Financial Planning for Entrepreneurs and Tech Professionals: Recent Episodes
Mike Morton, CFP®, ChFC®
Are you busy with your life, but know there are smarter things you could be doing with your money? Are you confused by all the financial jargon and overwhelmed by the options?
Breakthrough the complicated financial landscape with easy-to-understand information and strategies that you can actually follow. I discuss how to become wealthy: tips and habits to change in your life to achieve financial freedom. I dive into topics such as savings, investing, education planning, insurance, tax planning, and more. If it's related to financial planning and financial success, you can be sure we'll cover it.
I love to discuss listener questions, so please connect and follow me at https://www.linkedin.com/in/mwsmorton
In this episode of Five Minute Finance, Matt Robison and Mike Morton tackle the “when later becomes now” moment for parents approaching college costs. They explain how to review and adjust your 529 investments, what a glide path is, when to rebalance, and how to make sure your plan matches your goals.
Find out more about Mike at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
In this week’s Five Minute Finance, Matt Robison and Mike Morton explore whether money can really buy happiness, and what science says about it. From research on income thresholds to practical advice on using wealth to create joy, the duo breaks down how to shift your mindset from accumulating money to investing in meaningful experiences.
Find out more about Mike at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
Found money feels great, until it’s gone. In this episode of Five Minute Finance, Mike Morton and Matt Robison tackle the psychology and strategy of handling unexpected cash. From splitting your windfall wisely to creating “presents in progress” for future goals, they’ll help you turn surprise money into long-term satisfaction (and maybe even a guilt-free splurge).
Find out more about Mike at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
Got an inherited IRA, or think you might someday? On this episode of Five Minute Finance, Matt Robison and Certified Financial Planner Mike Morton give you the no-nonsense playbook. You’ll learn the nuances of the 10-year rule, how to build a simple distribution plan, and strategies for maximizing your inheritance. Don’t pay more in taxes than is absolutely necessary. Make a plan.
Find out more about Mike at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
In this episode of Five Minute Finance, Mike Morton and Matt Robison unpack the latest tax legislation, the “One Big, Beautiful Bill.” They cover the most important updates, including permanent tax brackets, a higher SALT cap, charitable giving changes, expanded 529 plan uses, estate tax exemptions, and family tax credits. They also highlight overlooked provisions like car loan interest deductions and tips for small business owners.
Find out more about Mike at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
In this episode of Five Minute Finance, Mike Morton and Matt Robison dig into the reality of the midlife “cash squeeze.” From kids’ sports and college to aging parents and the uptick in everyday expenses, money feels tight. They’ll discuss when it’s actually okay to pause retirement contributions, the dangers to watch out for, and how to create a smart, temporary plan that keeps your long-term goals on track.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
In this episode of Five Minute Finance, Certified Financial Planner Mike Morton reveals why the Employee Stock Purchase Plan (ESPP) is one of the most underutilized workplace benefits, despite offering free money in the form of discounted stock. He and host Matt Robison walk through how ESPPs work, whether to sell or hold, common mistakes to avoid, and why simply signing up can make a big difference.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
This week on Five Minute Finance, Mike Morton and Matt Robison dig into how automating your finances can dramatically reduce decision fatigue and increase financial well-being. Savings, investments, bills, donations, and even calendar tasks can all be automated. From "touch it once" productivity tips to smart strategies like using a separate credit card for subscriptions and automating 529 contributions, this episode is a blueprint for building financial systems that work quietly in the background while you focus on living your life.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
Thinking of stepping away from work for a few months—or even a year? You’re not alone. In this episode of Five Minute Finance, Mike Morton and Matt Robison break down the rising trend of sabbaticals and gap years among mid-career professionals.
They explore how to financially and emotionally prepare for extended time off, covering everything from sabbatical funds and health care planning to taking advantage of low-income tax strategies like Roth conversions. They also dig into the psychology of identity and burnout, sharing tools like “fear setting” and emphasizing the power of experiences over stuff. Whether you're craving rest, reinvention, or just a break from the grind, this episode offers a practical roadmap to make it happen—no bank heist required.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
In this episode of Five Minute Finance, Matt Robison and Mike Morton explore how parents can raise financially capable kids without micromanaging their every money move. From debit cards and budgeting to writing checks and spending psychology, they share stories, humor, and actionable tips—plus a great reminder that the best lessons often come from letting kids fail safely. Whether your child is 9 or 19, this episode offers a roadmap to building money confidence, one trial run at a time.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
In this episode of Five Minute Finance, Matt Robison and Mike Morton unpack the alluring world of alternative investments. Hedge funds, private equity, non-traded REITs…while these options promise high returns and exclusivity, many of them might be better left to the pros. From flashy marketing to hidden fees and illiquidity traps, Mike breaks it all down in plain English, sharing real-world examples and offering practical advice on when, if ever, these investments make sense for the average investor.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
What do Enron, Lehman Brothers, and GE have in common? They were once Wall Street darlings, until they weren’t. In this episode of Five Minute Finance, Mike Morton and Matt Robison unpack the hidden danger lurking in many portfolios: single-stock concentration. It feels great to ride a stock like Apple or Amazon to new highs, but if more than 10% of your wealth is tied to one company, especially if that company is your employer, you’re playing a risky game. We explore how this happens, why it’s riskier than you think, and what to do about it. From step-down plans and tax-smart strategies to the power (and pitfalls) of Net Unrealized Appreciation, this episode is your crash course in protecting your financial future.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
In this episode of Five Minute Finance, Matt Robison and Mike Morton tackle one of the most dreaded yet essential topics for families: how much college really costs—and how to avoid the full sticker price. With humor, real-life examples, and expert guidance, they break down the myths around the $90,000+ tuition price tags and show how most families actually pay far less. Learn how to leverage merit aid, use net price calculators, strategically spend 529 savings, and shift from panic to a smart college funding strategy. If you're staring down college costs and feeling overwhelmed, this episode is your reality check—and your roadmap.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
In this episode of Five Minute Finance, Matt Robison and Mike Morton tackle the age-old question: how much should you have in bonds? Spoiler: The old rules of thumb, like “your age in bonds” or “the 60/40 portfolio,” might be doing more harm than good. Mike lays out a smarter, more personalized approach using the “bucket strategy,” aligning your investments with short, medium, and long-term spending needs. They also cover why target date funds can be too conservative, and how to protect yourself from sequence of return risk in retirement.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
When the stock market is anything but calm, it’s tempting to panic, but this week, we explain why you should panic methodically instead. Drawing inspiration from WSJ columnist Jason Zweig, Matt Robison and I explore how to keep your cool when market volatility, political drama, and economic uncertainty are everywhere.
Don’t confuse the world’s chaos with your long-term investing plan. Use market downturns to reassess your true risk tolerance. Thoughtful strategies like diversification, rebalancing, and tax-loss harvesting can turn volatility into opportunity.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
This week on Five Minute Finance, Matt Robison and I break down a simple, stress-reducing, four-part framework for choosing your investments. Yes, we still love low-cost index funds—but smart investing is more than just picking one and hoping for the best.
We explore how to think about asset allocation, minimize costs, rebalance your portfolio, and stay aware of market trends without falling into the trap of market timing. Backed by academic research and built for real life, this approach is practical, repeatable, and designed to boost your confidence.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
Join Mike Morton and Matt Robison this week as they break down the income tax funnel, helping you understand how your earnings flow from total income to taxable income and, ultimately, to what you owe the IRS.
They dive into key tax deductions, credits, and how different income types are taxed, all through the lens of a jaw-dropping $500,000 tax return mistake. Whether you're looking to maximize deductions, take advantage of tax credits, or simply make tax season less stressful, this episode delivers practical, easy-to-digest insights to help you stay ahead. Tune in for a quick, no-nonsense guide to making smarter tax decisions!
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
Are you saving enough for retirement? How much should you set aside for college? And can you enjoy your money now without sabotaging your future? In this week’s episode, we put co-host Matt Robison in the hot seat to tackle these real-life financial questions. From retirement benchmarks to college savings strategies and optimizing investments, we break down the numbers, share key rules of thumb, and explore the balance between saving and spending. Whether you’re planning for the future or trying to enjoy life today, this episode will help you create a financial roadmap that works for you.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
In this episode, Matt Robison and Mike Morton dive into the complexities of inheriting money—from the emotional weight to the financial logistics. They discuss key strategies for handling an inheritance, avoiding common pitfalls, and maximizing its value. Whether you're navigating an inheritance now or planning for one in the future, they cover everything from tax implications to smart investment decisions. Plus, they explore why gifting before death can be a powerful financial tool. Tune in for practical tips that will help you make informed, stress-free choices during a challenging time.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
In this episode, career coach Jennifer Fink and Certified Financial Planner Mike Morton discuss how to invest your time and energy intentionally to create a fulfilling career. They explore the two types of career clarity—internal and external—and how finding both can guide your next career move. Jennifer shares practical strategies for overcoming the career change dilemma, balancing passion with financial stability, and making smart financial preparations for a pivot. Plus, they dive into the power of Tiny Habits and how small actions can lead to big career and life changes. If you're feeling stuck or considering a transition, this conversation will help you take the first step toward a more intentional future.
Resources:
- https://www.finkdevelopment.com/careerclarityguide
- https://tinyhabits.com/join/
- https://www.finkdevelopment.com/
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
Discover why it’s not just okay—but essential—to spend your money with intention! In this episode, Certified Financial Planner Mike Morton shares how to break free from the save-every-penny mindset and embrace spending as a tool for joy, connection, and meaningful investment. From saving for special occasions to creating lifelong family memories and making retirement dreams a reality, explore the four stages of intentional spending and learn from others’ experiences. Mike shares a listener’s dilemma about building their dream home. Tune in for practical advice and a fresh perspective on spending with intention.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
Open enrollment season often raises the critical question of whether to choose pre-tax (traditional) or Roth contributions for your 401(k). In this week’s episode, Matt Robison and certified financial planner Mike Morton break down this common dilemma, offering simple rules of thumb to help you make the right choice in minutes. They’ll explain the key differences—traditional contributions reduce your taxable income today but are taxed in retirement, while Roth contributions are taxed now and grow tax-free—and guide you on when to pick each option based on your career stage and tax bracket. Even if you get it "wrong," the good news is that saving consistently is always “right.”
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
Curious about what the stock market will do next? In this episode, Mike Morton and Matt Robison dive into the unpredictable nature of the stock market and why even experts struggle to forecast its future. With Wall Street projecting below-average returns for the next decade due to high valuations, learn why market timing is a risky game and why staying invested is often the best approach. Get practical strategies to navigate uncertainty, from reassessing your portfolio allocation and maintaining diversification to setting aside cash for short-term needs. Whether you're concerned about muted long-term returns or debating tweaks to your investment plan, this episode offers actionable insights to help you stay balanced and on track.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
Check out Mike’s Year-End Financial Checklist, a simple tool to help you wrap up 2024 stress-free and set yourself up for a successful 2025. They discuss five key items to tackle: Required Minimum Distributions (RMDs) for retirement accounts, Roth conversions to maximize tax-free growth, strategic charitable giving, Q4 estimated tax payments, and the best timing for year-end bonuses. With practical tips, insights, and humor, this episode makes financial planning less daunting. Download the full checklist, take 15 minutes to review it, and breathe easier knowing you’re prepared for the year ahead.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
In this episode of Practical Finance for Parents, Mike Morton and Matt Robison explore how grandparents can effectively save for their grandchild’s college education using 529 plans. They break down the best strategies, including whether grandparents should contribute to an existing parent-owned 529 or open their own account. With recent FAFSA changes, grandparent-owned 529 plans now offer even greater advantages, as withdrawals no longer impact the student’s financial aid eligibility. The episode also introduces the “Rule of Thirds” as a simple framework for planning college costs and emphasizes practical, stress-free solutions for families.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
In this episode, Mike Morton and Matt Robison dive into a commonly overlooked step in managing rollover and inherited IRAs: making sure your funds are invested and not just sitting in cash. They share practical tips on how to avoid leaving money idle, like setting a yearly reminder to check your accounts, opting for simple investment choices, and keeping track of dividends. They’ll show you how a few quick actions can ensure your money is working for you, so tune in to get easy strategies that keep your finances on track without the stress!
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
Make the most of your employee benefits and unlock “free money” that could add up to thousands yearly! In this episode, we break down essential perks, from maximizing retirement savings with 401(k) matching to the tax advantages of Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs). We also explore the value of education and tuition benefits, affordable insurance options, wellness programs, and unique perks like legal aid and tech discounts. Tune in to discover how a quick review of your benefits package could lead to major financial wins. Don’t miss out—learn how to maximize everything your employer offers!
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
As Halloween approaches, it's not just ghosts and ghouls that can be scary—financial planning can have its own terrifying elements. Join Mike Morton and Matt Robison as they demystify the top five fears in managing money. The risk of running out of funds in retirement, the uncomfortable reality of planning for death and inheritance, the rising costs of healthcare in old age, the trap of debt and poor credit, and the unpredictability of market volatility would make anyone scream in horror.
However, facing these fears is possible with the right strategies: creating a detailed retirement plan, establishing essential estate documents to protect your family, exploring healthcare cost solutions like long-term care insurance, committing to a realistic debt reduction plan, and building a financial safety net for market downturns. By taking proactive steps and making small, consistent changes, you can alleviate the fear around financial planning and approach the future with confidence. Remember, while Halloween is all about scares, your financial future shouldn’t be! 🎃
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
"How are you going to pay for college?" “How much should you save now?” Matt and Mike break down the current costs of higher education, from public in-state schools to high-end private institutions, and offer strategies for saving. Whether you're just getting started or have significant resources to allocate, you’ll get actionable advice on how to plan effectively. They cover the benefits of 529 plans, the "rule of thirds" savings approach, and why having a plan—any plan—is more important than aiming for perfection. Tune in to learn how to support your child's education without breaking the bank.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
In this episode, Mike Morton and Matt Robison dive into the often-overlooked topic of homeowners insurance and why spending just five minutes reviewing your policy could save you thousands of dollars.
They explain the importance of ensuring your coverage is adequate, especially with rising costs of rebuilding due to inflation and natural disasters. They walk through key elements to check, such as dwelling and personal property coverage, and share practical tips like taking a quick video walkthrough of your home. Tune in to learn how a few simple steps can provide peace of mind and financial protection.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
Join Matt Robison and Mike Morton this week as they teach you how to help boost your teenager's credit score. Learn the proactive steps you can take early on, such as adding your child as an authorized user on a credit card. This allows teens to start building credit history without the responsibility of managing payments themselves, and you remain in control of the account.
It’s important to educate teens about responsible credit card use, such as keeping balances low and paying off the card monthly. Alternatives for older teens and young adults include co-signing loans or credit cards, student or starter credit cards, and secured credit cards for those just beginning to establish credit. These steps can help lay a solid financial foundation and save significant money in the long run.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
Join Matt Robison and Mike Morton in this week’s episode to explore the common myth that election outcomes can predict stock market performance. They discuss real-life examples, such as the 2016 Trump election and the 2008 Obama election, highlighting how initial market reactions often mislead investors. They emphasize the importance of not overreacting to short-term volatility, noting that global events and market irrationality play a larger role than who's in office. Their key takeaway? Stick to your long-term investment plan, and don’t let election anxiety drive financial decisions.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
Join Matt Robison and me for this week’s episode in which we tackle the age-old question: actively managed funds or low-cost index funds? Brokers often promise better returns with active management through expert stock picking, but the data tells a different story.
We’ll break down the numbers, starting with the SPIVA report, which compares active funds to their benchmarks and reveals that a staggering 87.42% of U.S. Large Cap funds underperformed the S&P 500 over the last decade. We explore why index funds consistently outperform, highlighting the impact of fees, market efficiency, and diversification. Tune in to learn why index investing is the smarter, more reliable choice.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
Securities lending lets you lend your stocks or bonds to someone else and earn interest in return. It’s legit and has been around for a long time, with the borrower often using your securities to "short sell." You could make some nice passive income, like $800 a month, without doing much. Plus, you still own your stocks and can sell them whenever you want. But there are some catches—like losing the tax benefits of dividends, giving up voting rights, and the small risk that the borrower could default. You also lose SIPC insurance protection on lent securities. Overall, it can be a good way to make some extra money, but you need to weigh the risks and read the fine print before jumping in.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
In this episode, Matt Robison and Mike Morton consider the potential expiration of the Tax Cuts and Jobs Act (TCJA) in 2025 and what it could mean for your finances. They focus on three key areas: the possible reduction of the lifetime gifting exemption from $13 million to $6 million; the likely increase in tax rates due to a decrease in the standard deduction, making it a good time to consider Roth conversions; and the expiration of the 20% Qualified Business Income (QBI) deduction for small business owners. With these changes on the horizon, now is the time to plan for the future.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
In this episode, Matt Robison and Mike Morton dive into the world of investment fees and the truth behind the "no free lunch" adage. They explore how Wall Street packages seemingly attractive investment products with hidden fees that can erode returns. From Health Savings Accounts (HSAs) with unexpected management fees to interval funds with layers of costs, we break down why fees are the number one predictor of returns. Using real-life examples, we emphasize the importance of keeping investments simple and staying vigilant about fees—because there’s always a cost, even with the "best" deals.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
In this episode, Matt Robison and Mike Morton go back-to-basics with a focus on Roth Conversions—a financial strategy that could potentially save you millions of dollars in retirement. Whether you've amassed significant savings in tax-deferred accounts like Traditional IRAs and 401(k)s or you're just starting to think about how to optimize your retirement funds, this episode is for you. Explore how converting to a Roth IRA could minimize your lifetime tax bill, reduce Required Minimum Distributions (RMDs), and enhance your legacy planning. Learn when to take advantage of this strategy, the potential tax implications, and important considerations to keep in mind.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
Are you tired of being told to just "go with the flow"? Well, not today. In this episode, Matt Robison and I delve into why focusing on your net worth is more important than worrying about your cash flow. Have you ever scrambled to cover monthly expenses, or dipped into your investments for an unexpected charge, and felt the stress afterward? You're not alone, but these moments don’t truly reflect your financial health. We explain why net worth—your assets minus your liabilities—offers a clearer picture of your wealth. It's like the Game of Life®, where you tally up everything at the end to see how you really did. We’ll guide you through tracking your net worth, understanding its importance, and planning to keep it growing. Listen in to shift your perspective from paycheck anxiety to long-term financial stability.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
In this week's episode, I’m joined by financial coach Adam Koren, an expert in helping people overcome their money anxieties, to discuss the elephant in the room: your finances. No one likes to talk money, but it is monumentally important to pay attention to your finances, regardless of your income level. Stop feeling like you “should” know how and start learning what you can do to establish financial health and wellness. Through regular check-ins and a compassionate approach, Adam provides a roadmap for you to follow in order to make the most of your money.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
In this episode, Mike Morton and Matt Robison discuss the incredible benefits of Health Savings Accounts (HSAs), which offer a unique way to save money without losing any to taxes. Learn how HSAs provide a "triple whammy" of tax advantages: contributions are tax-deductible, funds grow tax-free, and withdrawals for qualified medical expenses are tax-free. Understand the strategies to maximize your HSA, such as contributing the maximum amount, investing the funds, and saving medical receipts to enable tax-free reimbursements in the future. HSAs can serve as long-term savings for medical expenses in retirement, making them a powerful financial tool.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
Dreaming of establishing your own dynasty? While you may not control a nation, you can create a long-lasting educational legacy with a 529 plan! Join Matt Robison and me, Mike Morton, on this week’s podcast as we delve into funding education for your children, grandchildren, and even beyond. We'll explore how 529 plans, tax-advantaged savings accounts for educational expenses, can be the foundation of your family's educational future. With benefits like tax-free growth, flexible beneficiary options, and no mandatory distribution rules, these plans are powerful tools for generational financial planning. Tune in to learn how to turn your dreams of a dynasty into reality with a 529 plan!
