Since many of us are stuck at home with our fiscal future full of bumps and potholes, I’ve found it to be a good opportunity to assess my relationship with personal finances. Full disclosure, I am a bit of an “Excel geek,” so expense tracking and spreadsheets are definitely in my wheelhouse. Nevertheless, this process need not be a burden, even for those of you who hate looking at numbers or facing the realities of your own spending habits. Getting your financial house in order may just be one of the most productive and important things you do this year. As someone who has just gone through the process, here are my favorite strategies that have worked well for me.
Analyze Last Year’s Income vs. Expenses
I, like so many others, spent the better part of a month not spending much money because we were told to only go out if we had to. When I saw how much my credit card bill went down, I decided to analyze what I had been spending money on. For me, the easiest way to start this process was to export digital copies of online credit card “year-end summary” statements, and input those numbers, broken out by category, into an Excel spreadsheet. Since your credit cards conveniently categorize everything for you, pulling this together should be a cinch. Next, I added in any expenses that came out directly from my bank accounts, and when all else fails, I estimated the rest. The objective of this exercise is to scrutinize where all my spending went, how much I saved at the end of the year, and whether those numbers fell in line with my wealth building goals. I learned that I didn’t save nearly as much as I had planned to. It became painfully apparent that my Amazon purchases and fine dining habits would be the areas where I need to show more willpower in the coming year!
No one would have predicted that we’d all be spending our spring, summer, and possibly beyond working remotely and restructuring how we engage with our coworkers, clients, and lives in general. Unfortunately, this extended period of disruption and uncertainty has also made us all more vulnerable to those who would capitalize on the moment. As we’ve all turned to online solutions to remain connected, hackers, fraudsters, and thieves across the globe have unleashed their arsenals toward exploiting any weakness. Now more than ever, stringent cybersecurity protocols, backed by a comprehensive insurance policy, are necessary.
As a general rule, the more money you make, whether in work generated income or capital gains, the more you will pay in taxes. But rules are meant to be broken, and there are ways to mitigate tax losses with the right planning and advice.
The after-tax return vs. the pretax return. Everyone wants their investments to perform well. But for many investors it’s their after-tax return that may make all the difference. After all, even if your portfolio is earning double-digit returns, it may not matter if you’re also losing a percent of those earnings to taxes.1
Holding onto assets. One method that may increase tax efficiency is to simply minimize buying and selling in order to manage your capital gains taxes. The idea is to pursue long-term gains, instead of seeking short-term gains through a series of steady transactions. In the words of Warren Buffett, “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”2
Many people believe in giving back, but under the new tax laws, it may not be as tax advantageous as it used to be. With the steady appreciation in the stock market – the longest bull run in history – some folks have achieved a level of wealth they never imagined. Our Charitable Strategies work is focused on smarter, tax-efficient ways to help people give back a bit of that wealth to various philanthropic causes. But we are often surprised to find even large, well-established, donors who are still not familiar with the benefits of donating appreciated stock and how to use Donor Advised Funds (DAFs).
On December 20th, 2019, new legislation was signed into law as part of a larger government spending package that promises to have wide ranging and lasting effect on saving for retirement. Called the Setting Every Community Up for Retirement Enhancement (SECURE) Act, the legislation includes many long-sought common-sense reforms that could make retirement saving both easier and more attainable for many Americans.
According to recent statistics, there are now more than 44 million unique borrowers who collectively owe $1.6 trillion in student loan debt—making student loans the second largest consumer debt category after mortgages. Those are staggering numbers.
For the considerable Millennials and massive Gen Z workforce to follow, student loan debt is a primary economic concern, often before mortgages and retirement savings can even be considered. Smart businesses have taken notice in a growing trend toward creating student loan repayment assistance programs as a necessary company benefit to attract and retain younger talent.