Tag Archives: RETIREMENT

The 5 Steps to Buying Your Happiness in Recessionary Times

President Harry S. Truman once said; “Recession is when a neighbor loses his job. Depression is when you lose yours.” While you may not have lost your job, more than likely, there’s a good chance you have lost a lot of money in your portfolio and are probably wondering what to do. It doesn’t matter if you are a business, individual, or charity, it seems as if all groups have lost faith in the buy and hold philosophy, and many are beginning to wonder if their advisers are actually doing anything to help them. Before you fire your adviser, put everything into cash under your mattress, and hunker down for nuclear Armageddon, there are a few things you should understand about how investments ideally should work within your plan, the role of advisers on your team, and important questions you should be asking whether you invest on your own, or you have someone helping you.

Revisit Your Goals
What’s important to you? If you found out you only had 6 months to live, what would you want to do in your life? Try writing your own eulogy. How would you want to be remembered? What would you want people to say about you? By starting with the important questions of life, you can get a really clear gut check and determine if you are actually doing what you want to do in your life. What are the things that came up? Often, we have limiting assumptions about what is possible in life. We use phrases like; “Some time, some day, if only blah, blah, blah”. When you take the time to have these conversations with yourself (or an adviser), frequently our real values get uncovered and we identify things we’ve always wanted to do. For example, many people say, “I’d want to spend more time with family”, or “I’d want to travel”. Once you have a list of these things, then then think about the reasons or excuses you’ve been making on why now isn’t the time. Usually this sounds like “I don’t have the money”, or “I’m to busy”.

Prioritize Your Goals
OK, so if not now, when? How much is enough? When will be the day? Perhaps you’ve achieved success in your business but you simply just don’t want to be bored with a “traditional retirement”. The important thing to consider here is WHEN. While some goals might seem crazy, no worries, just write them down. Ideally, when would you want to spend more time with family? What would you do? Where would you travel? Start to create some ideal time frames for the things that you said were important to you. Don’t worry about whether you think they are realistic at this point, just recognize that spending more time with your family WOULD make you happy, and write it down. Keep doing this exercise until you have at least 10 items on your list. Once you have the items listed, then prioritize them in order of importance. I like using index cards to do this since it allows you to move things around as you think of new things. Now ask yourself which of your goals you would be willing to give up in exchange for achieving the most important ones. Once you have completed this exercise, you have the foundation of a very powerful life plan for yourself. Now the question becomes how to pay for it.

Buy Your Happiness
OK, so how the heck do you do that right? “But I always thought…,blah, blah, blah”…Stop. Yes, money CAN buy happiness. I know,… I had you at hello, right? Here’s the thing about that…Having money will NOT make you happy, however figuring out what makes you happy, (as we discovered above in the “eulogy” exercise) formed the basis of your new plan. Now that you know what DOES make you happy, (spending more time with family, giving back to society, etc., now the question becomes, how do I use my wealth to buy those things for myself? Before you go postal on me, ask yourself, how much would it cost to leave your job so you can spend more time with family? What’s preventing it now? Perhaps you answered that making a difference in the world would make you happy? Well how much does it cost to make a difference? How much time do you want to spend making a difference? What’s preventing you from doing that now? OK, so your job is preventing that, how much do I need to have in order to “retire” so I can do the things that are important to me. Are you following all this? The point of this is to start to think about what it will cost, both personally, and financially to achieve your most important goals.

Position Your Finances
More than likely, taking less risk with your investments was one of your goals, (aka “Sleeping at night). During our exercise with the index cards, I asked you to prioritize how important your goals were to you. Where did investment risk fall in that conversation? The question really is, “What are you willing to do to reduce the risk in your portfolio?”. I think an even bigger question is, “How much risk do you really need to take in order to achieve your objectives?”. In my experience, investors are quite familiar with the question, “What’s your risk tolerance”, but most people have no idea how to answer that objectively. I have good news for you. Now that you know exactly what makes you happy, what your priorities are, and what you are willing to give up in order to achieve them, you’ve just answered what I believe is the most important question in planning; “How much, by when”.

Get Help when Needed
The fact is, we as investors usually don’t take the time to do these exercises, but now more than ever is the time to start. You have to know where you are, and what corrections you can make to get you back on track to achieving what’s important. If you don’t know how to do that, find a good adviser who can. If you have an adviser, talk to them about what you discovered about your goals and see how they can help you achieve them. If you don’t feel comfortable discussing this with your adviser, perhaps it’s time to find another.