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
In this week's podcast episode, "10 Financial Hot Topics for 2024: Boring and Painful," join me and Matt Robison as we delve into Allan Roth's latest financial insights for 2024.
We cover critical topics my clients often ask about, from understanding the difference between real and nominal returns,and managing cash to avoid inflation's eroding effects, to ensuring your investments oscillate between boring stability and occasional pain.
We also discuss the importance of transitioning from saving to spending in retirement, staying calm during market downturns, and achieving true diversification. Tune in to learn about balancing bond investments, protecting against inflation with TIPS, and staying financially educated. Don't miss it!
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
For decades, concerns have circulated that the U.S. The Social Security system would run out of money. While headlines continue to warn of imminent depletion, the political implications, especially during election years, fuel much of this fear. Join Matt Robison and Mike Morton this week as they discuss the efforts currently underway to ensure the sustainability of Social Security, such as adjusting tax caps and benefit calculations. Social Security should remain a key component of your retirement plan, though it's wise to stay informed about potential policy changes and regularly check your benefits.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
Join us this week as Matt Robison and I discuss the strategies for minimizing capital gains taxes in today’s profitable housing market. We'll share a real-life client story that highlights how a couple saved thousands in tax liability by leveraging home improvement receipts and the primary residence exclusion. Discover how meticulous record-keeping and strategic planning can significantly reduce your tax burden, allowing you to keep more of the profit from the sale of your home. Tune in for tips on maximizing your tax savings and ensuring your home sale benefits you, not just Uncle Sam.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
To-do or not to-do? Take a calendar approach
Ever feel like your to-do list never ends? Constantly moving unfinished tasks to the next day? In this episode, Matt Robison and I explore a game-changing productivity hack: scheduling tasks directly on your calendar. Forget the overwhelming to-do list that grows endlessly.
Instead, allocate specific time slots in your calendar for tasks, using your existing digital tools. This approach not only offers a clear visual of your workload but helps manage your time effectively. Batch similar tasks, allow flexibility for creative work, and use extra time wisely for small tasks or breaks. If you love checking blocks, keep a hybrid system with a list for quick wins and a calendar for bigger projects. Embrace this method to transform your productivity and reduce stress.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
Join Matt Robison and me as we delve into the intricate world of inherited IRAs. In the first quarter of 2023, Americans held over $12 trillion in IRAs, and if you've inherited some of that wealth, there's a lot you need to know.
We'll clarify who qualifies as an Eligible Designated Beneficiary (EDB), the impact of the Secure Act 1.0's 10-year rule, and the importance of understanding required minimum distributions (RMDs).
We'll also discuss strategic considerations for taking distributions, the influence on your tax bracket, and the implications for student loans. Tune in to navigate the complexities of inherited IRAs and maximize your inheritance.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at: https://www.mortonfinancialadvice.com and connect at: https://www.linkedin.com/in/mwsmorton/
In this week’s podcast, Matt Robison and I delve into the world of "home hacking," a trend that's gaining traction in the realm of real estate. But forget about the usual DIY tricks to boost your home's value – we're talking about doubling your net worth through unconventional living arrangements. Imagine living with your mom as the key to unlocking financial prosperity. Sounds intriguing, right? This innovative approach isn't just about financial gains; it's about redefining the dynamics of multigenerational living. Join us as we explore the potential of home hacking and how it could revolutionize your approach to caring for aging parents while securing your financial future.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
In this week's episode, Matt Robison and I delve into the essential lesson from renowned economist Robert Shiller: don't get swept away by stock market hype. Join us as we explore the implications of the Shiller PE ratio, currently standing at a lofty "34," we unpack Shiller's groundbreaking research and its practical applications for investors.
With a focus on the importance of valuation and maintaining a well-diversified portfolio, we emphasize the need for specificity in financial planning, particularly as you approach retirement or set specific financial goals. Shiller's insights remind us to steer clear of short-term hype and instead prioritize long-term fundamentals, ensuring confidence and resilience in navigating market volatility. So, whether you're a seasoned investor or just starting out, remember to stay focused, stay diversified, and stay the course for long-term success.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
In this week's podcast, Matt Robison and I, Mike Morton, delve into the world of charitable giving and the benefits of using a Donor Advised Fund (DAF) into your philanthropic strategy. A DAF functions like a personal account where you can deposit various assets, such as cash, stocks, or cryptocurrencies, which then become charitable donations. We explore nine compelling reasons why utilizing a DAF might be advantageous, ranging from tax benefits to flexibility in donation timing and asset growth potential. Moreover, DAFs offer a streamlined approach to philanthropy, allowing for easy management, involvement of family members in giving decisions, and the ability to donate a wide range of assets. As DAFs continue to rise in popularity, they represent a powerful tool for individuals seeking to plan their charitable giving effectively while maximizing tax advantages and leaving a lasting legacy of generosity.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
In today's episode, Mike Morton and Matt Robison introduce a revolutionary solution to alleviate financial anxiety: the Joker Fund. Inspired by the infamous line from The Dark Knight, "Nobody panics when things go according to plan," they emphasize the importance of planning ahead to tackle irregular expenses that often leave individuals feeling financially overwhelmed. With statistics showing that 76% of U.S. adults experience financial anxiety, it's clear people need relief.
The Joker Fund turns unexpected expenses into anticipated by automating savings for things like insurance payments, tuition bills, summer camps and even vacations; things you know you will spend money on but don’t make it into any monthly budget because the timing varies. Get a step-by-step guide on implementing the Joker Fund, from identifying irregular expenses to setting up automatic transfers to a dedicated savings account. By embracing automation, individuals can plan and bid farewell to financial panic.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
In this week’s episode, hosts Mike Morton and Matt Robison discuss IRA Beneficiaries. They delve into the critical decision of choosing a beneficiary for your Individual Retirement Account(s) (IRA) and its financial ramifications. Through a real-life example, you will see how one of Mike’s clients' strategic maneuver saved her family $150k in taxes by spreading the withdrawal of her spouse's $500k IRA over a longer period of time.
They also explore the workings of beneficiaries for IRAs, 401(k)s, and 403(b)s, emphasizing the importance of proper estate planning to avoid tying assets up for long periods in probate court. Use the handy checklist provided by the hosts to review your beneficiary designations. Take proactive steps in securing your financial legacy for your loved ones' benefit, potentially saving them significant tax burdens in the future.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
In this week’s episode, Mike Morton is joined by financial coach Adam Koren to discuss strategies for overcoming the stress and shame often associated with managing personal finances. They delve into the emotional aspects of money management, emphasizing the importance of recognizing societal barriers to financial literacy and fostering open dialogue. Adam shares insights on facing fears surrounding bank account balances and past expenses, highlighting the benefits of discussing financial concerns with trusted individuals. The episode also explores the value of structured conversations, such as monthly "financial date nights" with a partner, and emphasizes the role of self-compassion and gratitude in navigating financial challenges. Listeners are encouraged to approach finances with empathy and understanding, utilizing various strategies to empower themselves and achieve peace of mind.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
Join Matt Robison and I this week as we discuss the various ‘buckets’ your finances are in and if you have the right ratios for your needs. Inspired by a real client’s story, we talk about portfolio holdings such as real estate, brokerage and retirement. Having too much money “locked up” in assets such as your house and your 401k could make it difficult for you to cover unexpected expenses or even planned ones. Tune in to be sure you have your assets in a row.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
In this week's episode, Matt Robison and I, Mike Morton, delve into the concept of asset location. No, we aren’t revealing CIA operatives' whereabouts but rather discussing the strategic placement of investments, which can significantly impact returns, potentially yielding a $74k difference. Asset location refers to where investments are held, such as 401ks, IRAs, or brokerage accounts, with a focus on optimizing tax savings, particularly by placing bonds in tax-free or tax-deferred accounts. Using a real client example, I illustrate how adjusting asset locations can notably enhance returns over time. We also offer practical tips like reviewing account types and balancing taxable fixed income and equities accordingly. Does this seem overwhelming? Fear not, we also give you the “good enough” strategy that does not include optimizing asset locations: save 15% of your gross income and invest predominantly in low-cost index funds.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
This week I am joined by special guest Anne Lester to discuss the importance of educating young individuals about finances. In particular, we discuss Anne’s latest book titled Your Best Financial Life: Save Smart Now for the Future You Want and its focus on individual financial responsibility. We also talk about the shift towards personal financial management, overcoming behavioral biases in saving and investing, the benefits of automated savings, and the significance of educating young individuals about finances.Watch on Youtube Retirement Savings - You’re on your ownAnne and I begin our chat by acknowledging a historical shift in retirement savings. Back in the day (our parents’ generation and even ours, to some extent), companies would take care of their employees with pensions and retirement packages. It was normal for an individual to spend years, decades even, at the same job, or at least employer. The same cannot be said for today’s economy in which most people spend a maximum of five years in any one given position. Why does this matter? If your job isn’t actively preparing you for retirement, that responsibility now falls on your shoulders. There is a lack of education and an abundance of complication when it comes to personally managing long-term savings. Let’s break those key issues down to their impact on you: Educating kids and young adults on personal financeMath in elementary school covers the basics. In high school, it gets more complicated with advanced computations but most public schools do not spend much, if any time on personal finance. It is up to us parents to teach our kids about credit (cards, lending, etc), real estate (purchase, lending), and arguably most important: long-term savings. These concepts are not intuitive and they accompany two significant behavioral biases: loss aversion and present mindset. Loss Aversion and InvestingWe’ve talked about loss aversion in the past on this podcast, in particular in the episode Be More Aggressive. Anne revisits this behavioral bias that is well defined by the Decision Lab as a “cognitive bias that describes why, for individuals, the pain of losing is psychologically twice as powerful as the pleasure of gaining. The loss felt from money, or any other valuable object, can feel worse than gaining that same thing.”How does this impact investing? It explains why so many people are afraid of the stock market. Even if they know that historically speaking, they will always gain money from investing in stocks, watching the tickers and tuning into the day-to-day market volatility wreaks havoc on the psyche and impacts one’s decision making. Putting money in a savings account feels safer than investing, even if we know that it is a financially detrimental decision. We just talked about this last week!Anne breaks it down further by running some numbers. Investing $5k in the market today will likely grow to $100k in 40 years. So how do we overcome, or teach our kids to defeat that behavioral bias? Well, first we have to acknowledge that living in the moment isn’t always a good thing. Present Self vs. Future Self Have you ever tried telling your young child that if they eat those chocolate-dipped, deep-fried oreos from the fair they probably won’t feel well in an hour or so? You probably then held their hair or rubbed their back as they made a sacrifice to the porcelain throne. 🤢Trying to explain to a young person the concept of regret in the face of instant gratification is a lot like banging your head against a wall, repeatedly. We all remember the feeling, and likely still indulge (binge-watched any shows into the wee hours of the morning lately? You know you have!). Ane talks about the challenge we all face when it comes to present self vs. future self. Luckily, she also has some tips for overcoming the tendency to prioritize the now over the later. Tips for teaching/embracing long-term financial planningWhat’s the easiest way to help your kids achieve success in retirement planning? Automate. Show them how to take the decision and the tendency toward instant gratification out of their hands. You can’t spend money you don’t have, right? So start by saving off the top. Use those employer benefits to contribute to any and all savings vehicles offered to you including (but not limited to): 401k’s, Health Savings Accounts (HSA’s), 403(b), TSP, etc.Next, automate transfers to those savings vehicles that don’t come directly from your paycheck. Set up an auto-transfer for the day after you get paid to 529’s, IRAs, Brokerage account and more. Sure, your newly minted adult child might not be able to manage a huge contribution if they want to make rent and eat, but they can plan to set-aside a percentage of their yearly raise to savings goals. You can’t miss what you never had, right? The less they have to think about it, the easier it is to let their money grow overtime. Future selves for the win! Your Best Financial LifeAnne Lester was a truly delightful guest to have on the Financial Planning podcast. Our conversation shed light on the evolving landscape of personal finance, particularly in terms of retirement savings and the imperative for financial education among young individuals. As we navigate a world where traditional employer-provided pensions are increasingly rare, the responsibility for long-term financial security falls squarely on individuals' shoulders. Anne's insights underscore the importance of equipping the younger generation with the knowledge and tools necessary to navigate complex financial decisions, combatting behavioral biases such as loss aversion and present bias. By emphasizing the benefits of automated savings and instilling the value of long-term financial planning early on, we can empower our kids to take control of their financial futures and strive towards their best financial lives. Anne Lester's expertise serves as a valuable guide in this journey towards financial literacy and security.
Risk: It bears RepeatingAnything worth saying is worth repeating. - Humble the PoetWe’ve talked about risk many times in the past. In particular, how you view risk. The reason the conversation bears repeating, other than the fact that I field this topic on the regular, is because it is tied to a strong emotion: anxiety. Not taking a risk is the biggest riskMany people “feel” like the safest way to save money is to hide it under a mattress (ok, not really, but savings accounts are today’s mattresses). Why? Watch the news. The stock market ticker runs at the bottom throughout many newscasts. People have market changes pinged directly to their phones. Do you know how often the market fluctuates, daily? If you do, then you know exactly what I am talking about.Do you view taking a risk as losing money? Then this podcast is for you! Join Matt Robison and I this week as we discuss how you should be looking at risk. Spoiler alert: risk isn’t losing money, it is losing purchasing power. Risk: How long until retirement?When deciding how to invest, consider the timeframe - it all depends on when you will need to spend the money.1. 30+ years until retirement: You are just starting in your career, maybe you have one or two young children at home. Your best option for long-term investments are stocks. Over long periods of time (40+ years), stocks have always outperformed any other type of investment. 2. 10-20 years until retirement: Your kids are (mostly) grown, you’re paying college expenses, etc. The strategy here is almost the same as above: Stocks are still your best bet for 10+ years of investment. However, you need to balance that with anticipated costs for the next couple of years. For instance, the 529 account for your high school junior should be invested more conservatively than your 401(k). 3. About to retire or retired: Congratulations! Now your main concern is having your money last, being available when you need it, and keeping up with inflation. See below for the Retirement Bucket strategy!
These time frames are important when you look at historical market returns. Retirement BucketsNow that you are about to retire, or even better - you have already retired - you need to keep a close eye on your portfolio to ensure it will keep up with your ongoing needs.1. Cash: Keep the next 1-2 years of expenses in cash and money market funds. You don’t want to lose that money! 2. Bonds: The following 2-7 years of expenses can be invested in very safe bonds or bond funds. This will get you some nice return (hopefully!) while not losing value. 3. Stocks: Any money that you plan to spend in 7+ years from now, you can consider investing in low-cost stock index funds. Stocks tend to ourperform over long periods (10+ years) and you want your retirement portfolio to keep up with inflation
The first two buckets above (1+2) are your war chest: the money you need to have to cover expenses over the next 5-7 years in case the stock market crashes. Stocks for the Long RunNeed more proof that stocks are your best bet? Let’s pretend that you were around in 1802 and you were rich. You had a crisp $1 to save. Had you put it under your mattress and pulled it out this year, it would be worth a whopping $.04. Yes, you read that correctly. Four cents. Do you see how the dollars don’t make sense? Had you invested that $1 in the stock market, it would now be worth $1,601,184.Here is where the purchasing power comes into play. That dollar bill in 1802 could probably purchase dinner for the whole family. Uh, not so much in 2024! You can see from the chart that a dollar from 1802 has lost so much purchasing power that it can only buy 4.7 cents worth of goods. Bonds have done better, with a modest return from $1 to $1,746. Obviously, stocks far outpace cash and bonds. That’s why we say “stocks for the long run.”It is a common mistake to equate risk with volatility. Separating the two can help assuage the stress and anxiety brought on by market fluctuations if you just keep reminding yourself that time and strategy are on your side.
Have you heard the news? There are now Bitcoin Exchange-Traded Funds (ETFs)! I can hear your head scratching from here but don’t worry. Matt and I are here to break down these new trade floor offerings on this week’s episode and give you the information you need to make an informed decision when it comes to investing in this new product. What is a Bitcoin ETF?Let’s start by breaking down Bitcoin and ETFs. In a prior episode, we talked about cryptocurrencies in depth and how buying into them is more speculation than investing. At the time, two and a half years ago, cryptocurrencies were dangerous due to their associated risks, including regulatory, security, insurance, fraud, market, and liquidity. That hasn't changed much in the meantime. We also did an episode on ETFs. In it, we discussed how ETFs are wrappers for financial products. So what is a Bitcoin ETF? Essentially, it is an easier way for you to enter the cryptocurrency market.By purchasing a Bitcoin ETF, you gain exposure to cryptocurrencies without the complexities of directly buying, storing, and managing the actual “coins.” Features of a Bitcoin ETFHere's a summary of how they generally work:1. Structure: Bitcoin ETFs are traded on traditional stock exchanges rather than cryptocurrency exchanges. 2. Underlying Asset: The ETF might be backed by actual Bitcoin holdings (physically backed), or it may use derivatives like futures contracts to track Bitcoin's price (futures-based). These new Bitcoin ETFs are set up to hold actual Bitcoin, so you do not have the peculiarities of Future contracts. 3. Accessibility: Since it's traded like a stock, investors can buy and sell shares of a Bitcoin ETF through regular brokerage accounts. This makes it accessible to a wider range of investors who may not be familiar with or comfortable using cryptocurrency exchanges. 4. Regulation and Safety: ETFs are regulated financial products, which means they are subject to the oversight of financial authorities. This provides a level of security and legitimacy that direct cryptocurrency investments may lack. 1. Custodial security: Your ETF is held by a Custodian (i.e. Fidelity) that is regulated by the SEC and has insurance against fraud 2. Avoidance of technical complexity: Trade it like a stock, and you own Bitcoin. You do not have to create new digital wallets, accounts, cold storage or any of that. 5. Risk Management: Investors get exposure to Bitcoin's price movements without dealing with the risks associated with holding the cryptocurrency, such as hacking or loss of access to their wallets. 6. Tax Efficiency: For some investors, particularly in certain jurisdictions, investing in a Bitcoin ETF can be more tax-efficient than holding Bitcoin directly. Basically, the reporting is the same as your other investments - Bitcoin will be represented in the year-end report so you don't have to track the cryptocurrency exchange personally. 7. Liquidity: ETFs are generally more liquid than holding the cryptocurrency directly, as they can be quickly and easily traded during market hours. 8. Fees and Costs: Investors should be aware of the fees associated with Bitcoin ETFs, which might include management fees and the potential costs associated with the fund's method of tracking Bitcoin's price.
Now that you know what a Bitcoin ETF is, you can make an informed decision about investing in this new technology.
It’s January. The W-2’s and 1099’s are beginning to roll in. Your tax accountant is chomping at the bit to get your documents so they can begin preparing your returns. Why not take this opportunity to review your financial well-being? Join Matt Robison and me this week as we present a handy checklist of things you should examine every year to reach your financial goals.While it may seem daunting, taking the time to perform this review saves you money on taxes and makes you some extra cash with a few small tweaks to logistics. There are six main areas of concentration for you to review: a personal assessment, cash flow considerations, asset and debt factors, tax implications, insurance planning, and legalities. I’ve put this all in a handy dandy downloadable checklist, just click below to receive your free copy and keep reading to learn more about each category you should review. Don’t just take my word for it…tune in and hear Matt talk about how he “earned” about $1,000 an hour by taking the time to complete this review! Personal Assessment1. Do you need to assess the progress you made toward your goals last year? If so, consider the following: 1. Review and compare your financial models, comparing a snapshot of where you are today to last year and/or a prior time. Inventory your recent accomplishments to identify what strategies worked well. 2. Have you identified new goals for this year or the future? 1. If so, assign a priority and time horizon, and incorporate them into your overall plan. 3. Are there any life events that are likely to occur for yourself or your immediate family this year (e.g., move, marriage, birth, higher education, job change, retirement, illness, death)? 4. Do you need to confirm whether you or any family members will reach a milestone age this year? If so, reference the “Important Milestones” guide. 5. Are you concerned about any variables or circumstances that could potentially impact your plans for this year?
