know that if they use all of the time they have on their side, they will be very well off. By well off, I don’t just mean financially. Leaning how to use and save money can give peace of mind, the power to make smart decisions, and a happy retirement.

 

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Have you had “The Talk”?

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For many the talk about the birds & the bees seems to be the hardest but in reality, “The Talk” about money with your Parents is worse. My Dad passed away in a blink at the age of 50, this forced an abbreviated version of the talk, but it has been 28 years and we need to have the talk again.

My Mother recently went to see her 91 year old Brother who was put under Hospice care, this has forced the issue. I have found out that while she has paid for a cemetery plot, she has not arranged for or pre-paid for a funeral. She does have a life insurance policy that should cover that expense. I also found out that she does not get rid of any statements. She has about 40 years of statements neatly bundled together – why?! I told her that she only needs to keep a few years (but not really in our world today) if that would make her happy.

What we really need to find out is; does she owe on anything? Who does she hold credit cards with? Who is her health insurance with? What does that cover? Where is all of her liquid money and where are the retirement accounts? One would assume that I, of all people, would know these things. Our Parents that are in their mid 70’s or older do not like to talk about money.

You have to have “The Talk” – it will make things so much easier in times of illness and death.

 

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Important questions to ask your Parents.

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For the last 8 months we have been going through agony trying to help my Father-in-Law, who has Parkinson’s. He has known for years that he has this disease but refused to prepare. I don’t want you to have to walk down the same path we have been. Here are some very important questions to ask your Parents – and don’t stop asking until you get answers.

Where are your assets held? You will want to know where they bank, do they work with a Financial Advisor, who holds their insurance policies, and have they filed their taxes.

What different doctors do they see? What medications do they take, where are their health insurance policies, have they names anyone through a health care directive?

Do you plan on staying in your home? Is the house assessable for a wheelchairs or walker, what type of caregiver can be brought in to help, is everything in working order?

It is a tough conversation to have – but one that must be had.

 

 

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The annual party…it usually lasts 3 days.

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Yesterday, I started my annual party with TurboTax. It is not the best party but like most good parties, it does leave me exhausted. I am pretty used to the TurboTax system and, for my family, it is easy and works well. It did make me think about all of the others out there doing their own taxes and the common mistakes they make. Here are a few to easily avoid:

Choose the right filing status. There are 5 choices, that is it. The choice that hangs up most is Head of household. If you are not married at the end of the year, have cared for a closely-related dependent for more than ½ of the year and paid more than ½ the cost to maintain a home for yourself and said dependent, you are Head of household.

Be a good scribe or typist. The names and social security numbers for everyone on your return must be exactly as they appear on the social security card. Please double check your input to make sure you do not transpose (as I do).

Addition and subtraction errors cause the most adjusts to your return. Picture yourself signing the return and sticking it in the mail confident that it is all correct. Then weeks later, you get a lovely letter from the IRS, and they checked your math. Yes, someone with the IRS actually does that. In some cases, the error is in your favor, most often it is not.

So grab a drink, I suggest strong coffee, and attend your own tax party.

 

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8 Times my annual income?

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The other day my girlfriend asked me about an article she read stating that pre-retirees need to save 8 times their annual income in order to have a comfortable retirement. With the average income in the U.S. being just over $50,000 that means $400,000 in the nest egg. After the last few years we have been through economically, this figure may be hard to reach for many Americans.

My comment to her was; I prefer to look more at expenses vs. earnings. I want to know how my clients are living their lives + taxes and inflation. My average client is spending $30,000 so that would mean having a nest egg of $180,000 – $240,000 in reserves. Most of my clients do not wish to reverse their standard of living in retirement and that is why I like to look at their expenses vs. their current income. I want my clients to know that when the time comes to buy an airline ticket to their Grandchild’s graduation, they do not have to think about what they might have to give up to do so.

Financial planning should be done no less than 2 years prior to retirement. Call me today for your plan.

 

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