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Filed under Current Events, ECONOMY, FINANCIAL PLANNING, INVESTING, Law of Attraction, NON-PROFIT & CHARITY, SOCIAL ENTREPRENEURSHIP

The New Law of Attraction in Financial Planning

Have you ever had an “Ah Ha” moment when things seemed to become crystal clear to you and everything just made sense? This happened to me recently after an acquaintance recommended a book called “Think and Grow Rich”, written by Napoleon Hill in 1937. As a Certified Financial Planner™ practitioner, I have read many books on personal finance and financial planning over the years, however nothing prepared me for what I read in “Think and Grow Rich”.

My Coach
I utilize a coach to help me learn things about my industry, stay ahead of the curve, manage my time more efficiently, and learn about the things that I don’t know that I don’t know. While going through my coaching program, I was given a book list that would help me to gain insight from other experts in my industry. Among the books, was a book on “values-based” financial planning. Now I already knew that values were important in financial planning, however after reading Napoleon Hill’s book, I had my “Ah Ha” moment. The values conversation became crystallized in my mind. Picture the following:

On a routine visit to your doctor, you are told that you have a rare medical condition and you only have 6 months to live.

Would you be doing what you are doing right now in your life and your business? If you aren’t, why not?

What would you be doing differently? If you had only 6 months, would you be tempted to want to make a difference? How about reconcile with your family and relationships? What will people remember you for? “What will be written on your tombstone?”

Over the years, I have encountered many different kinds of people who each have their own ideas about what they want from their money. In many cases, I have found that people don’t know what they want from their money, or their life for that matter. Early on, I realized that it was important to help people to focus on their goals, rather than the return in their portfolio. When I read “Think and Grow Rich”, my mind saw something that had I had not seen before. Goals are not values. A big portfolio, buying a vacation home or a fancy new car does not bring happiness. If you answer why those things are important and how achieving those make you feel, you will have a better understanding of your values. The value could be, “Buying the home makes me feel like I have accomplished something”. Why is that important? “Accomplishment makes me feel fully fulfilled”, you might answer. Take the time to understand the values behind your goals.

Your ”Wake Up” Moment 
We have all heard stories about people who survived horrible diseases, had near death experiences, or had some other life “wake-up” event that stirred them to change their life. Perhaps you remember the scene in the WWII movie “Saving Private Ryan” when just before Tom Hanks dies, he tells Private Ryan to “Earn This”, (his life was saved by men who died saving him). Were continually reminded about the deeds of “The Greatest Generation” and are often amazed at how purposefully that generation lived their life. Perhaps it was because this generation faced the definite reality that every day in battle could be their last. Perhaps that they told themselves that if they lived, they would live a purposeful life. Perhaps if the doctor told you that you only had 6 months to live, your priorities might be different than they are today.

Ultimately, using your money to achieve what’s really important to you is the law of attraction in financial planning. People have strong emotional connections to their money and what it means to them. When you successfully make the mental connection between your true underlying values and your financial goals, it will serve as a personal compass and a discernible foundation for an inspiring plan for your money and your life.

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Filed under FINANCIAL PLANNING

What is the Best Way to Reduce Your Federal Income Tax?

As a CERTIFIED FINANCIAL PLANNER™ , this is a subject that I get asked frequently. There is no one best answer to this question, however there are a number of places you can look to take advantage of tax breaks the government makes available. My first suggestion is “don’t let the tax dog wag the lifestyle tail”.logo-irs.gif

Before You Start:

  • Review your “life plan”

Starting a business is one of the best ways to avoid (not evade) taxes if there is something that you have a genuine passion for. Starting a business is a major undertaking, however if you have interests in certain areas, think along the lines of how you could make a career of it . If you like photography, start a photography business. Fishing, how about a charter? Following your own interests will be your best guide as to the type of business you create.

As an individual, you might say that you earn money, pay taxes, and live on what’s left. A business earns money, takes deductions, then pays taxes on what’s left. Big distinction! The type of business (S corp, C corp, etc.) will dictate the specifics on business tax deductions.

In addition to deductions for running the business, you might be entitled to establish a retirement plan or pension plan for your business. Retirement plans are deducted from your income and are a deduction for the business. Depending on what type of plan you establish, contribution limits for retirement plans range from $44k to almost $200k per year! Deductions for retirement plan contributions could provide a major source of tax savings and be a good step toward securing a better retirement nest egg for yourself.

If starting a business isn’t your cup of tea,  home mortgage interest allows for a hefty deduction. Currently the government allows homeowners to deduct “qualified residence interest” of up to $1,000,000 of “acquisition debt” and up to $100,000 of home equity debt.

The Alternativee Minimum Tax (AMT) has been affecting average taxpayers more and more over the years.  The AMT can severely limit your ability to take certain kinds of deductions and it is important to work with a qualified tax professional or financial planner who can advise you on your individual situation before you implement a new strategy.

Opportunity abounds for people to save money on taxes. The right strategy will depend on your goals, opportunities, and stage of life.

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Filed under TAX