Cash Flow Considerations1. Do you expect your household income and/or expenses to change materially this year? 2. Do you need to review your cash flow plan? 1. If so, evaluate your actual income and expenses, and adjust your spending plan as necessary. 3. Do you need to review your employee benefits to ensure that you are taking advantage of what your employer offers? 1. If so, consider maxing out annual contributions to any retirement accounts, Health Savings Account, Flexible Spending Account, and/or Dependent Care Flexible Spending Account. 4. Are you able to contribute to an IRA? 1. If so, consider the following: Fund a Roth IRA, make deductible contributions to a traditional IRA, or make after-tax contributions to a traditional IRA, depending upon your eligibility. 2. If you are married and your spouse does not have earned income, explore spousal IRA options. 5. Do you need to confirm that you are adequately saving toward your goals? 1. If so, review your target savings and funding rates. If you fully fund some goals early in the year, continue saving toward other goals. 6. Do you have funds left in your FSA from last year? 1. If so, consider spending such funds before the expiration of any grace period. 7. Are you subject to taking RMDs (including from inherited IRAs)? 1. If so, consider the following: If you are charitably inclined and age 701⁄2 or older, you can do a QCD to satisfy your RMD. Note the “first dollars out” rule. 2. Time the satisfaction of your RMD to support your goals, and be sure to review your withholdings. 8. Do you make annual gifts? 1. If so, make a plan to fund strategically, and track the use of your annual exclusion amount for non-charitable gifts.
Asset and Debt Factors1. Do you need to adjust or replenish your emergency fund? 2. Are you planning to buy or sell business, personal, or real property this year? 3. Do you need to review your investment risk tolerance? 4. Do you need to review the performance of your investment accounts? 5. Do you need to rebalance your investment portfolio or otherwise adjust your asset allocation? 1. If so, consider the following: Be sure to consider the tax consequences and trade strategically. If you made any trades last year that were meant to be short-term (e.g., due to tax loss harvesting or to avoid capital gain distributions), revisit your strategy and reposition as necessary. 6. Do you need to review your asset location across the accounts in your portfolio? 1. If so, consider holding tax-efficient investments in taxable accounts, and tax-inefficient investments in tax-preferred accounts. 7. If you have a mortgage, should you explore refinancing? 8. Are there debts that you would like to eliminate this year? 1. If so, strategically target debts with the least favorable terms first. 9. Are you a co-signer/guarantor on any loans/agreements? 1. If so, check in with the other interested parties to confirm the terms, payment history, current status, etc. 10. Will you potentially need to borrow funds this year? 11. Do you need to review your credit report/score? 12. Do you need to freeze your credit?
Tax Implications1. Do you need to collect tax forms and organize other documents in preparation for filing income tax returns for last year? 1. If so, use last year’s filings and/or a tax organizer to begin to gather all information necessary for filing Form 1040 and any state returns. 2. Did you make taxable gifts, or do you want to split gifts for last year? 1. If so, collect the documentation necessary for filing Form 709. 3. Would Roth conversions be beneficial this year? 4. Did you fail to make an IRA contribution for the prior tax year, but would you like to do so? 1. If so, you have until Tax Day (excluding extensions) this year to make a contribution for last year. 5. Do you own investments in taxable accounts that are likely to make capital gains or income distributions (e.g., certain mutual funds and ETFs)? 1. If so, consider your cost basis and whether it might be advantageous to sell in advance of such distributions. 6. Do you need to review your unrealized gains and losses and create a harvesting strategy?
Insurance Planning1. Do you expect any changes with regard to your health or medical treatments? 1. If so, consider reviewing your health insurance coverage and alternate options. 2. Do you need to review your life insurance coverage? 3. Do you need new or increased disability insurance coverage? 4. Is it time to explore (or review existing) LTC insurance? 5. Have you made any improvements to your property or acquired new valuables? 1. If so, consider reviewing your property insurance (homeowners, renters, etc.), increasing coverage and/or adding riders as appropriate.
Legal Issues1. Do you need to review your estate plan? 2. Do you need to review the titling/ownership of your assets? 3. Are you, or will you be, serving as a fiduciary? 1. If so, consider the following: Review your duties and your performance to ensure that you are upholding applicable standards. 2. If you are an Executor or Trustee of an irrevocable trust, consider whether a distribution and election under the 65-Day Rule would be prudent. 4. Have any new laws gone into effect that might impact your financial plan? 1. If so, consider how your saving strategies, income tax situation, estate plan, etc. might have been affected and what steps might be necessary. 5. Are you subject to any new contracts/agreements, or did any such arrangements expire? 6. If you own a business, are there any changes on the horizon this year? 7. Are there any state-specific issues to consider?
Legit Money Laundering: After-Tax 401k Contributions Are we really talking about money laundering in a financial advice podcast? Yes, but it is completely legit and could give you an extra $25k/year! This week Matt and I explored a unique and powerful strategy for maximizing savings and potential earnings: After-Tax 401k contributions. The short story involves using your taxable brokerage account for living expenses and contributing your maximum amount to an often overlooked employee benefit: after-tax 401k’s.Does this strategy apply to you?Let’s break it down with the long story. First, who does this strategy even apply to? 1. Anyone with access to make after-tax 401k contributions as an employee benefit or people not maximizing their contributions to the pre-tax 401k (check with human resources to find out if you are offered this benefit) AND 2. Anyone with long-term investments in a brokerage account
Now that we’ve established the ‘who,’ let’s look at the what:But I can't save more money!The ‘money laundering’ strategy involves transferring funds from a taxable brokerage account into a 401k, but it's not a direct transfer because that isn’t permitted. In order to make contributions to a 401k (pre-tax, post-tax or after-tax), the money must come directly from your paycheck. But Mike, if I am transferring even more money from my paycheck into my 401k’s, how will I pay my mortgage and feed my kids? Good question. Here’s where the laundering happens. Refer back to number two in the above “who” guidelines. That money sitting in the brokerage account gets transferred to your checking account for you to spend on your everyday life. The goal is to bridge the gap between contributions to the 401k and general budgeting, allowing for the full after-tax contributions to be made.Why bother with all these transfers?Why bother with this? Won’t you have to pay capital gains on the money taken out of your brokerage account? The answer is yes, but the benefit far outweighs the tax. Let's take a look at the following chart to see the difference between that money staying in your brokerage account or growing tax-free as after-tax 401(k) contributions. Using the following assumptions, it is clear that choosing the right account type makes a significant impact on your overall savings.* Compounding Growth: 6% Growth + 2% Dividends (8% total) * Income Tax Bracket: 24% * Capital Gains Tax Bracket: 15%
| YEAR | BROKERAGE | After-Tax 401k | | --- | --- | --- | | Account Balance | Value (After Tax) | Account Balance | Value (After Tax | | 0 | $30,000 | $30,000 | $30,000 | $30,000 | | 10 | $61,946 | $58,123 | $64,768 | $64,768 | | 20 | $127,911 | $116,193 | $139,829 | $139,829 |
Let's talk specifics: How to implement this strategyWhile this might seem overly complicated, it only involves some adjustments at the beginning of the year to achieve this goal. So, how do you make this strategy work for you?1. At the beginning of the year, make adjustments from your employee portal to add/increase your contributions to 401k and after-tax 401k from your paycheck. 1. Ensure that your after-tax 401k contributions are being rolled into the Roth "side" of your 401k 2. Set an auto-transfer from your brokerage account to your checking account in the amount you would have received in your paycheck. 3. Live your life and watch your money start working smarter for you.
What if you don't have access to after-tax 401k contributions?Bummed that you don’t have an after-tax 401k at your place of employment? This strategy can also be used with 529s, HSAs, and IRAs. The key takeaway: tax-free growth versus taxable growth. After-tax 401k, 529, HSAs and IRAs all grow tax-free whereas your brokerage gets taxed every single year. That yearly tax slows down your compounding growth! Wouldn’t it be cool watercooler fodder to say your money laundering has earned you an extra $25k? Tune in to this podcast to learn all about this strategy in order to optimize your savings and investments. By strategically utilizing after-tax 401k contributions, you can unlock additional earnings and set yourself on a path to financial success. The key lies in understanding the process, assessing your circumstances, and seizing the opportunity to make your money work smarter and harder.
It’s that time of year when we all swear we are going to get to the gym more often, eat healthier, limit our time on social media, and make a better effort to stay in touch with family and friends. Looking ahead feels good, but how many times have you set those goals only to have abandoned them by January 31st? In this year-end review episode, Matt Robison and I discuss looking back before you look forward. In particular, when examining your finances it is imperative to understand past actions in order to prepare for future financial decisions. Let’s say last year at this time, you resolved to make exercise a priority for the New Year. If you are like most people, you probably stuck with it for a few days, maybe a few weeks, perhaps even a month but then it fell by the wayside. Did you ever stop to ask yourself why you were making the goal? To get healthier? Why did you not succeed? Was it the time commitment? The discomfort of sore muscles and stretched lungs? Looking at your past behavior can be the key to succeeding in future endeavors, including financial goals.Matt loves colorful metaphors. The best way to approach your year-end financial review is with a 💩 sandwich. Yes, you read that correctly. What are we talking about? 1. Figure out what you did well (your first slice of bread). 1. Make the time to sit down and review your expenses. 2. Look at your income sources over the year, including salary, investments, rental income, etc. 2. Take a look at what you can improve (the 💩). 1. How were your expenses this year? Examine your spending patterns and identify areas where expenses may have increased or decreased. 2. How’s your debt? Assess your progress in debt reduction, including credit cards, mortgages, student loans, etc. 3. Have you checked your portfolio lately? Evaluate the performance of stocks, mutual funds, retirement accounts, etc. 3. Make progress and plan for moving forward (the last slice of bread). 1. Be sure to look at all your employee benefits to take advantage of everything offered to you. 2. Identify the positives and focus on consistency.
Did you do one thing really well this year? Anyone can perform exceptionally once in a while. Consistency is what truly creates greatness. Take professional athletes, for example. All the best are the first in and last out because they play consistently. The best way for you to be financially consistent is to work on one thing at a time and do that job well. If it is budgeting, look at your past expenses, predict future spending, set limitations and stick to them every month. Achieving consistency will help you realize financial success. Remember, look back before you look forward to enjoy a prosperous 2024.
IRAs: They can make you want to rolloverHost Matt Robison asks me this week about his rollover IRA. In an enlightening episode for us both, you will learn the ins and outs of Individual Retirement Accounts (IRAs) including the different types, rollovers, and the strategic moves you can make to optimize the tax benefits of these accounts. While I’d have thought the answers were all in the name, it turns out IRAs are not nearly as intuitive as I believed them to be.
Individual Retirement Account: IRAThere are many different types of IRAs, from rollover to Roth, traditional to back door, and everything in between. The one key thing to remember is that they all share a common thread—they end in ‘IRA.’ Each Individual Retirement Account comes with its own set of rules for things like transfers, withdrawals, and contributions, and has its own tax implications. We’ve gone over these in previous episodes, such as the Clean Back Door IRA, Traditional vs. Roth, 529 to Roth, and the oldie but goodie SEP-IRA vs. Solo 401k.
Consolides IRAs and 401(k) for SimplicityIn this episode, Matt shares his personal experience of rolling over an IRA from one financial institution to another. Seems like it would be a straightforward process, right? Not exactly. First, we talk about the challenges Matt faced as he attempted to ensure a successful rollover and then we dive into the importance of careful consideration when managing accounts tied to previous employers.
So, where to begin? Consider consolidating multiple IRAs into a single rollover IRA for simplicity and ease of management. Do you have previous employer retirement accounts such as a 401(k) or 403(b)? You could also transfer those funds into one account so that you can maintain centralized control over older, tax-deferred funds. But be careful: there are reasons to leave them in that 401(k)! So make sure to consider the consequences (Clean Back Door Roth)
Tax BenefitsSpeaking of taxes, IRAs are designed to give you tax benefits. That is why putting savings into these accounts, versus your checking, savings, and brokerage accounts is so important. Decide how much liquidity you need (for instance, an emergency fund) then put the rest in a place where it will make you more money.
What place is that? Grab your employee handbook and figure out your options. Employer benefits are often overlooked but usually offer excellent ways to make the most from your savings. Google your yearly contribution limits for IRAs. They vary by age and by year, so once you have the info you need, make the transfer. If you are just starting this process, you can look up your 2023 contribution limits and those for 2024 and fund both accounts before April 15, 2024 (tax day). Then, set a calendar reminder for Q1 2025 to get ahead of your IRA funding and be sure you aren’t missing opportunities.
The bottom line is that IRAs are a great place to put your savings because of the many tax advantages. With a little bit of homework, you can make a lot more from your savings than leaving it sitting in accounts with no real benefits.
If you’ve been a listener to this podcast for some time, you are likely well aware of the things to look for when hiring a financial planner. However, your friends may not be. If the topic of finances comes up, do the right thing: educate your friends and family on how to find a good advisor.What happens when you don't help your friends and familyI recently had a client who came to me with a concern for a family member. Her cousin inherited a sizable sum of money and hired a financial advisor to assist with the logistics. My client expressed concern about a few aspects of the plan her cousin received, in particular, the number of life insurance policies she was encouraged to obtain, and did not understand some of the recommended investments.When it comes to Financial Advisors: Ask the Right QuestionsWe talked about how my client could help her cousin with regard to asking the right questions of her new financial planner. This advice applies to anyone interested in obtaining financial services so I decided to share her story and a list of nine questions anyone should ask when hiring a financial advisor. I’ve also taken the liberty of including my answers as a reference point for any interview conducted with potential financial planners.9 Questions to Ask When Interviewing a Potential Financial Advisor1. Are you a fiduciary? 1. YES! I started my own Registered Investment Advisor (RIA) company, licensed in the states of MA, CA, and PA. These states require that I act as a fiduciary for my RIA and all my clients. 2. What are your professional qualifications and credentials 1. I am a Certified Financial Planner (CFP®), a Registered Life Planner (RLP®) and a Chartered Financial Counselor (ChFC®). 2. When I started my RIA in 2018, I immediately enrolled in the CFP® curriculum. It took a few years to complete the required college-level courses, pass the comprehensive exam, and fulfill the work requirement (2-3 years of full-time work in the industry). 3. I have also taken the required coursework for the Registered Life Planner in 2021 - a year of classes and work provided by the Kinder Institute. 3. How are you paid? What are your fees and how are they structured (hourly, flat fee, percentage of assets under management)? Are there any additional costs I should be aware of? 1. I typically work with new clients in a flat fee arrangement to provide comprehensive planning. You can always find the latest fees and services listed right on my website. This is a one-time fee to cover all the initial planning together. 2. Often, clients will engage me to provide ongoing services. This service is also a flat-fee, yearly arrangement, based somewhat on net worth and paid monthly. Again, those transparent fees are listed on my website. 3. There are no other fees paid to me. Sometimes I will recommend services that have associated costs (estate planning, tax preparation, life insurance, etc) - but I always let you know the potential costs of these services, paid directly to other professionals, with no commissions or incentives for me. 4. How long have you been working as a financial advisor? What is your experience with clients in situations similar to mine? 1. I started my own RIA in 2018 and have been working with clients in the years since. I primarily work with busy parents who want to get organized with their finances to ensure a successful future for themselves and their children. 5. What is your investment philosophy? How do you select investments for your clients? Can you explain your approach to risk management? 1. I believe in using low-cost index funds, in a mostly buy+hold approach, which involves monitoring and rebalancing throughout the year. I use academic research (rather than hot stock tips!) to drive my investment recommendations. Money is a tool to be used to live your best life and your investments should support that goal. 6. What services do you provide? How often do you communicate with your clients? Do you offer comprehensive financial planning? 1. I typically start new clients with comprehensive financial planning. We cover topics such as budgeting, education planning, insurance review, estate planning, investments, and taxes over a few meetings spanning a couple of months together. I also provide ongoing financial planning, accountability partner, and investment advice for those clients who want a working partnership throughout the year. 2. I only work with a small number of clients, so I am readily accessible. Every piece of advice or recommendation you receive comes from me directly, not from staff or assistants. 7. What is your financial planning process? How do you determine and prioritize financial goals for your clients? 1. I have a standard process that I take all new clients through, which includes a set of meetings, questionnaires, information gathering, analysis, and recommendations. While the process is standardized for all clients, the information, analysis, and recommendations are all unique to your situation. 8. How do you communicate with clients, and how often? How can I reach you if I have questions or concerns? 1. During our initial planning process, I will communicate with clients before, during, and after each of our meetings. I send out an agenda, keep us organized during our meetings, and write summaries. I use email, text, and a customer portal to organize our communications and information. 9. Can you provide references from current or past clients? Have you had any disciplinary actions or complaints? 1. I typically do not provide references because all my communication with clients is confidential. That said, I do have some clients who have volunteered to be a reference for me, so I can usually match you with someone in a similar position who is willing to chat about my services and approach. 2. I have never had any complaints or disciplinary actions against me.
It's important to find the right advisor for you. You hope to be in a long-term relationship, so don't skimp on the upfront work to find the right match!
10 Year-End Financial Moves As the year draws to a close, it's crucial to take a closer look at your finances and ensure you're getting the most out of 2023. In this podcast episode, we've compiled a checklist of 10 financial considerations that can make a significant impact on your overall financial well-being. Listen to Matt and I discuss the following checklist (it is far more entertaining in audio!) and refer to the notes below to ensure you end the year strong. ☑️ Maximize Retirement Contributions: Start by contributing as much as possible to retirement accounts such as 401(k), 403(b), IRA, and HSA. Not only does this help secure your future, but it also reduces taxable income, providing an immediate financial benefit.☑️ Charitable Donations: Consider making contributions to qualified charities before the year ends to potentially benefit from tax deductions. It's a win-win situation—supporting a cause in which you believe and catching a break from Uncle Sam.☑️ Prepay Deductible Expenses: If feasible, prepay deductible expenses like mortgage interest, property taxes, and other eligible costs before the year concludes. You could receive valuable deductions on your upcoming tax return (keeping in mind that you would not be able to take advantage of them for 2024).☑️ Utilize Education Tax Benefits: Explore education-related tax benefits, including the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). These credits can provide substantial financial relief for qualified education expenses.☑️ Review and Offset Investment Gains/Losses: Take a closer look at your investment portfolio. Consider offsetting gains with losses to potentially reduce your overall taxable income. Read more about this strategy in the Wall Street Journal.☑️ Utilize Health Savings Accounts (HSAs): Maximize contributions to HSAs to reduce taxable income and cover medical expenses. ☑️ Maximize Child and Dependent Care Credits: Ensure you've accounted for all eligible expenses related to child or dependent care for potential tax credits. This includes childcare costs, summer day camp expenses, after-school care, and contributions to a Dependent Care Flexible Spending Accounts (FSAs).☑️ Evaluate Business Expenses for Deductions: If you're self-employed, meticulously review and account for business expenses like supplies, mileage, and home office costs. These deductions can significantly impact your taxable income.☑️ Consider Energy-Efficient Home Improvements: Did you make some upgrades to your home this year? Explore potential tax credits for qualifying home improvements such as solar panels, energy-efficient windows and doors, HVAC systems, insulation upgrades, and energy-efficient appliances. Not only do these upgrades benefit the environment, but they also allow for nifty tax savings. ☑️ BONUS: Review Financial Goals: Finally, take the time to evaluate your progress toward your financial goals for the year. Use this reflection to make informed adjustments and set new goals for the upcoming year.Remember, it's not just about making the list; it's about taking action. By addressing these financial considerations before the year ends, you'll be better positioned to make the most of your money in 2023. So, as you navigate the holiday season, don't forget to give yourself the gift of financial empowerment. Happy planning!
Not your Father’s Personality Test
This week, Matt and I are joined by Registered Life Planner and former guest Andrea Miller, to delve into the fascinating world of Sparketypes. You’ve probably heard of the Myers-Briggs personality test developed in the 1920’s or the DISC assessment that followed two decades later, but the Sparketype tool is the first to come along in almost a century designed to help you identify “your unique, source code for work that makes you come alive, whether that gets deployed in your job or career, in your personal life, or on-the-side.”
Andrea explains the essence of Sparketypes— a concept developed by Jonathan Fields, author of the 2021 Sparked: Discover Your Unique Imprint for Work that Makes You Come Alive. Unlike other personality assessments, Sparketypes focus on understanding what truly energizes and fulfills you, steering away from the complex jargon that often accompanies psychological frameworks.
Start by taking the free online quiz to discover your Sparketype. This 10 to 15-minute survey provides you with two out of ten Sparketypes, your primary and shadow. Each Sparketype represents a unique aspect of your core nature.
Why am I talking about a personality assessment on my finance podcast? Anyone who has worked with me knows that my approach to helping people set and obtain financial goals is about more than just numbers. Learning that I am a Sparketype Advisor allowed me to articulate why I love my job as much as I do, and I want to share that discovery with others. Learn your Sparketype today and let’s use that insight to create your ideal life.
The 60/40 401k Portfolio is Dead! 😯Are you one of the many who set up a 60/40 stock-bond split in your retirement portfolio, thinking it was the golden ticket to a worry-free retirement? Well, think again. Recent market events have signaled a paradigm shift, leaving the classic 60/40 401k portfolio gasping for breath.
The Rise and Fall of the Classic PortfolioAccording to the Wall Street Journal (paywall), the classic 60/40 stock-bond split, comprising the S&P 500 index and 10-year Treasury notes, earned a respectable 15.3% in 2020. For decades, this strategy rode on 40 years of tailwinds from falling bond prices, offering investors a relatively smooth journey toward their retirement goals.
However, the landscape drastically changed in 2022. For the first time in over 50 years, both stocks and bonds experienced a downturn. The culprit? Inflation! It turns out that the real killer isn't market crashes; it's the relentless rise in inflation that's wreaking havoc on traditional portfolios.
Inflation has emerged as the silent enemy, eroding the purchasing power of your hard-earned savings. The 60/40 portfolio, once considered a stalwart, is now facing a wide range of outcomes. What worked for the past four decades may not necessarily be the silver bullet for the future.
How can you learn from the past and protect your future?1. Don’t rely on market timing metrics: The attempt to time the market using metrics like CAPE10 or any other value-based indicator has proven futile. Studies show that trying to tilt your portfolio based on specific market values above or below a certain line is no more effective than blind luck. 2. Rebalance: In times of uncertainty, it's essential to be adaptive. Instead of sticking rigidly to a pre-determined allocation, consider rebalancing your portfolio based on market conditions. Take what the market gives you and adjust your holdings accordingly. 3. Build a War Chest: In the face of economic uncertainty, it's wise to hold a financial "war chest." This means having seven to ten years of spending set aside. This cushion can provide peace of mind, ensuring you have the financial flexibility to weather storms without compromising your long-term goals. 4. Explore alternative investments: The Wall Street Journal suggests looking beyond the traditional. Small-capitalization, emerging-market, and value stocks offer the benefit of diversification at seemingly more affordable prices. This diversification can act as a safeguard against the challenges posed by a volatile market.
The classic 60/40 401k portfolio may be on life support, but all is not lost. By adopting a flexible approach, avoiding market timing traps, and exploring alternative investments, you can navigate the turbulent waters of today's economic landscape. The key is to be proactive, stay informed, and be willing to adapt your strategy to ensure a secure and prosperous retirement. Remember, the only constant in the financial world is change, and it pays to be prepared.
Cut the Cord on Cable and Streaming Services
In the fast-paced world of entertainment, where streaming services have become the norm, the decision to cut the cord and bid farewell to traditional cable TV has become a common topic of discussion. But what about all those streaming services? The three-month free trial ends and suddenly you are paying $70/month to watch curling matches in some obscure Canadian village. You have a service for watching Marvel movies, one for sports, another for Ted Lasso…before you know it you are spending $3,600 a year on television!
The escalating costs of streaming services has happened with inattentional blindness. With popular platforms like Disney+, Netflix, HBO, and Prime Video continuously raising their subscription fees, you may find yourself questioning the value of your entertainment expenses (or what those expenses amount to over the course of a month or a year).
Subscription Streaming Services Overload
Let’s start with a simple question: How many services do you subscribe to? Not sure? You’re not alone! Many people experience difficulty keeping track of multiple subscriptions. As the number of available services grows, managing various accounts and remembering which shows or channels each one offers becomes increasingly overwhelming.
To begin, go through your monthly account statements (credit cards, debit, etc.) and get a running list of all services you subscribe to and the cost of these services. If you use a budgeting platform such as Mint, check your “Entertainment” budget to see a list of your subscriptions.
Once you have a handle on all your subscriptions, cancel them. You read that correctly. Go on a digital detox, live without streaming services for a while…a few days, a week, a month. Gradually reintroduce only the essential ones back into your life. There is no time like the present to reassess your entertainment needs and prioritize quality content over quantity.
If cutting the cord completely is anxiety producing, use the following tips to pare down your subscription expenses:
- Evaluate your viewing habits: Identify the top shows or channels you regularly watch and find cost-effective ways to access them.
- Leverage family and friends: Explore sharing subscriptions with family and friends to optimize costs without compromising access to desired content.
- Stay vigilant with promotions: Be cautious about promotional deals and set reminders to cancel or renegotiate subscriptions before prices increase.
- Consider streaming platforms with bundled services: Explore platforms like YouTube TV, which offer bundled services, providing access to various channels at a more affordable rate.
Check out NerdWallet and Consumer Reports for more tips on ways to save on streaming.
In the ever-expanding universe of streaming services, the decision to cut the cord is a personal one, dependent on individual viewing habits, budget constraints, and preferences. Be mindful of subscription costs, staying vigilant with expenses, and explore creative solutions to strike a balance between entertainment indulgence and financial prudence.
Ongoing Pain in the CostsYou’ve done the math, compared the options, and finally settled into your dream home. Or perhaps you’ve acquired that sleek, new car you always wanted. You know the one-time fee, but do you truly understand the ongoing cost? It's easy to overlook the continuous financial and time investments required for the maintenance of your possessions. Join Matt Robison and I this week as we delve into planning for the ‘not-so-one-off’ costs of upkeep.The dream of owning a home is often painted with idyllic scenes of family gatherings and cozy evenings by the fireplace. Yet, behind this picturesque facade lies the reality of constant maintenance. On average, home maintenance and upkeep can account for 1-2% of your home's value annually. Think about it - for every $100,000 your home is worth, you might spend $1,000 to $2,000 every year just to maintain its current condition.But it’s not just about money. It’s about time, too. The larger your home – in terms of lot size, square footage, and price – the more time it takes to manage it. Ignore it, and you might soon see your investment plummet in value.Consider the various components of your home that demand constant attention. From heating and cooling systems (furnace, dehumidifier, ducts, vents, AC unit, portable heaters) to electrical appliances (lights, outlets, generator, fridge, stove, microwave, dishwasher), plumbing (well pump, water filtration, sinks, faucets, toilets, copper plumbing), and the structural elements (roof, radon systems, vents, shingles, gutters), the list seems endless. if these items generally last around 25 years, you’re looking at potentially one significant replacement every year. It's a cycle that doesn’t end, and you need to plan accordingly.How to manage this pain in the walletUnderstanding that every possession you acquire comes with an ongoing cost is the first step. Don’t let these expenses catch you off guard. Here are a few practical steps you can take:1. Budget Wisely: When you make a large purchase, factor in the ongoing costs of maintenance and repairs. Create a budget that accounts for these expenses. 2. Educate Yourself: Learn the basics of home and car maintenance. Small repairs that you can handle yourself can save you both time and money. 3. Regular Inspections: Conduct regular inspections of your home and car to catch potential issues early. Preventive maintenance often costs less than emergency repairs. 4. Emergency Fund: Have an emergency fund set aside specifically for unexpected repairs and maintenance. 5. Get Professional Help: Don’t hesitate to call in professionals when needed. While it might seem costly upfront, it can save you from more extensive and expensive repairs down the line.
It is essential to recognize the ongoing responsibilities and costs that come with one-time purchases. By understanding and preparing for the continuous costs – both in terms of money and time – you can enjoy your investments without the constant stress of unexpected expenses. Expect maintenance, be proactive, budget wisely, prepare, and remember - it’s not just the price tag; it’s the ongoing commitment that truly defines ownership.
“For every minute spent organizing, an hour is earned.” - Anonymous
You’re organized, right? You made an estate plan…set-up guardians for your kids, named beneficiaries in your will. Everything will go as smooth as butter should you meet your ultimate demise, yes?Maybe, but maybe not. The best way to ensure everything goes according to your plans is to get organized. Creating an assets and liabilities spreadsheet, while tedious, will help you and your loved ones navigate your financial wishes in the event of your incapacitation or death.How will a spreadsheet make the process easier? Let’s use a real client example to highlight the use case:I have a client, we’ll call her Amanda, that I’ve been working with for years. Amanda’s mother passed away two years ago, not unexpectedly. She had two children, Amanda and her brother and had remarried and acquired three step-children. She worked her entire life, leaving behind some assets in trust and a will to assign her retirement accounts and two businesses to her beneficiaries.
While it may seem as though Amanda’s mother had her plan carefully arranged, it turns out that asset allocations were a lot trickier than anticipated. The plan was to give her retirement account, valued at $1 million to Amanda and her brother to split. The two businesses were valued at $500k each. $100k was set to be given to each step-child from that while the other $700k was to go to her widowed husband. Unfortunately, the businesses were not worth $500k each, making the distribution of funds a nightmare for her survivors. Had the assets been accounted for prior to her death, the plan could have been reevaluated without the tremendous effort and headache left for Amanda to deal with upon her passing.
What can you learn from Amanda’s story? First, take the time to create an asset and liability spreadsheet to include all of your accounts and where they are held. 👉 Here's a handy template to get you started!Next, use that spreadsheet to review all your beneficiary forms for each account. Why is this important? The Wall Street Journal recently published an article explaining how different states have different rules for beneficiaries. For instance, if you name your eldest child the beneficiary of your 401(k), but then get married, the beneficiary automatically changes to your spouse, even if you later divorce that person. How do you keep it all straight? Via an asset and liability spreadsheet review completed yearly. It may take you thirty minutes to prepare an itemized list of all your accounts and beneficiaries but it will save you and your loved ones hours of trying to organize everything in the event of an emergency or death.
What if I told you that you could be paying thousands of dollars in unnecessary taxes every year on your savings? You might think I have some savvy financial trick up my sleeve to save you from Uncle Sam, but the opposite is actually true. In this episode, it's all about the basics. Basic account types, that is: The Three Musketeers: Taxable, Tax Deferred, and Tax Free Taxable Accounts: The Draining Leak in Your PocketTaxable accounts include your checking, savings, and brokerage accounts. The unfortunate characteristic of these accounts is that every year, like clockwork, a portion of your hard-earned money gets siphoned off to pay taxes. Imagine this as a leak in your financial bucket, slowly draining your resources. Tax Deferred Accounts: Delayed TaxationWith these types of accounts, you haven't paid taxes on the money yet. Think of traditional 401(k)s, IRAs, and similar accounts. While it might seem like you've got a pot of gold, remember, a chunk of that treasure belongs to the government. You're merely holding it in trust until the taxman comes knocking. Tax Free Accounts: The Holy GrailThese accounts are the gems of the financial world. Once you've paid your taxes, your money gets to grow, flourish, and multiply without being haunted by the specter of taxation. Roth accounts, such as Roth 401(k)s, Roth IRAs, 529’s and the beloved Health Savings Accounts (HSAs), fall into this category. Once you've entered the realm of tax free accounts, you've found the holy grail of personal finance—a place where your money can thrive without the relentless bite of taxes. Which is Best?In the world of finance, understanding these account types is akin to wielding a shield against the ever-present taxman. By choosing the right account types, you can strategize and minimize the amount you pay in taxes, leaving more money in your pocket. Let's Review an ExampleTo drive this point home, consider the following real-client scenario: Joe (not his real name) is a diligent saver with most of his funds parked in his brokerage account. While he had managed to save, he hadn't optimized where he was putting that money. A large portion of his savings sat in taxable territory, meaning he was hemorrhaging money in taxes every year. The story of Joe is not uncommon. Many individuals find themselves in similar situations, unknowingly losing substantial amounts to taxes, all due to a lack of understanding about account types.Need more convincing? Take a look at the following chart to see the difference between taxable, tax deferred and tax free accounts. Using the following assumptions, it is clear that choosing the right account type makes a significant impact on your overall savings.* Compounding Growth: 6% Growth + 2% Dividends (8% total) * Income Tax Bracket: 24% * Capital Gains Tax Bracket: 15%
| ROTH 401k | Traditional 401k | Brokerage | | --- | --- | --- | | Year | Brokerage | Roth 401k | Brokerage | Traditional 401k | Brokerage | Traditional 401k | | 0 | $4,600 | $22,500 | $10,000 | $22,500 | $27,100 | $0 | | 1 | $4,946 | $24,300 | $10,752 | $24,300 | $29,138 | $0 | | 2 | $5,318 | $26,244 | $11,561 | $26,244 | $31,329 | $0 | | 3 | $5,718 | $28,344 | $12,430 | $28,344 | $33,685 | $0 | | 4 | $6,148 | $30,611 | $13,365 | $30,611 | $36,218 | $0 | | 5 | $6,610 | $33,060 | $14,370 | $33,060 | $38,942 | $0 | | 6 | $7,107 | $35,705 | $15,450 | $35,705 | $41,870 | $0 | | 7 | $7,642 | $38,561 | $16,612 | $38,561 | $45,019 | $0 | | 8 | $8,216 | $41,646 | $17,861 | $41,646 | $48,404 | $0 | | 9 | $8,834 | $44,978 | $19,205 | $44,978 | $52,044 | $0 | | 10 | $9,498 | $48,576 | $20,649 | $48,576 | $55,958 | $0 | | 11 | $10,213 | $52,462 | $22,201 | $52,462 | $60,166 | $0 | | 12 | $10,981 | $56,659 | $23,871 | $56,659 | $64,690 | $0 | | 13 | $11,806 | $61,192 | $25,666 | $61,192 | $69,555 | $0 | | 14 | $12,694 | $66,087 | $27,596 | $66,087 | $74,786 | $0 | | 15 | $13,649 | $71,374 | $29,671 | $71,374 | $80,410 | $0 | | 16 | $14,675 | $77,084 | $31,903 | $77,084 | $86,456 | $0 | | 17 | $15,779 | $83,250 | $34,302 | $83,250 | $92,958 | $0 | | 18 | $16,965 | $89,910 | $36,881 | $89,910 | $99,948 | $0 | | 19 | $18,241 | $97,103 | $39,655 | $97,103 | $107,465 | $0 | | 20 | $19,613 | $104,872 | $42,637 | $104,872 | $115,546 | $0 | | SUBTOTAL | $21,088 | $104,872 | $42,637 | $104,872 | $115,546 | $0 | | Pay Taxes when you sell | -$2,252 | $0 | -$4,896 | -$25,169 | -$13,267 | $0 | | After Taxes | $18,836 | $104,872 | $37,741 | $79,702 | $102,279 | $0 | | TOTAL | $123,707 | $117,444 | $102,279 |
So, what can you do if you suspect you might be in a similar predicament? The first step is awareness. Understanding the nuances of account types arms you with the knowledge needed to make informed financial decisions. From there, it's all about devising a plan to move your money strategically, exploring tax deferred options where applicable, and aiming for the coveted tax free accounts.While it might seem overwhelming, remember, financial freedom is often a journey of small, intentional steps. And with each step, you're one stride closer to keeping your hard-earned money where it belongs—in your pocket.
Traditional vs. Roth 401k - Which is truly better? This week Matt Robison and I put the Traditional 401k and the Roth 401k in a head-to-head battle of the retirement accounts. If you’ve been following this podcast for a while, you are well aware of what a 401k account is a tax-advantaged way to help fund your retirement. Just in case you need a refresher, a 401k, or 401(k), is a retirement savings plan offered by many employers in the United States. It's a valuable tool that allows you to save for your retirement while enjoying potential tax benefits. There are two types of these accounts, a Traditional and a Roth. Which is right for you? Follow the fight to find out. 🥊 Round One:Traditional vs. Roth - The TaxesFirst up in the ring, the two accounts swap jabs with regard to taxes. One of the primary distinctions between these two types of 401(k) accounts is the timing of tax payments.* Traditional: Contributions are made with pre-tax dollars, which means you don't pay taxes on the money you invest until you withdraw it in retirement. * Roth: Contributions are made with after-tax dollars, so you pay taxes upfront, but your withdrawals in retirement are tax-free.
So what’s the score? At first glance, it might seem like a wash when it comes to Traditional vs. Roth 401(k) accounts. The math appears to work out the same if your tax rate remains constant throughout your life. If you pay 24% on your contributions now or in 20 years, there is no difference. Math nerd alert - it’s the commutative property: tax x $dollars x compounding = $dollars x compounding x tax.However, there's an important factor to consider: tax drag. 🥊 Round Two: The Sucker Punch - Tax DragUnfortunately the simple math above doesn’t work in the real world. Why? Tax Drag! Let’s see how. Warning: The following section might explode your brain. 🤯Let’s say that you contribute $22,500 to a Traditional 401(k) in 2023. On top of that, you save an additional $10k from your paycheck. Awesome!If instead, you contribute $22,500 to a Roth 401(k) in 2023, you owe more in taxes (this year). Recall that you pay tax in 2023 on that $22,500 of income to enjoy tax-free withdrawals in retirement. This tax, taken out of your paycheck, is 24% x $22,500 = $5,400. Since your paycheck is lower, you can only save $4,600 ($10k - $5,400)So now let’s compare those two examples:* Traditional: Contribute $22,500 and have $10k of savings in your brokerage account * Roth: Contribute $22,500 and have $4,600 of savings in your brokerage account * All the money grows at 8% (6% increase + 2% dividends) each year. + In the Traditional and Roth accounts, it grows tax-free! + In your brokerage account, the 2% dividends are taxed each year plus the gain is taxed (capital gains tax) when you sell. * After 20 years, you withdraw all the money from the Roth (tax free) or Traditional (pay taxes on the account balance at 24% tax rate)
| ROTH 401k | Traditional 401k | | --- | --- | | Year | Brokerage | Roth 401k | Brokerage | Traditional 401k | | 0 | $4,600 | $22,500 | $10,000 | $22,500 | | 1 | $4,946 | $24,300 | $10,752 | $24,300 | | 2 | $5,318 | $26,244 | $11,561 | $26,244 | | 3 | $5,718 | $28,344 | $12,430 | $28,344 | | 4 | $6,148 | $30,611 | $13,365 | $30,611 | | 5 | $6,610 | $33,060 | $14,370 | $33,060 | | 6 | $7,107 | $35,705 | $15,450 | $35,705 | | 7 | $7,642 | $38,561 | $16,612 | $38,561 |
Three Advanced Strategies for the 529 Education AccountWant to supercharge your savings? Look no further than 529 Education Savings Plans!If you're intrigued by the idea of making the most of your 529 accounts, I have just the podcast for you. This week Matt Robison and I discuss three advanced strategies that can help you get the most out of these versatile financial tools. Use a 529 to fund education expenses for a future (unborn) child1. No Kid, No Problem - Have you ever considered opening a 529 account for a child who hasn't arrived yet? It might sound unconventional, but it's a smart move for forward-thinking parents and grandparents. By starting a 529 for an unborn child, you can get your money growing tax-free today. You become both the owner and beneficiary of the account initially, allowing you to make contributions early on when you have fewer financial responsibilities. This can be a game-changer down the road in two ways: 1. Pass it On: When your child is born or a grandchild comes along, you can simply change the beneficiary of the 529 account to the new addition. The compounding works in their favor to fund their education 2. Fund Your Roth IRA: Fast forward 15 years when you might have more expenses and a higher income. The money in the 529 account can serve as a source to "contribute" to your Roth IRA. This is a creative way to maximize your retirement savings within the annual Roth IRA contribution limit while enjoying the tax benefits.
Dynasty Trust: Use a 529 for future generations1. Dynasty (The Trust, not the Soap Opera) - A Dynasty Trust can be an excellent option for families with substantial wealth looking to create a lasting financial legacy. While it's a powerful strategy, it comes with some complexities, including potential gift tax and Generation-Skipping Transfer Tax (GSTT) implications, maximum contribution limits, and state-specific rules. For an in-depth look at this financial tool, check out this Kitces Article. 1. Long-Term Wealth Preservation: Dynasty Trusts are designed to ensure that wealth remains within a family for multiple generations. You can establish a 529 account within a Dynasty Trust to fund educational expenses for your descendants. 2. Tax Implications: It's crucial to work closely with a financial advisor or estate planning expert to navigate the potential tax implications of a Dynasty Trust. This strategy is best suited for high-net-worth individuals. 3. Not without Risk: Keep in mind that while Dynasty Trusts offer incredible benefits, they come with some risks. Future changes in 529 plan transfer rules, shifts in government policies, or unforeseen events may impact the effectiveness of this strategy.
How to use a 529 to fund your Roth IRA1. The Escape Hatch: As mentioned above, 529 accounts can now serve as a source of funds to contribute to your Roth IRA. This strategy is particularly beneficial when you're younger, have fewer expenses, and can generate "extra" savings. Here's how it works: 1. Me, Myself and I: Open a 529 account in your name, with yourself as both the owner and beneficiary. Fill it up with your extra cash while you have it (i.e. before kids). 2. No money, no problem: Down the road, when you have more financial responsibilities (mortgage, cars, children [and the separate 529 accounts to go along with them], aging parents, etc.), you can use the funds in your529 account to "contribute" to your Roth IRA. This allows you to maximize your retirement savings while staying within the annual Roth IRA contribution limit. 3. No Income Limits: Unlike traditional Roth IRA contributions, this strategy has no income limits, making it accessible to a wider range of individuals. Check out this article from the AARP on Traditional and Roth IRA contribution limits.
529 accounts have evolved into powerful financial tools that extend beyond education savings. By exploring these advanced strategies, you can make the most of your 529 accounts, secure your family's financial future, and even boost your retirement savings. However, it's essential to consult with a financial advisor or tax expert to ensure these strategies align with your specific financial goals and circumstances. With careful planning, you can unlock the full potential of your 529 accounts and achieve your long-term financial objectives.
When it comes to saving for education, 529 accounts have long been a go-to option for many families. These tax-advantaged accounts allow you to set aside funds for educational expenses, and any earnings within the account grow tax-free. While they have been traditionally associated with saving for college, Congress has recently expanded the horizons of 529 accounts, making them an even more versatile tool for financial planning.
We’ve done a number of episodes on 529’s. In episode 55, we talk about how to pay for education expenses. Then we do a deeper dive into education savings in episode 83 and round it all out with an All About 529’s breakdown in episode 84. Check those out if you haven’t already, because today we will be talking about 529’s as a potential savings vehicle for retirement.
First things first, 529s in brief: A 529 account is a tax-advantaged savings plan designed to encourage saving for future education costs. These accounts are sponsored by states, state agencies, or educational institutions and come in two primary types: prepaid tuition plans and education savings plans.
529 Use CasesInitially, 529 accounts were created to cover qualified higher education expenses such as tuition, fees, books, and computers. However, their utility has expanded significantly over the years.
- Qualified education expenses (for more, see the US News Article from 2021):
- Traditional 4-year college costs, 2-year colleges, graduate schools, and trade schools
- Books and computers
- Here's a significant development: off-campus housing and rentals are now qualified up to the cost of room and board on campus, along with food expenses
- K-12 Education: The Tax Cuts and Jobs Act (TCJA, 2018) expanded the use of 529 plans to include covering up to $10,000 per student in tuition for public, private, or religious elementary or secondary schools.
- Paying Off Student Loan Debt: The Secure Act 2.0 (2022) introduced a provision allowing individuals to use 529 funds to pay off up to $10,000 in student loan debt.
- Funding Roth IRAs: Yes, you read that correctly! Perhaps the most exciting development is the ability to transfer $35,000 (total) from a 529 account to a Roth IRA belonging to the 529's beneficiary. This can serve as an "escape hatch" option to fund a Roth IRA thanks to an update to the Secure Act 2.0 which will go into effect in 2024.
- To execute this transfer, the 529 account must have been open for at least 15 years.
- Only funds that have been in the 529 for at least 5 years are eligible for the transfer.
- The transfer must be a direct conversion from one institution to another.
- The annual Roth IRA contribution limit and eligible earnings will apply, but there are no income limits.
Maximizing the 5291. A “poor man’s Dynasty Trust”: 2. For those with the means, opening a 529 account today with a $15,000 contribution can potentially grow to $35,000 in fifteen years, assuming a growth rate of 7%. This can be a smart strategy for wealthy families to fund Roth IRAs for their children or grandchildren. 3. Personal Roth IRA: 4. Consider opening a 529 account for yourself when you're younger and have fewer expenses. You can be both the owner and beneficiary. 5. In 15 years, when you might have more expenses and a higher income, you can use the funds in the 529 account to "contribute" to your Roth IRA.
Leftover 529sIf you find yourself with leftover funds in your 529 account, you have options. You can use the money for yourself, pass it on to another beneficiary, or withdraw the money. If you choose to withdraw funds, you'll typically pay taxes on the earnings, plus a 10% penalty on those earnings.
529 accounts have evolved into a versatile financial planning tool that goes beyond college savings. They now offer flexibility for covering various educational expenses, paying off student loan debt, and even funding Roth IRAs. Understanding these expanded uses can help you make the most of your 529 account and secure a brighter financial future for yourself and your loved ones.
In today's fast-paced world, many of us find ourselves living life on autopilot, following a checklist of societal expectations without truly examining what brings us fulfillment and joy. The recent trend of prioritizing external achievements over internal well-being is leaving many feeling drained and disconnected from their true desires. In this week’s episode, I chat with Registered Life Planner Andrea Miller to explore the importance of paying attention to what energizes you and how it can lead to a more fulfilling life.
Checking the Block
It's easy to fall into the trap of the "checklist mentality." We set goals for ourselves: get the job, earn the salary, buy the house, find the perfect partner, have kids, and acquire material possessions like cars, houses, vacations, etc. While these goals are not inherently wrong, they often prioritize external achievements over internal happiness and well-being.
This check-the-block approach can leave us feeling unfulfilled and disconnected from our true selves. It's essential to recognize that life is more than a series of boxes to tick off; it's about finding meaning, purpose, and joy in each moment.
Pay Attention - Don’t Be Asleep at the Wheel
In a world where we're bombarded with distractions and demands on our time, it's crucial to pay attention to where we're directing our energy and focus. Often, we give away our time and attention without realizing it, leaving us feeling like we're "asleep at the wheel."
Our brains are wired to protect us, and sometimes they create narratives and beliefs that push us to chase external accomplishments, thinking they will keep us safe. To break free from this pattern, we must become more aware of our thought patterns and redirect our attention to what truly matters.
Get into The Flow: Attention, Emotion, Behavior, Results
Understanding the flow of attention, emotion, behavior, and results can help us gain clarity and make positive changes in our lives. Work from the top, down:
- Pay Attention: What we focus on at the top of the triangle determines our entire life experience. Pay attention to your thoughts, beliefs, and where you direct your energy.
- Identify Emotion: Your attention influences your emotions. Are you feeling energized and joyful, or drained and frustrated? These emotions are often linked to where you're placing your focus.
- Tune in to your behaviors: Are you asleep at the wheel? Emotions drive behavior. Are your actions aligned with your true desires and values, or are you simply reacting to external pressures and expectations?
- Check your results: Your behavior leads to outcomes. Are you achieving the results you desire in life, or do you feel stuck and unfulfilled?
To begin your journey...
Spending decisions can be emotional events. It can feel amazing to buy yourself that Bentley you’ve always wanted (one can dream), or vexatious to spend thousands repointing your crumbling chimney.
Join Matt Robison and I this week as we discuss whether paying down your mortgage is a good decision. Spoiler alert, when it comes to putting extra cash into your mortgage, why you shouldn’t is equally as compelling as why you should.
By the numbers, it almost always makes sense to put extra cash into a high yield savings account (earning 5%, generally speaking) or the market (returns of 10% or more on average, over the long-term). Why? Because the returns you receive are greater than the interest you save based on your mortgage’s rate.
But numbers aren’t everything. There are actually four ways to think about paying down your mortgage:
- Strictly Math - What can you earn on the extra money you would put toward your mortgage vs. what you would save in interest? For example, if you have an extra $1k to put toward something, investing it in a Money Market Fund might earn you, let’s say, $50 (with a 5% return). If you put it toward your mortgage, which is charging 3% interest, you save $30. Numbers make sense.
- Can’t Sleep at Night - “We own our house without a mortgage which is the worst financial decision we’ve ever made but the best money decision we’ve ever made…the one thing that has given us the level of independence and autonomy” - Morgan Housel, The Psychology of Money We are human. Anxieties are a part of life. Many people feel the weight of a mortgage as an anvil sitting on their shoulders. There is no discounting of emotions. Sometimes it just feels better to pay the mortgage down.
- Relationship to Money - Our formative years made a huge impact on how we feel about money. Maybe you grew up with the mantra “debt is bad.” Or “owning your house is the truest sign of wealth.” Your relationship to money certainly plays a part in your decision to pay down your mortgage.
- Life Event Planning - This model combines the three above. If you have a 30-year mortgage after refinancing to take advantage of those super low interest rates from a few years ago, you might be thinking “but I will retire in 15 years, I don’t want a mortgage payment then!” Planning your payoff date to coincide with a particular life event can be a great way to align your mind with your wallet.
How your mortgage makes you feel can be as important as its impact on your financial health. Tune in to hear more!
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
Ah, estate planning. Such a fun exercise. No one wants to think about the end, but we will all smile, so we might as well plan for it. In this week's podcast, join Matt Robison and I as we explore the importance of planning for your golden years, the ones filled with activity, those that slow down, and even the ones where you may need extra care.
In particular, we discuss:
- The spending smile
- Realistic goal planning
- Reframing your perspective from what you have to do to what you get to do
Don't let the icy grips of death scare you. Instead, view retirement planning as an opportunity, not an obligation. By thinking ahead and preparing now, you empower yourself to make the most of your time. Embrace change, seize the present, and shape a future that's not just secure but also filled with the adventures and experiences you've always dreamed of.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
This week, Matt Robison and I discuss the concept of being aggressive in your investment strategy, especially when you have time on your side.
Over a 40-year period, historical data shows that investing $10,000 in the U.S. stock market could grow to an impressive $650,000, assuming an average annual return of 11%. Even in the worst-case scenario over the past century, where returns were just under 9%, that $10,000 investment would still grow to a substantial $300,000.
In contrast, conservative investments like bonds would only see your initial $10k grow to around $50k over the same time frame. This stark contrast illustrates the potential rewards of being more aggressive with your investments.
But, what about Target Date Funds?
Many people rely on target date funds to simplify their investment decisions. These funds automatically adjust your asset allocation based on your expected retirement date. While target date funds are a solid starting point, they tend to include up to 10% bond allocations even when you have decades until retirement.
But, what if the stock market tanks?
One of the main reasons people shy away from aggressive investing is loss aversion, a psychological bias that makes us fear losses more than we desire gains. It's a natural instinct, but it can hinder your financial progress if you're overly cautious.
To overcome this bias, it's essential to evaluate your investments rationally. Consider the worst-case scenario when it came to that $10k investment discussed earlier. Even at the lowest returns, it is still almost 83% more than the return on bonds.
In summary, being aggressive with your long-term investments can significantly enhance your financial success. While caution has its place, don't let fear hold you back from embracing an aggressive investment strategy. Consider your long-term goals, evaluate your risk tolerance, and explore opportunities for higher returns. With the right approach, you can harness the power of aggressive investing to secure a brighter financial future.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
Inflation has a way of eroding the purchasing power of our money over time, making it essential to plan smartly to ensure financial security. In this episode, Matt Robison and I delve into the intricacies of managing finances in the face of rising inflation. Most notably, we talk about the importance of aligning investment strategies with specific timeframes to make the most of your assets.
What does time have to do with investments? Quite a bit, actually. We are currently in a period in which our savings are generating some income. We are seeing a return on CDs, bonds, and even checking and savings accounts. You might find yourself in a situation where you have some extra cash (yay!) but don’t know what to do with it. The most effective financial planning requires aligning your investment choices with your anticipated expenses.
Consider the following:
- Short-Term Needs: Emergency Savings and Upcoming Expenses
- Maintain an accessible emergency fund (Cash, CDs or Money Market Funds) for unforeseen financial setbacks.
- Allocate cash for immediate needs or short-term expenses like a down payment on a house or a new car and keep those funds in appropriate safe options like cash, CDs, individual bonds or Money Market Funds.
- Medium-Term Goals: Two to Five Years
- Consider bonds and bond funds as a way to preserve capital and earn moderate returns.
- Evaluate investment options to counteract the effects of inflation on your money by getting some interest payments plus potential upside returns.
- Long-Term Investment: Over a Decade or More
- Stocks are the wisest choice for long-term growth.
- Companies adjust prices to account for inflation, offering an effective hedge against its impact.
- Real estate investments also present opportunities for long-term financial growth.
Inflation can indeed be a drag on financial stability, but with careful planning, it can also serve as a catalyst for creating a resilient investment strategy. By understanding the relationship between timeframes and investment options, you can take steps to navigate inflation's impact on your finances.
Ever wonder what’s in your index fund? Similar to reading labels in a grocery store, you are likely to find things that you either don’t recognize (erythorbic acid in your frozen blueberries??) or are surprised to find (cane sugar in jarred pasta sauce??). It would serve you well to delve deeper into the components of your investment vehicles, particularly index funds, to avoid potential pitfalls and misconceptions.
Join Matt Robison and I this week as we discuss the various labels you should be paying attention to in the stock market. One of the first label mishaps is not knowing the difference between mutual funds and exchange-traded funds (ETFs). These investment wrappers may contain similar assets but have distinct characteristics such as tax treatment and use in investment strategies.
In case you aren’t completely confused yet, let’s jump into another sticky subject that even has Wall Street scratching its head. You’ve likely explored the concept of value and growth companies, which are commonly used labels to categorize stocks. Growth companies are expected to expand and generate higher future profits, while value companies tend to have stable earnings and lower growth prospects. Understanding these distinctions when choosing investments is key as different funds may focus on either value or growth stocks.
Speaking of funds and Wall Street’s “whoops,” a popular value index fund, the iShares S&P 500 Value ETF (ticker IVE) includes Microsoft which is typically a growth company. Here is where knowing the ingredients of the fund is crucial.
While it may seem laborious, it is essential to gain insight into the underlying assets and strategies employed by the fund. This knowledge enables you to make informed decisions based on your preferences and risk tolerance.
Stick to the Basics
Would you prefer to avoid the intricacies of analyzing individual funds altogether? You would do well to stick to three broad categories of funds:
- Total US stock market
- Total international market
- Total bond market
By investing in these diversified options, you can bypass the need to decipher specific ingredients and still achieve a well-rounded portfolio. (hint: use low-cost index funds that track the above)
In the world of investing,...
Join Matt Robison and I this week as we explore the idea that our individual lives may not hold significant meaning in the grand scheme of things. Don’t get disheartened, embracing the notion that your life doesn’t matter can actually be a fulfilling and liberating approach to life.
By acknowledging that our actions have minimal impact on the universe, we can prioritize our personal passions and goals.
Why is that prioritization important? Simply put, it's how happiness is derived. By embracing the idea that what we accumulate materially doesn’t define us, we can experience a sense of liberation and contentment.
What does this have to do with finance? Well, until you understand what brings you true joy and fulfillment, how can you possibly know how to prioritize your spending and saving?
Our lives are ultimately finite, and the only resource we can truly control is our time.
Focusing on experiences and connections rather than material possessions can help align your financial goals which leads to happiness.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
In this week's episode Matt Robison and I delve into the realm of finances within marriage and present seven rules that can help couples achieve financial harmony. Whether you're young and just starting out or have been together for a while, implementing these rules can save you from countless disagreements and stress. Here’s our advice:
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Start young: One of the keys to financial success in marriage is starting early. By setting parameters and discussing financial goals from the beginning, couples can prevent misunderstandings and conflicts down the road. However, it's never too late to start. Remember, the only better time to start than yesterday is today.
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Work as a team on the budget: A budget is not a restrictive tool; instead, it offers couples more freedom. Without a budget, every dollar spent becomes a potential source of conflict. By working together as a team and creating a budget, couples can align their values and priorities, ensuring financial decisions are made collectively.
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Budget buy-in: Creating a budget empowers you to spend your money wisely. It allows you to allocate funds towards your joint goals, such as retirement, education, or a dream vacation, while also providing the flexibility to spend on individual wants. By defining spending limits and priorities, couples can enjoy the freedom of managing their finances effectively.
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Always pay yourself first: To ensure your long-term financial security, it's important to prioritize saving. Set up automatic transfers that allocate a portion of your income towards joint goals, such as retirement or an emergency fund, before any other expenses. By making saving a priority, you invest in your shared future and protect yourselves from financial uncertainties.
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Pick a number: Mutual agreement on spending limits can prevent impulsive purchases and financial conflicts. Agree upon a threshold, such as a maximum spending amount, beyond which you consult each other before making a purchase. This approach fosters trust, respect, and shared responsibility for financial decisions.
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Separate needs from wants: By evaluating the true impact of a purchase on long-term happiness, couples can avoid impulsive buying and focus on what truly matters. Consider whether a purchase will bring joy not just in the short term, but also in the months and years ahead.
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Enjoy a frivolous slice: While it's essential to prioritize savings and responsible spending, it's equally important to indulge in life's pleasures. Treat yourselves occasionally and celebrate your achievements. Embrace the philosophy of "Treat yo' self," as coined by Donna and Tom from Parks and Recreation, and savor the joy of something nice once in a while.
Bonus Rule: Do regular check-ins: As a bonus for our listeners, we present an eighth rule for financial marital bliss: regular check-ins. Avoid waiting for financial emergencies to address your financial situation. Instead, schedule periodic discussions to assess your overall financial picture, ensure alignment of goals, evaluate spending habits, and make adjustments as needed. By proactively communicating about finances, you can avoid unnecessary stress and foster a sense of financial security.
Achieving financial harmony in a marriage is a journey that requires open communication, shared goals, and a commitment to responsible financial practices. By following these eight financial rules, couples can navigate the complexities of money management, prevent conflicts, and build a solid foundation for a prosperous future together. Join us for this week's podcast episode and discover how implementing these rules can enhance your marital bliss while keeping financial burdens at bay.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at
“The rich have money. The wealthy have time. “ Tune in to learn how you might
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
In this podcast episode, we delve into the complexities of estate planning and provide valuable insights to help you make informed decisions when it comes to choosing a trustee. Whether you're considering a friend, family member, or professional as your trustee, learn how to navigate the process and ensure the smooth administration of your assets.
When deciding upon a trustee to oversee the management of your financial and logistical life plans, it is important to think about the following four W’s:
Who: Choosing a trustee - This is almost like choosing a life partner. The person you choose to be trustee of your estate is someone you intend to have a long-term relationship with. As such, consider the following:
- Does this person want the job and everything that comes along with it? It’s a long-term commitment so be sure they are willing and available to fulfill trustee responsibilities.
- Is this person qualified? Be sure to assess the potential trustee's financial know-how and ability to handle complex duties such as investing trust funds and managing various assets.
What: Co-Trusteeship- Sometimes two heads are better than one. If one of your trustees lacks experience, you might consider adding a co-trustee to combine expertise and relationship dynamics. Some advantages of co-trustees include:
- Achieving checks and balances for proper administration and accountability.
- The role of an impartial trustee or trust protector in overseeing trustee actions.
Why: Professional Trustees - Choosing a professional trustee can aid in ensuring continuity and harmony. Why consider a professional?:
- The long-term nature of estate planning lends itself to professional management since a company can outlive any humans assigned to the task.
- Conflicts of interest are commonplace among surviving spouses and ultimate beneficiaries. This can be alleviated by a professional, unbiased third party handling distributions.
How: Selecting the Right Professional Trustee - There are many factors to consider when evaluating professional trustees such as:
- There are different options for different sized trusts. Look at banks for large trusts and trust companies for mid-sized estates.
- Cost will inevitably be a concern. Be sure to appraise administrative and investment fees and keep in mind that this expense will be incurred posthumously.
- Customer service should also be examined. Choose a firm with a solid reputation, experience, accessibility, responsiveness and ability to collaborate with beneficiaries.
Don't miss this informative episode, offering actionable advice on selecting the ideal trustee for your estate. Subscribe now to our podcast and embark on your journey to successful estate planning.
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Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
Managing your finances can be a challenging task, especially when it comes to making sound investment decisions and navigating the complexities of taxes. In this podcast, Matt Robison and I tackle some common financial misunderstandings and provide insights into how you can avoid them.
1) Accounts and Investments are not one in the same
You might have a backpack for hiking, but it's what’s inside that counts. One prevalent misconception is that the type of account you have determines the success of your investments. However, the truth is that the account is merely a vehicle for holding investments and has no direct impact on their performance. It is crucial to recognize that the key to growing your wealth lies in investing wisely, rather than solely relying on the type of account.
2) Index Funds: They aren’t all the ‘safe’ option
Index funds are often considered a reliable investment option due to their built-in diversification and lower expenses compared to actively managed funds. While they can provide stability and consistent returns over the long term, it's essential to remember that all investments carry some degree of risk. Educate yourself on market dynamics and timing to make informed decisions.
3) Make sure you are truly diversified
You may eat at a different restaurant every night, but if they are McDonalds, Burger King and Wendy’s, then you aren’t really eating a diverse diet. The same holds true for investments. Diversifying your portfolio across different asset classes and industries can help mitigate risk and potentially enhance returns.
4) Roth IRA Contributions: Know the Income Limits
Contributing to a Roth IRA can be an excellent strategy for retirement savings, as it offers tax-free growth potential. However, it's important to be aware of the income limits. For single individuals, the maximum income threshold is $138,000, and for married couples filing jointly, it is $218,000. Understanding these limits ensures you avoid any potential tax penalties.
5) Backdoor Roth IRA - Get Professional Help
The backdoor Roth IRA strategy involves converting traditional IRA contributions into a Roth IRA to take advantage of potential tax benefits. However, executing this strategy correctly can be complicated. Stay in your lane.
6) Taxation on Bonuses: It’s not as clear cut as it seems
Receiving a bonus at work is always a cause for celebration. However, it's crucial to understand the tax implications. While tax is paid when the bonus is received, that money is also considered income so you will owe the difference between what you paid upon receipt and your income tax obligations at the end of the year.
7) DIY is not for taxes at this stage in your life
While filing your taxes yourself may have sufficed in simpler financial times, as your wealth and financial situation grow, so does the complexity of your tax obligations. Engaging the services of a certified public accountant (CPA) or a qualified tax professional can help ensure accurate reporting, maximize deductions, and minimize the risk of errors that could trigger an audit.
8) Pay Your Taxes - Filing an extension does not apply to paying your obligation
Extending the deadline to file your tax return does not mean you can delay your tax payment. Regardless of when you file your taxes, failing to pay your tax liability by April 15 can result in late-payment penalties and accrued interest on the amount owed. Make sure to budget for your tax obligations and submit your payment promptly.
Conclusion:
Avoiding financial misunderstandings requires a proactive approach and a commitment to ongoing education. By recognizing that investment success depends on wise decision-making rather than the type of...
1) How can you beat the stock market?
Low-cost index funds can help you beat the stock market by providing diversification and low fees. Index funds are designed to replicate the performance of a particular index, such as the S&P 500, by investing in all the stocks in that index. This means you get exposure to the market as a whole, which can help reduce risk and increase returns over the long term.
In addition, low-cost index funds have lower fees than actively managed funds, which means you get to keep more of your money. Over time, these fees can add up to significant savings, which can boost your returns and help you achieve your financial goals. So, if you want to beat the stock market, low-cost index funds are a great way to start!
2) Does this approach really beat individual investors?
Low-cost index funds can outperform individual investors by providing broad exposure to the market and minimizing the impact of emotional decision-making.
Individual investors may make decisions based on emotions like fear or greed, which can lead them to buy and sell stocks at the wrong time and result in lower returns. On the other hand, low-cost index funds follow a predetermined strategy that removes emotional biases and is based on market trends and data. They also offer broad diversification, which minimizes the risk of putting all your eggs in one basket.
Additionally, low-cost index funds have lower fees than actively managed funds, which means you get to keep more of your money. Over time, these savings can add up to a significant advantage over individual investors who are paying higher fees for actively managed funds.
Overall, low-cost index funds are a great option for investors who want to beat the market without taking on the risk and emotional biases associated with individual stock picking.
3) Still want to try your hand at individually beating the market? Here’s how:
If you are looking to beat the market, there is no one-size-fits-all strategy that will work for everyone. That being said, there are some general principles that many successful investors follow.
One strategy is to focus on value investing, which involves looking for stocks that are undervalued by the market. This requires doing your own research and analysis to identify companies with strong fundamentals and good growth potential that are currently trading at a discount to their intrinsic value.
Another strategy is to focus on growth investing, which involves looking for companies that are poised for above-average growth. This often involves investing in innovative companies that are disrupting their industries or creating new markets.
A third strategy is to use a momentum-based approach, which involves investing in stocks that have been performing well in recent months or years. This approach relies on the idea that stocks that are doing well will continue to do well in the future.
Ultimately, the best strategy will depend on your individual goals, risk tolerance, and investment philosophy. It's important to do your own research and consult with a financial advisor before making any investment decisions.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
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I’ve talked about Health Savings Accounts (HSA’s) in the past but it was time for Matt Robison and I to revisit one of my favorite retirement accounts. You read that correctly, HSA’s are great vehicles for retirement savings. Here’s the four W’s:
- What: What is a Health Savings account? It is an employee benefit intended to offset health care costs of high deductible insurance plans. Once opened, employees and employers can contribute to this account (more on this below). The money can be used now to pay for out of pocket medical expenses such as co-pays, prescriptions and even certain over-the-counter items such as sunscreen OR it can be saved to pay for medical expenses incurred in the future and to reimburse for expenses paid during the eligible period.
- Why: Why open an HSA? It’s simple: Contributions made to the account are tax free. Eligible withdrawals are tax free. And all money earned in the account incurs no tax burden. That is the triple tax benefit!
- How: How do you open an HSA? Have a chat with your company’s HR department. Evaluate your options. Choosing an insurance plan for your family that works for your current needs is the priority. If your employer offers a high deductible plan with an HSA and you have the means to cover your health care expenses, open the account. Contribute the maximum per year (often employers will contribute to these accounts as well so be sure to take advantage of FREE MONEY). Invest the money in the account in a low cost index fund. Let the money grow while you collect receipts for your eligible medical expenses. In 10-20 years, use all that cash to buy yourself a new knee or hip or reimburse yourself for all those kids’ urgent care bills and pay NOTHING to Uncle Sam.
- Who: Who can take advantage of this amazing benefit? Anyone working for an employer that offers an HSA. Check with your HR department today!
Tune in to hear more details about this savvy retirement savings strategy.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
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You don’t need a ninja suit and a broom to sneak through this clean back door and “steal” an extra $10k.
Many of my clients see the income limit for contributing to a Roth IRA ($150k/year single; $228k/year married) and give up on this wholly beneficial retirement account.
This year, the contribution limit is $6,500 for an individual. Since a Roth IRA grows tax free and is 100% yours, it is an account everyone should take advantage of. Unfortunately the income limits leave many to believe it is not an option. I am here to show you exactly how to get in that back door, cleanly.
- In order for this to work, you must not have money in any other IRA accounts: traditional, rollover, SEP or SIMPLE. This does not include other types of employer accounts like 401(k), 403(b), etc.
- Open a traditional IRA account and contribute $6,500 for 2023 (if under age 50 - $7,500 if older)
- Wait for a few weeks/months and open a Roth IRA and transfer the money from the traditional to the Roth account. Then invest your cash into a low cost index fund and get excited about your extra $10k of tax-savings.
That’s it. Clean and simple. So what are you waiting for?
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
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Do you want some help with money? Tune in to find out if your parents could potentially help you out!
Want to set your kids up for financial success? Well, you should have started 20 years ago. Before you start sputtering and scrambling, know that the next best time to do this is right now.
When time is on your side, you can afford to take on the risk of market volatility in order to reap large rewards (in the form of compounding interest) in the future. Want to know how?
It's as easy as 1,2,3…
- Open an account - You can do this at your current brokerage, via any robo-advisor or even with your own robo-advisor at M1 Finance. Name it “Kids Outer Space Fund” or anything you’d like to remind you it's for the next generation.
- Set up automatic monthly transfers to fund the account in whatever amount you deem appropriate
- Invest 100% of the money in the stock market. There is no specific goal here except to swing for the fences. Use a low cost index fund in the total US stock market or the small cap value. Why? Because historically speaking, over the course of 40 years, the total US Stock Market average return was 10%-11% and the Small Cap Value return was 15%-16%
That’t it. So what are you waiting for? Tune in to hear all the gory details or just go open your account today.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
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This week we are celebrating the 100th podcast by bringing you the top five most downloaded episodes. Join Matt Robison and I as we countdown the topics most listeners found helpful:
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Health Savings Accounts - How you can enjoy triple tax benefits by using my favorite all-time account
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ETF vs. Mutual Funds - This was a hot topic last year when many people were hit with an unexpected capital gains tax bill on their mutual funds. In this episode we talk about the difference between the two “wrappers,” which is best for your portfolio and the nuances and work-arounds to ensure you are getting the most from your money.
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SEP IRA vs. Solo 401K - Another head-to-head battle, this one for small businesses. Spoiler alert: Solo 401K is the way to go!
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Maximizing Employer Benefits - Want to learn how to launder your money, legally and with the most benefit to you? Listen up for a strategy to use more of your paycheck to take advantage of benefits such as after-tax 401K contributions and employee stock purchase plans while spending from your brokerage account to cover your usual monthly expenses.
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ROTH IRAs for Minors - It turns out my listeners really want to set their kids up for success. In this episode you will learn how to turn your young child’s $3k in earned income (chores) into $50 million for their retirement courtesy of compounding interest.
Didn’t see a topic that resonates with you? That’s ok. Check out my podcast page for 94 more episodes bringing you the knowledge you need to make the best decisions for your financial success.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
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A smart man learns from his mistakes, a wise man learns from the mistakes of others.
Many of my clients are in the tech space and thus affected (at least emotionally) by SVB’s failure in early March. On this week’s podcast I will give you the wisdom gleaned from the downfall of the bank that was not too big to fail.
I break it down into three parts:
- What does the collapse of SVB mean for me?
- First, single stocks are very risky. Use low cost index funds to reduce the risk of having all your eggs in one basket.
- Second, go government. Don’t leave your cash sitting in a bank. Invest the cash you don’t use on the regular in a government money market fund. Why? Because it is fully backed by the United States Treasury.
- Lasty, be aware of who you are doing business with. Who is the producer of the financial products you use? Are they credible? What risk is associated with their brand?
- Why did SVB fail?
Banks are a business. They offer products to consumers, in the form of accounts and returns. SVB used its clients' deposits to invest in other businesses and the market at large, resulting in profits for both the bank and its depositors. Until those investments took a dive. Suddenly, clients want their money back but the bank doesn’t have it to return.
- Long-term bonds: The Golden Egg
When you buy a bond you get two things over a set period of time: an interest payment each year and the return of your principal at the end of the time period. So, here is an example of how bonds lose value:
- Say that you buy a 10-year golden egg for $10k that pays you $100 per year in interest for 10 years, then you get your $10k back.
- Three years later, the government raises interest rates, and a new platinum egg is released. That egg will pay you $400 in interest over ten years. Suddenly your golden egg is now only worth $9k because everyone would rather have the platinum egg.
This is what happened to the 2019 10-year US Bond that SVB bought 3 years ago. It is still paying 1% ($100 per year) but is only worth $9k today. So, if SVB is forced to sell that bond today to pay back a customer, it only has $9k to give back to the customer!
Tune in to hear more about the lessons that should be learned from SVB’s collapse. And if you were affected by the bank’s demise and have questions or just want to chat, reach out!
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
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Many parents want to set their kids up for success and support them on their life journey. With the memory of establishing 529’s at the forefront, the thought of IRA’s and Roths can be overwhelming. Don’t get caught in the weeds.
Join Matt and I this week to learn how you can take the 5-minute approach to giving a small, but meaningful, boost to your kids. The bottom line is: don’t over-complicate the saving.
- Open an additional brokerage account wherever you do your investing.
- Name the account something flashy like “For the Kids” or “Kids’ Savings.”
- Auto-transfer $20/$50 (whatever amount you want) to the account monthly.
- Let it grow (next week I’ll tell you how to invest it).
This is a great way to give a little extra (if that’s your thing) toward college, a down payment on a house, backpacking in Europe… or something that will make a big difference to a young person.
The account is in your name so there are no additional tax ramifications or extra hoops to jump through (vs. setting up IRA’s in your child’s name). Keeping it simple makes it easy to give a potentially life changing gift to your kids in the future.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
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Listen to this week's podcast on if you should finance your car today or in the future.
Congress’ passing of the Secure 2.0 Act at the end of 2022 provides savvy planners with many new ways to benefit from retirement savings.
Join Matt Robison and I this week as I walk through some of the changes and sprint through others to give you an overview of how this monumental piece of legislation impacts your bottom line.
- Required Minimum Distribution (RMD) age changes - If you were born after 1960, you don’t need to worry about that until you are 75 (it used to be 70.5, this year it changes to 72 and in the next couple of years it will reach 75. Not something you need to worry about now, but it is a benefit.)
- ROTH 401k Employer Contributions - Without getting into the weeds of the laws, the big change in the Secure Act 2.0 allows employers to contribute to an employees ROTH 401k as opposed to being restricted to only matching funds in a traditional 401K account. This strategy requires employees to pay the tax on the match up front, and allows that employer contribution to grow tax-free forever which could add up to a lot of money.
- 529 to Roth IRA - You can now do a one-time rollover of “extra” 529 money into your Roth IRA. Plenty of caveats abound, but it’s a great new use of found money.
- Honorable Mentions to be aware of in the coming months/years:
a. 401k contributions and catch-ups are increasing. As you're planning your 401K contributions, be aware of the 2023 limits, they will be increasing over time.
b. Starter 401ks for small businesses will be getting easier to implement.
c. Student loan payments often keep people from being able to contribute to a 401k. The new law allows matching employer contributions to the 401K for folks paying down student debt.
d. Auto enrollment for 401Ks has been expanded.
The bottom line is there are no changes that you need to make today but be aware of the Secure Act 2.0 in order to get the most out of your retirement plan.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
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January’s over and I’d be willing to bet that if you bothered to make a resolution, you probably already broke it, am I right?
Resolving to make some significant change in your life can feel overwhelming, not to mention is often unsustainable. Planning to lose weight by cutting out sugar? How long did that last? Vowing to save more money but then your power went out for days, pipes froze and you fulfilled the plumber's savings resolution instead?
There is an old adage about eating an elephant, and how the only way to accomplish the monumental task is one bite at a time. That’s where my one thing comes into play.
Think about the last time you felt great in your job. Or a moment with family that made a lasting positive impression. Or a financial decision that led to a small (or large) success. Break those moments down into feelings and actions. What parts of the moment, specifically, made you feel happy? Can you replicate any of those small actions that led to happiness? For instance, let’s say a funny car ride with your kids was a highlight of your recent time spent with them. What were you laughing about? Why was everyone in a good mood? Did someone win a sports game? Had you just wrapped up a work project freeing your mind for some family time? How can you recreate that moment in small ways? Is there one thing you can do to help make funny car rides a more regular thing? It could be something as simple as having silly trivia websites bookmarked on your phone or grabbing everyone a treat from a coffee shop before your journey.
Tune in to learn more about how one thing can make a momentous improvement in your life this year.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
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People make financial decisions for a plethora of reasons. While we may understand that it makes more sense, financially, to invest extra cash in the market, sometimes pulling the trigger on a lump sum can lead to anxiety and regret.
So how can you feel better about making that investment? Using a strategy called dollar cost averaging (DCA). Let’s say you have $10k in cash and want to invest but you’re feeling skittish based on the current state of the market. Mathematically, it makes the most sense to go ahead and put all that money right into a low cost index fund but math doesn’t help everyone sleep at night. If you know that watching the market will create stress for you, you can invest that $10k at $1k per month over the next year.
What are the pros to this strategy? First, if you put $1k in and the market goes up, you make money and you are happy. If it goes down, you now get to invest the next $1k while the market is on sale (i.e. the cost is down). It is a win-win, emotionally.
The best way to ensure your financial future is to make sound decisions that feel good. Listen to this week’s podcast to learn more about DCA and whether it is right for your portfolio management.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
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While college tuition is a common financial planning line item amongst my clients, I also find myself having more and more conversations about private elementary and secondary education. Tune in this week as Matt Robison and I discuss what goes into choosing a private school vs public education. Spoiler alert: it’s not just a budget analysis!
Public vs. Private
- Location: Where you live is likely a deciding factor when choosing whether public or private schools are the right choice for your family
- Location: How far are you willing to drive?
- Location: How will your choice affect the relationships you’ve built in your community?
Funding Considerations
- Where will the tuition money come from?
- Should you use a 529 for early education?
Maybe your child needs more than the public school has to offer in the form of greater challenges or additional resources. Perhaps social and emotional factors weigh in on your decision to choose private over public schools. There are so many factors to consider and Matt and I understand that first-hand. Listen Up to hear more.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
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Have you struggled to talk to your kids about money? If so, you're not alone. Tune in to this weeks podcast to learn more about how you can teach your kids about spending and saving!
“Dad, how much money do you make?” “How much did our car cost?” “What did you pay for our house?” Kids rarely have filters. As uncomfortable as it can be to answer questions about human sexuality, we also feel a degree of that discomfort when it comes to answering their questions about money. This week, Matt Robison and I tackle this discussion in part I of a two part series on talking to kids about money. There is no one-size-fits-all, as you will hear in our exchange. But you will learn more about such topics as: When and how to include numbers in the answers to kids’ inquiries What brings your child joy based on how they choose to spend money Family values in spending Conveying your financial message without the underscore of fear or guilt
You’ve probably asked – or received, if you didn’t think to ask – your pediatrician for advice regarding talking to kids about their bodies. Gaining some tips from a financial professional as well as fellow parent (i.e. me) will hopefully help you pass on your wisdom in a productive and loving manner. Learn more about Mike and my services athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/) https://www.meetmikemorton.com/ (Are you ready to create your ideal lifestyle? Let’s Connect.)
Handing your W2’s and 1099’s to your preparer might be the extent of your participation when it comes to income taxes. Having a general understanding of how taxes work can give you a new perspective on just how much of a share is owed to Uncle Sam. Join Matt Robison and I this week as we discuss the basics of taxes. Get a crash course on: Income: Wages (W2 or other), interest income capital gains and qualified dividends Adjusted Gross Income (AGI): Wages - above-the-line deductions
What are above-the-line deductions?: Contributions from HSA, contributions to traditional IRA, student loan interest (unless your income is too high), self-Employment costs (such as health insurance, retirement plan contributions, 50% of self-employment taxes), alimony, and certain education expenses 3. Taxable Income = AGI - standard or itemized deductions Standard deduction ($12,950 Single, $25,900 Married, Filing Jointly (MFJ)
Itemized Deductions: State, Local, Other Taxes Mortgage and Investment Interest Expense Charitable Giving Medical Expenses (above a limit) More….
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Total Tax = Taxes on Taxable Income Taxes: Income tax, capital gains tax, AMT, NIIT, Medicare Surcharge, etc
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Payment or Refund: Total Tax - Credits - Taxes Paid Credits: Child Care Credit, Dependent Care Credit, Lifetime Learning Credit, etc Taxes Paid: From your paycheck or estimated tax payments
Well, that’s as simple as I can make it in just 5 steps! AGI (step 2) is very important because that number gives you your tax bracket. But did you know that we have marginal tax brackets? If you’re like a lot of people, you probably think marginal means that if you are MFJ and your AGI is $150,000, https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2022 (you owe 22% in Federal Income Taxes), ($33,000) right? WRONG! The “marginal” means that for the first $20,550, you owe 10% in taxes. [$2,055] You then owe 12% on the next $63,000 (the next tax bracket) [$7,560] Then, 22% on the next $66,450 (the bracket you are in) [$14,619] That’s a total of: $2,055+$7,560+$14,619 = $24,234. Not $30,000 ! It means a difference of almost $6,000 in your favor
So now you have your tax bill. Using the same example as above, you owe $24,234 in federal taxes. This is your total tax. Now come the credits (hopefully!). Credits differ from deductions in one major way, they are dollar for dollar. Deductions reduce your total tax bill by reducing your Taxable Income. Credits, on the other hand, come straight off your total tax bill. Some credits include the Child Tax Credit, Child & Dependent Care Credit, or the Lifetime Learning or American Opportunity Credit. Obviously credits are the way to go! Once you’ve deducted your credits, you then subtract any payments you’ve already made (withholdings or direct payments) and this will determine what you owe or are owed in the form of a refund. Learn more about Mike and my services athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/) https://www.meetmikemorton.com/ (Are you ready to create your ideal lifestyle? Let’s Connect.)
The government’s announcement and forthcoming forgiveness of student loan debt is a hot topic right now. Many people have asked me if they qualify, including a regular guest on this podcast, Matt Robison. Join us this week as we discuss the who, what and how’s of student loan forgiveness. What will you learn from this episode? Who is eligible: For the 2020 or 2021 tax years, individuals who make less than $125k in income, taxpayers who are married and file jointly and have less than $250k in income and current dependent college students using parents income with the above income eligibility qualify for student loan forgiveness. What is eligible: All federal college loans are eligible as long as they are issued no later than June 30th, 2022 to include Direct Subsidized and Unsubsidized Loans, Direct Grad PLUS Loan, Direct Parent PLUS Loan, Direct Consolidation Loans and Some Federal Family Education Loans (FFEL) are eligible (these loans were discontinued in 2010 but if there is a balance and the loan is not held commercially, it is eligible) How: The Department of Education says it’s going to work “quickly” and “efficiently” to set up a simple application process for borrowers to claim debt relief. As of publication, https://www.usatoday.com/story/money/personalfinance/2022/10/02/student-loan-forgiveness-applications-online-soon-how-apply/8136477001/ (USA Today) says the application will be available early this month. That said, nearly eight million borrowers may be eligible to receive relief without filing an application because their relevant income data is already available in the federal system. What if you have multiple loans? No matter how many types of federal loans that an individual possesses, there will only be one payment for either $10,000 or $20,000 or less if the loan balance is lower. $20,000? How do I qualify for that? Only borrowers with a Pell Grant will have $20k discharged, which represents about 60% of student borrowers. Not sure if that’s you? Sign into studentaid.gov and click “My Aid” to find out. Can I get a refund if I made payments during the time the loans were federally deferred? You bet! Contact your loan servicer and request a refund. Borrowers should obtain proof of loan payments that they made during the pandemic starting from March 13, 2020. Once you’ve got that, request a payment refund from your loan servicer.
Learn all this and more on this week’s podcast. It could save you $10,000 or more off your student loan debt. 🦎 Learn more about Mike and my services athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/) https://www.meetmikemorton.com/ (Are you ready to create your ideal lifestyle? Let’s Connect.)
You’ve surely heard of Warren Buffet, but have you ever heard of https://en.wikipedia.org/wiki/Bill_Miller_(investor) (Ben Miller)? He is a successful investor most known for his portfolio management strategy that beat the S&P 500 for 14 years straight (1991-2005). Miller attributes his achievement to the same concept that made Buffet his billions: its time, not timing. Join Matt Robison and I on this week’s podcast to learn why your odds of beating the market are slim. In particular, we explore: Market Efficiency - It all balances out in the end meaning there will be winners and losers. If you want to be a winner, there are fees that come with having an active fund manager looking for ways to get you that extra return, which usually leads to a net zero. Differentiation - Still want to try and outperform the market? You have to have a different strategy that is also better than everyone else’s.
There is a simple strategy to winning - don’t try. Invest in low cost index funds and let the market do its job and make you money. Don’t just take my word for it, check out https://www.oaktreecapital.com/docs/default-source/memos/i-beg-to-differ.pdf (this piece from Howard Marks.) Learn more about Mike and my services athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/) https://www.meetmikemorton.com/ (Are you ready to create your ideal lifestyle? Let’s Connect.)
Tune in to this week’s podcast where I give Matt Robison a quick and dirty lesson on all things HELOC and explain why I just paid mine off. Home Equity Lines of Credit (HELOC) are popular lending options for homeowners with a decent financial stake in their property. Earlier this year, https://www.lendingtree.com/home/mortgage/reasons-for-home-equity-study/ (it was estimated that 17% of Americans currently have a HELOC). And why not? With interest rates in the 2-3% range, a HELOC made a great option for getting cash to fund projects like home improvements. Did you spot the past tense? As federal interest rates rise, so do mortgage rates and, you guessed it, HELOC rates. https://www.cnet.com/personal-finance/mortgages/why-helocs-are-becoming-a-popular-way-to-unlock-home-equity/ (The average HELOC rate for borrowers is currently 6.51%). It made sense for me to take a HELOC a few years ago to cover some education expenses and home improvement projects. Rather than pulling money from my portfolio, where it was making roughly 8% in interest (https://mortonfinancialadvice.com/captivate-podcast/how-to-invest-in-the-current-market-environment/ (given historical context and what we know about the market)), I borrowed against the equity in my home since I was only paying 2% interest. Now, however, the interest rate has risen to the point where it no longer makes financial sense for me to keep that balance outstanding. Will I close the line of credit? Absolutely not. Why? Because if the market takes a downturn and I want to buy-in while everything is essentially “on sale,” I can use the HELOC to get cash easily. It can also be used as an emergency fund, should that become necessary. Learn more about Mike and my services athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/) https://www.meetmikemorton.com/ (Are you ready to create your ideal lifestyle? Let’s Connect.)
https://mortonfinancialadvice.com/captivate-podcast/thinking-about-education-savings/ (Last week’s episode) probably got you thinking about saving for education expenses. Starting early can make paying for an Ivy League college for your budding genius a reality. Now that we’ve established the ‘why’ of education savings, this week we talk about the ‘how’ to plan for education expenses. The bottom line is to use 529 plans. Sure, you could funnel money into your brokerage accounts and earmark it for education, but then you miss out on the substantial tax benefits that accompany 529 plans (similar to 401K’s and HSA’s). Any contributions you make to a 529 account grow tax-free, meaning that the capital gains interest in dividends you earn from growth is all tax free. Then, when you make withdrawals to spend on qualified education expenses, those are also tax-free. So once you put the money in, it's all tax free when you use it for qualified education expenses. Listen in to hear Matt Robison and I talk all about the in’s and out’s of 529’s. Beneficiary Flexibility: 529’s offer the option to change beneficiaries at any time. You can set up an account now for an unborn child, grandchild, niece, nephew, etc. If one beneficiary doesn’t need the funds or use the entire balance of the account, you can switch the account holder to another child or to yourself. Multiple Accounts: While 529’s provide flexibility in beneficiaries, you will still want to establish multiple plans for multiple children as they may overlap in spending plus there are contribution limits per beneficiary, per year. Do Your Homework: Each state offers a different 529 plan with different benefits. Start with your own state and begin by assessing tax deductions. If they aren’t great, look at other states’ plans for things like low cost funds, better investment options, account fees, portfolio management fees, program manager fees, state fees and the fund fees. Spoiler alert: Illinois and Utah have two of my favorite funds. Set-it-and-forget-it: Invest in low cost index funds or age based index funds during your initial set-up so that all future contributions go directly into that fund. Spending from your 529: Sure, you can spend money from the fund on things like tuition and fees, books, computer technology etc. But did you know you can also use it for Kindergarten through high school? Distributions are capped at $10,000 a year, but you can use the account as a pass through for tax deductions (put money in then take it right back out to pay for education). It can also be used for student loan repayment up to $10,000. Leftovers: There are many ways to spend the money in the 529 but if you find yourself with leftover funds, you can pass that on to related family members, or use it on yourself! Have no one left in your life with qualified education expenses? You can still access that money and use it on non-qualified expenses. You'll pay a 10% penalty on any of the growth and you'll have to pay taxes. No one I know has ever complained about extra money leftover.
Hopefully after last week’s episode and this week’s breakdown of 529’s, you are feeling more confident about your education savings plan. Learn more about Mike and my services athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/) https://www.meetmikemorton.com/ (Are you ready to create your ideal lifestyle? Let’s Connect.)
$50,000-$80,000 per year is what higher education expenses look like these days. https://educationdata.org/college-tuition-inflation-rate (The average cost of tuition at a public, 4-year university increased by 31.4% from 2010 to 2020.) The 2022-2023 academic year tuition and fee rates for some popular (and less popular) schools are as follows: https://www.bc.edu/bc-web/bcnews/campus-community/announcements/tuition-2022-2023.html (Boston College): $80,296 https://admission.ucla.edu/tuition-aid/tuition-fees (UCLA): $68,474 https://www.admissions.illinois.edu/invest/tuition (University of Illinois, Chicago): $59,556 https://morehouse.edu/admissions/tuition-and-fees/cost-of-attendance/ (Morehouse College in Atlanta, GA): $49,799 Let’s say your precocious 8-year old has her heart set on Boston College. By the time she is ready to attend, you are staring down the barrel of a $107,000+ yearly tuition bill. Don’t panic. Instead, join Matt Robison and I on this week’s podcast to learn the best strategies for saving for education expenses. We cover such topics as: Saving for education vs. retirement - no one will loan you money to retire but they will loan you money for education Sticker shock and the reality of what education will actually cost you after https://www.usnews.com/education/best-colleges/paying-for-college/articles/these-colleges-are-giving-tuition-discounts-this-fall (discounts) How to’s: Roth IRA’s 529’s Checking/Saving/Brokerage Accounts
The bottom line is this: saving something is better than saving nothing. Planning for future education, even if that means calculating the scary inflation rates, will help you plan for the worst case scenario before you are hit with the bill. Learn more about Mike and my services athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/) https://www.meetmikemorton.com/ (Are you ready to create your ideal lifestyle? Let’s Connect.)
Do you have or know a pre-teen or teenager who’d like to be as wealthy as Warren Buffet? It’s easy. Have them begin investing in the market RIGHT NOW. I’ve talked about this story before…https://www.cnbc.com/2020/09/08/billionaire-warren-buffett-most-overlooked-fact-about-how-he-got-so-rich.html (Warren Buffet )is worth about $80 billion dollars. $70 million of that was earned after he was eligible for Social Security benefits. The key to his success goes back eight decades. Yes, eighty years. Buffet began investing when he was 10-years old. And all that money he put away 80, 70, 60 years ago began compounding in his later years and led to him being one of the wealthiest men on earth. Join Matt Robison and I on this week’s podcast for some quick and easy ways to get your teenager invested now in order to secure their future wealth. We discuss these simple steps: Open a Roth IRA and deposit earned income Consider investing in the Total US Stock Market for set-it-and-forget-it fund management Add monetary gifts from grandparents, aunts, uncles, etc to the fund Sit back and watch your 40+ year return of 9.5%-12%
Investing 15-20 years earlier than their peers will pay off significantly in retirement. Learn from Buffet: start investing now for your pre-teen/teenager. Learn more about Mike and my services athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/) https://www.meetmikemorton.com/ (Are you ready to create your ideal lifestyle? Let’s Connect.)
This week’s podcast is the final installment of the series with Megan Russell from Marotta Wealth Management regarding healthy spending. We began the series by identifying a https://mortonfinancialadvice.com/captivate-podcast/focus-on-healthy-spending/ (core values budgeting) strategy. Then we moved on to https://mortonfinancialadvice.com/captivate-podcast/avoid-advertising/ (avoiding advertising) in order to curb impulse buying. Our episode on https://mortonfinancialadvice.com/captivate-podcast/how-to-spend-wait-a-week/ (waiting a week) before making larger purchases really resonated with our audience as a great way to spend less. The last episode centered around buying worth and getting the most from what you’ve already spent. Megan’s last theme for us involves some great advice for spending less. In particular, we talk about setting up spending alerts, performing an intentional review of those alerts, becoming conscious of your spending (especially the things that you are paying for automatically and on a regular basis), establishing a price book to make sure that frequent expenditures aren’t costing you more than they should, buying in bulk/wholesale/secondhand and finally returning things that don’t live up to your expectations. Let’s explore each tip in more detail: Spending Alerts Set up automatic alerts with your financial institution. This could be your credit card or bank card, whichever you most often use to pay for things. On your settings page, you can choose to be alerted to any purchase that exceeds $1. You read that correctly, one dollar. Worried about your inbox being inundated with spending alert emails? That’s the point. Intentional Review Every spending alert email you receive will have a dollar amount included. Now it’s time to review all of those purchases. Did you realize you have the habit of ordering lunch every Wednesday? Maybe you find that you frequent the local coffee shop multiple times every weekend. You get charged every month for Netflix, Disney+, ESPN and Hulu. Did you even know that your entertainment spending was so high? Conscious Spending Now it’s time to think about your core values. Does grabbing a coffee on the weekends bring you joy? If the answer is yes, great. Keep doing that! Is lunch on Wednesdays simply because Tuesday evenings is your carpool night for kids’ basketball? Maybe you can start prepping two lunches on Monday night. Do you really watch programs on all those streaming services? Enough to warrant the $1k price tag for a year’s worth of subscriptions? Price Book Now that you are conscious of your spending, are you sure it is consistent? Have you ever noticed that the same pack of diapers you buy every week is sometimes $12 and other times $18? You would if you kept a price book or use a free service like https://camelcamelcamel.com/ (camelcamelcamel) to track prices on Amazon. Next time those diapers are $12, buy more than one pack, which leads us to Megan’s next tip… Buy in Bulk This one is a well known way to spend less on items you use all the time that don’t have a short shelf life. Check the unit price on items. A bottle of 200 ibuprofen tablets might cost $15 and the bottle of 500 is $30 and you think “that’s double the price!” But the exact same pills will cost you $.09/each in the small bottle and $.06 in the larger container. Return Did you finally buy that headset you had your eye on? You waited a week, you watched the pricing, you did research beyond the ad you saw on social media and now it has arrived but it pinches your ear. Return it. It didn’t meet your expectations. Send it back, get your $75 refund and start over again. Don’t let the $75 collect dust next to your computer. Spending less is all about awareness. Use these tips to avoid that dreaded question “where did all my money go?” Learn more about Mike and my services athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect...
Technology is great. There are so many things people can do for themselves now that weren't possible in the past. For instance, setting up an investment portfolio used to require a broker. The real-time ticker for stock prices was only available on the trading room floor. Funds required management and careful oversight. Now, however, there are countless apps, websites and tools allowing individuals with little to no financial planning experience to set up a successful portfolio and then forget about it. “A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools.” - Douglas Adams, from The Hitchhiker's Guide to the Galaxy #5 So why hire a financial planner? Maybe you don’t, because the set it and forget it model works perfectly fine for you right now. However, the greatest value a financial planner can provide is helping you with all the things you didn’t know you wanted to know. What does that mean? Matt Robison and I discuss the value of a financial planner in this week’s podcast. In particular, we explore: The difference between Financial Planning and Wealth Management Building confidence in your path to financial success What is a fiduciary and how will the responsibilities of that title help you with your financial plan?
The bottom line is that a financial planner knows the right questions to ask in order to provide you with the best strategy to fulfill your individual wealth goals. Beginning with goal identification and working through all the steps that you need to build a comprehensive financial portfolio, a financial planner has the knowledge, expertise and network to insure your financial freedom. Learn more about Mike and my services athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/) https://www.meetmikemorton.com/ (Are you ready to create your ideal lifestyle? Let’s Connect.)
One of our most valuable assets is our time. How do you decide your allotments? If you find an empty space on your calendar, is your automatic response to fill it? I’ve spoken to a couple of clients recently who expressed their desire to have more unhurried time. What does that mean, exactly? That’s the driving conversation in this episode. Unhurried time can mean different things to different people but the underlying value of it comes down to a simple phrase: scheduled, unscheduled time. Imagine having two hours every Friday afternoon from 4:00-6:00pm. That time is scheduled as “free time.” What will you do with those two hours? Maybe you have a long to-do list and your goal for that time is to pick an item and get it done. Perhaps you want to spend more quality time with your kids so your goal is to do something together. Unhurried time is yours to do with as you please. There is no compulsion to get something specific accomplished. You aren’t scheduling two hours to get that bathroom re-grouted so your spouse stops needling you to complete the task. That’s not to say that during your unhurried time you can’t choose to get the grout job done. You aren’t scheduling a hike with your kids. But that’s not to say you can’t grab some granola and hit the trails when the time comes. Booking yourself some unbooked time is a great way to get the most value from your time. We live in a world in which capacity is almost always filled. Take Robert Moses’ construction of the NYC freeways, for example. He believed that by expanding the Long Island Expressway from three to four lanes would increase capacity by 33%. After years of construction and expense, the LIE went from three lanes of gridlock traffic, to four lanes of gridlock traffic. We are conditioned to fill to capacity. Our wallets, our homes, our time… Use your unhurried time to live in the moment. What do you need when the clock stops ticking? Learn more about Mike and my services athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/) https://www.meetmikemorton.com/ (Are you ready to create your ideal lifestyle? Let’s Connect.)
This week’s podcast is a continuation of the series with Megan Russell from Marotta Wealth Management regarding healthy spending. In past episodes we talked about https://mortonfinancialadvice.com/captivate-podcast/focus-on-healthy-spending/ (core values budgeting), https://mortonfinancialadvice.com/captivate-podcast/avoid-advertising/ (avoiding advertising) and https://mortonfinancialadvice.com/captivate-podcast/how-to-spend-wait-a-week/ (waiting a week) before making larger purchases. In this episode, Megan and I discuss ways to get the most value from the things you’ve already spent money to acquire. In particular, we talk about using what you already own, squeezing out the last bits of value from items that no longer bring you joy, taking care of the things that you buy in line with your core budgeting and finally, making all the strategies above a team effort for your family. First, we explore using what you already own. This is where the notion of good to the last drop, or in Megan’s case, sucking all the fun out of something (in a good way) comes into play. We’ve all found ourselves in a situation in which we need a particular item. Instead of buying said item, take a minute to think about two things: 1. Do you already own the item you need? 2. Could your need be fulfilled by something you already own? Have a pile of books on the floor? Do you have a bookshelf that can be cleared off? What about another piece of furniture you could stack the books on or store them inside? Don’t rush to buy something new when you might be able to get more value from something you already have lying in wait. If some of the things you own are no longer bringing you joy, consider if they are worth passing along to others that might find value in the items. Selling stuff that still has life left via garage sales, local social media avenues such as NextDoor or Facebook Marketplace, and even eBay can spread the wealth by giving you some money back on what you purchased. If the money isn’t worth the effort in some cases, pass the items along for free. Bringing someone else joy is just as valuable as recouping some cash on prior purchases. Next we explore the notion of taking care of what you own. This seems like common sense but all too often, tools are discarded in random places, toys are left out in the rain, shoes are left where the dog can chew on them… Get into the habit of keeping track of the things that you use most often that bring you joy. For instance, I use my woodworking shop when I have the time. I also love to run. Whenever I head into the workshop, I know where everything is because I have taken the time to organize my tools and keep my work area clean. I also keep a box where all my running accessories are stored. These two hobbies are part of my core values and it shows in the way I maintain my “stuff” for each. Getting kids to take care of what you own is another challenge. Megan gives great tips on creating scarcity and allowing kids to feel the pain of loss. If you have four soccer balls, it's not likely the kids will care if they kick one into the woods. They won’t chase after it knowing there are three more in the garage. What if you only have one soccer ball? They will need to keep track of it, put it away when they are finished playing otherwise they won’t have a ball next time they want to kick one around. Have an older child with expensive electronics? If something breaks, consider learning how to repair the item together. Lost their phone? Have them mow the lawn or shovel the driveway to earn back the money you spend to replace the item. The best way to get the most value from what you already own is to surround yourself with like-minded people. Buying into all these money saving tips as a family will help you be far more successful than trying to do it on your own. Share your knowledge from these podcasts with friends. Frugality is contagious. Learn more about Mike...
Most people have one mortgage, the rich have two. I get asked the question often: “I have extra cash, should I put it toward paying down my mortgage?” The short answer is sure, but no. Confused? Don’t be. The answer inevitably lies with your goals and feelings about money. Typically, we steer clear from emotions when making a financial plan but some decisions can be made with your peace of mind at the forefront of your decisions making. One of those financial forks in the road is where to put extra cash within your portfolio. Should you put “extra” money towards paying down your mortgage? There are two main avenues to consider when making this decision. First, does it make fiscal sense? That answer depends on a few factors: What is your current interest rate? If you have a low rate mortgage, as most people do right now, you are paying around 4% interest or less. Do you have additional debt with higher interest rates? These should be paid down first. How much time do you have? Are you nearing retirement? Still 20-30 years from the end of your career? This makes a difference. Do you have an emergency savings fund established and funded should you need to change jobs, move, etc.? Are you saving for retirement, education and other goals?
If you have a low interest mortgage, no debt with higher interest rates, are still far from retirement age, have an emergency fund and retirement savings, then you truly have extra cash. Congratulations! This is where the quote above, “most people have one mortgage, the rich have two” comes into play. Financial stability allows for the freedom of borrowing at a lower interest rate in order to invest at a higher rate of return. Let’s start by looking at some crude numbers to demonstrate the financial ramifications of real estate investment (in your home) vs. market investment: A house bought outright in 1995 for $73k and sold in 2015 for $460k made 6.3x return. In that same 20-year time, $1k invested in the stock market in 1995 yielded a 6.5x return.
A slight difference, until you factor in that the house cost money to maintain. There were taxes to pay, insurance, and upkeep. So was it really a 6.3x return? Very likely, not. Whereas, the money in the stock market just sat there, ignored for years and still managed to make 6.5x return. So the long-term math argument to invest in the market vs. paying down your mortgage is sound. That’s not to say it is the right decision. Here are a few reasons why paying down your mortgage could be an excellent choice for you: If you pay down your mortgage, you get a guaranteed return (whatever the rate of interest you are paying). You have flexibility. You can stop and start extra payments anytime you want (instead of waiting to pull cash out of brokerage accounts). It feels good. This one can’t be discounted. A lot of people sleep better at night knowing their money is going into something they eat, sleep and live in day-to-day.
What you choose to do with extra money is completely up to you, just don’t hold it in cash. Make your money work for you. Learn more about Mike and my services athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/) https://www.meetmikemorton.com/ (Are you ready to create your ideal lifestyle? Let’s Connect.)
If you Google “How much should I save for my retirement?” underneath all the advertisements for financial institutions you will get consistent results of “15% of your pre-tax income.” Great advice, but at what point in your life are you when you ask that question? Would the answer be the same if you are 25 years old or 50 years old? Obviously, the answer would vary greatly based on your age and how much savings you’ve managed to achieve. So, let’s do a quick breakdown. If you are 30 years old, you should have 1x your salary banked for retirement. This includes 401k’s, IRA’s, 403b’s, etc. (listen to my https://mortonfinancialadvice.com/captivate-podcast/which-account-do-i-use-first/ (Account Funding Priority) podcast for more on where the money should be invested). So, if you make $50k/year when you’re 30, you should have $50k in retirement savings. As you age, here are the multiples of your salary you should have saved: Age 35: 2x Age 40: 4x Age 45: 6x Age 50: 9x Age 55: 12x Age 60: 17x Age 65: 23x
Panicking because you just did some quick math and realized that if you are making $150k by the time you are 60, you should have $2.5 million saved? Relax, your money will be working hard for you at that point. You’ve heard of Warren Buffet, right? His net worth is over $102 billion. Did you know that 99.7% of his wealth was earned after his 52nd birthday? That’s because compounding works wonders for your retirement savings in those later years. Here’s how you can make sure you live comfortably in retirement and take advantage of compounding interest: First, look at what you’ve saved and check the age chart above to see if you are where you need to be. Start saving now. Just as Google suggested, put away 15% of your pre-tax income. Are you behind where you need to be? You have options: Save more - Put a higher amount into your retirement accounts than the recommended 15%. Spend less - Need help trimming the fat from your budget? Listen to https://mortonfinancialadvice.com/captivate-podcast/how-to-spend-wait-a-week/ (Wait a Week )for tips on not spending. Work longer - No one said you have to retire at 65. There are many benefits to delaying retirement, including significantly increased Social Security payments. Automate your savings so you live off what is left in your paycheck AFTER you’ve saved. Listen to my https://mortonfinancialadvice.com/captivate-podcast/set-up-automatic-savings/ (two-part series on automation).
It’s never too early or too late to begin planning for retirement (ok, it might be too late if you are already 65!). Check out the resources below for more information on saving for your future. https://www.marottaonmoney.com/how-much-should-i-have-saved-toward-retirement/ (https://www.marottaonmoney.com/how-much-should-i-have-saved-toward-retirement/) https://mortonfinancialadvice.com/captivate-podcast/which-account-do-i-use-first/ (https://mortonfinancialadvice.com/captivate-podcast/which-account-do-i-use-first/) https://mortonfinancialadvice.com/captivate-podcast/set-up-automatic-savings/ (https://mortonfinancialadvice.com/captivate-podcast/set-up-automatic-savings/) https://www.cnbc.com/2020/09/08/billionaire-warren-buffett-most-overlooked-fact-about-how-he-got-so-rich.html (https://www.cnbc.com/2020/09/08/billionaire-warren-buffett-most-overlooked-fact-about-how-he-got-so-rich.html)
Learn more about Mike and my services athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
With the market down 22%, we’re officially in a bear market. Is the pain causing you to make changes or re-evaluate your plan? Hopefully you already had a plan going into this week. But if not, use this opportunity to make necessary changes and also update your plan going forward. Know yourself and how you’re reacting. This bear market may be short or it could be long. It might go down further, or hover at this level. The past has shown a variety of types of markets - and you need to be ready for whatever is going to come next. Is your portfolio prepared? How about your spending? Your job? Make sure you exercise control over the things in your control - because the Bear itself is outside of your control. A few things to consider: Delay taking social security Stay in your job an extra year, or take a part-time job Continue to add to your savings + retirement accounts by buying stocks while they are on sale Adjust your spending to ensure your savings stay high or your portfolio lasts longer
Learn more about Mike and my services athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/) https://www.meetmikemorton.com/ (Are you ready to create your ideal lifestyle? Let’s Connect.)
In part two of our conversation regarding your time and its value, Matt and I discuss the concept of intentional attention. Your time is a limited resource. How often do you find yourself scrolling through your phone on social media, clicking on videos and generally winding up down a rabbit hole? Suddenly, you look up and three hours have passed. Probably more than you’d care to admit, right? You’re not alone. Forty seven percent of Americans identify as being addicted to their cell phones. So how do we quit the habit? Think about your time as currency. You are paying Facebook, Instagram, Twitter…whatever your guilty pleasures might be, with your time. That’s not all you’re spending. You are also paying them with your information which is fed to advertisers. Billions of dollars are spent and received keeping your eyeballs glued to your screen. How can you spend less? Be intentional. Organize your tech habits - make reading lists in your browser or folders in your email that you store articles or other materials you’d like to read at some point. Schedule “reading” time to go back and choose what you actually want to spend time reading. Set a curfew for your screens and put them away (out of sight, out of mind) during downtime. Make a schedule and stick to it. Give yourself a prescribed amount of time for scrolling, tweeting, reading…whatever it is you enjoy but set a timer and stick to it.
The overall question you should ask yourself is “am I getting value from this activity?” Or, in other words, is it worth your time? Be intentional with your attention.
How do you know if you have a problem? Are you forgetting things in your life? Crucial moments with your children is something you don't want to miss, because in a few years you will wish you had it back. What can you do? STOP, think about if this time on your phone is really benefitting you, or if it's just a time killer exercise. The chances are you don't need to be on your phone 24/7. You will struggle! Phones are addicting, you won't be perfect, but just realizing the time you are missing out on can change your entire perspective for the better. Accept your mistakes, learn from them, and move on! Learn more about Mike and my services athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
David is the founder and owner of The Parents Estate Planning Law Firm, PC. His practice focuses on estate planning, wealth transfer, and asset protection. He develops lifelong relationships with his clients, serving as a trusted advisor to them and to their families. Why is this important?
Plan ahead for your child if something bad were to happen to you. Don't leave your child in a pickle. What is the process like?
Learn about how David walks his clients through the process of estate planning comfortably. What are some actions that someone could take today?
Start today! As David mentions in the podcast, everything you did before today is in the past, focus on what you can control right now and in the future. Where can people connect with you?
https://parentsestateplanning.com (The Parents Estate Planning Law Firm)
https://www.marottaonmoney.com/staff/megan-russell/ (Megan Rusell) of https://www.marottaonmoney.com/ (Marotta on Money) joins me once again to discuss how to enjoy your wealth and stay wealthy at the same time! There are many items that we want, need, and enjoy purchasing. Almost exclusively none of these are absolutely necessary within a week - so do yourself a favor and utilize wish lists to hone your spending on those items that will truly bring you the most value. Most of what we purchase has fleeting utility. You really want something so you click buy. The money is gone and the enjoyment of the pursuit is fulfilled. However, that enjoyment fades quickly until we click buy again. Instead, try https://www.marottaonmoney.com/how-to-spend-wait-a-week/ (waiting a week) and if you still really want that item, then go for it. Other strategies for having the enjoyment AND keeping money in your pocket: https://www.marottaonmoney.com/how-to-spend-take-a-photo-instead/ (Take a picture instead). When traveling and you see a great item for yourself or a friend? Pull out your phone and snap a pic. You can afford anything but not everything. https://www.marottaonmoney.com/how-to-spend-learn-to-do-without/ (Learn to do without) (and what you want to live WITH) Use shared wish lists to create greater value for yourself and others. This allows better purchasing (more enjoyment!) for both buyer and receiver.
Why is this important? Feel CONFIDENT about your financial future. Decision fatigue on two levels:
Consistently remembering to save. Deciding what to purchase or what to do.
Make the decision once! Future flexibility!
What should you do? Decide how much to start with. Set up automatic transfers. Invest: You can do this every 3 or 6 months, or even once a year!
Why is this important? Feel CONFIDENT about your financial future. Decision fatigue on two levels:
Consistently remembering to save. Deciding what to purchase or what to do.
Make the decision once! Future flexibility!
What should you do? Decide how much to start with. Set up automatic transfers. Invest: You can do this every 3 or 6 months, or even once a year!
The stock market is off to a shaky start in 2022. Many are asking: What should I do with my portfolio? It’s important to have a plan for when the market goes up or goes down. A client recently asked, “What should we do with my portfolio and when will we do it?” Remember that market declines are normal: it goes down 10% every 2 years, on average. So it’s important to plan ahead and understand what to do and when to do it. Options for your plan include: Do Nothing. You can let your portfolio decline and ride the return on the other side. That’s a viable plan, as long as it’s an actual plan (not sticking your head in the sand!) Rebalance. You can purchase more stocks while they are on sale. Tax Loss Harvest. You can sell stocks or funds that have lost value to make lemonade out of lemons.
The important thing is to have a plan, write it down and stick to it. Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/) https://www.meetmikemorton.com/ (Are you ready to create your ideal lifestyle? Let’s Connect.)
It’s best to learn how to use money while in a safe environment: when you’re a kid. This is a lot better than trying later on when it really matters! Kids are natural learners, but we need to give them the space to explore their own desires and their environment; to try things out and fail and succeed. In this episode we discuss: Allowing freedom for kids to spend their own money Don’t couple chores with allowance: allow children to be a part of the family duties When and how to talk to teenagers about college expenses
Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
The average American is bombarded with advertisements throughout the day. Companies spend money on these ads because they work! To align your spending with what truly brings you happiness: make sure to avoid and understand advertising so that you don’t end up with too many things cluttering your home. First, avoid as much advertising as possible. Use ad blockers, skip commercials, call your credit card company to stop mailings, and unsubscribe from newsletters. This will help reduce the number of ads you see each day. Second, understand when you are being advertised and build awareness at the moment. The more you recognize an ad and interact with it, the more likely you are to avoid its traps. Advertisers know that you aren’t paying much attention - and so they prey on your subconscious and feelings. Be alert and interact with the ad in front of you and its power will quickly fade. https://www.marottaonmoney.com/marotta-family-saying-not-good-if-they-have-to-advertise-it/ (Is that great a product if you have to advertise it?) https://www.marottaonmoney.com/staff/megan-russell/ (Megan Rusell) of https://www.marottaonmoney.com/ (Marotta on Money) joins me once again! Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
Most people choose a career fairly randomly. I mean, maybe you had a high school counselor that helped you. Or you spent some time thinking about your major at college. But a job comes along and it’s like “Money? Let’s go!” Your human capital, or the amount of money that you make over your lifetime is one of the biggest factors in your financial success. (Hint: the other is your expenses). No matter where you are in your life journey, it’s worth thinking about that trajectory. How steep is the income potential in your current career? Can you pivot to another career that has a steeper path? What is the job that you really want after your next job? And how much did you think about your current work team and boss? Finding people that you enjoy working with and will invest in you makes a tremendous difference. Ask anyone who works with the best team: it’s a joy going to the office every day (or the zoom room ;) Matt and I discuss all these topics and more! Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
Today's topic is how to spend money. More specifically: How to spend money so that you maximize your happiness in life. Of course, we all want to live with more joy. In the companion article (https://www.marottaonmoney.com/core-values-budgeting-one-strategy-to-identify-budgeting-changes/ (Core Values Budgeting)) and today’s episode, Megan and Mike discuss how to actually do that. Remember that there is only ever spending: either now (expenses) or in the future (savings). These are the core of financial planning. Expenses are required to live with joy now and savings are required to meet your long-term goals. Every dollar you spend, you don't save. In this episode, we discuss an exercise that helps you understand what spending brings you the most joy. Cliff notes version: Write down every type of thing you or your family spends money on. Imagine that in one category you won’t be allowed to spend money ever again. Cross it off and number it with a 1. This is the first item to go. Repeat the process again and again with 2, 3, 4, etc. until you just can't cut anything. What is left is at the core of what supports your specific life and joy? Protect your core spending and be ruthless at cutting the rest.
"You can afford anything, just not everything."
Resources: https://www.marottaonmoney.com/crazy-rich-asians-series-what-we-can-learn-from-the-millionaire-lifestyle-of-astrid-leong/ (Crazy Rich Asians Series: What We Can Learn From The Millionaire Lifestyle of Astrid Leong) - One of the wealthiest women in Singapore shopping for groceries at the supermarket with super-saver coupons while trying to purchase art for over a hundred million dollars. https://www.marottaonmoney.com/how-to-spend-learn-to-do-without/ (How To Spend: Learn To Do Without) - You can either live rich or you can be rich. Almost no matter how much money you make each year, there is someone spending every penny of a salary five times as great and someone saving more than you on a salary half as much. It takes diligence to keep spending low and saving high. I heard it suggested once, that if you want to develop a rich mindset, put a $100 bill in your wallet, take out your credit cards, and then practice not spending it.
"I want you to spend like you are the richest person in the world, a person who has so much happiness and balance in your life that you can’t imagine anything you could buy that would make you any happier." https://www.marottaonmoney.com/staff/megan-russell/ (Megan Russell) has worked in finance most of her life and is the Chief Operating Officer for Marotta Wealth Management. She has written over 700 financial articles and can be found at https://www.marottaonmoney.com/ (MarottaOnMoney.com). Find more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
You can easily find yourself swimming in accounts between old jobs (401k, 403b and 457), individual accounts (IRAs and bank accounts) and then double that from your partner as well. It’s enough to throw up your hands, put your head in the sand and just forget about it. That’s not really all bad (honestly), but also consider the following. Feeling more Organized: By transferring your old 401k accounts into a Rollover IRA, you might feel better about your financial organization. Feeling better is great! Portfolio: You may not be invested in a way that makes the most sense for your current life. It can be hard to coordinate across so many accounts. Check on Fees: Some old 401k accounts have pretty “bad” choices inside of them. Definitely check on the fees of funds inside your account. If there are no great choices, you might want to transfer the balance to an IRA. Careful of “Clean” Back Door Roth: If you end up with a larger balance in your Rollover IRA, that could have an impact on Roth conversions, so be aware of the larger plan before implementing.
You can consolidate accounts by transferring 401k accounts to a Rollover IRA to help simplify. I recommend doing a trustee-to-trustee (direct) transfer where you never actually hold the money yourself. Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
Summary: A listener asks ”What apps or tech do you use to help manage your finances?” In part 1 of this two-part show I talk about: Why it’s important to build awareness about your expenses Banktivity: I use this app for tracking my expenses Mint.com: A classic app for budgeting and expenses YNAB: An envelope system for tracking your budget - which really appeals to some people Simplifi and Trubill: Another couple of budgeting apps that clients have recommended to me.
Don’t forget to tune into Part 2 where I talk more about investments, credit cards and financial planning. Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
Summary: A listener asks ”What apps or tech do you use to help manage your finances?” In part 1 of this two-part show we spoke about budgeting and expenses. In part 2, II talk about: How I use a spreadsheet to track my Investments What is important to track when it comes to investments PersonalCapital: A tool to aggregate investment accounts. Fidelity / Schwab / Vanguard / Other: How free tools from these companies can help but also their limitations. What to do with Credit Cards Why a password manager is important
Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
The situation in Ukraine is terrible and my thoughts and feelings go out to everyone in that struggle. There are a myriad of lessons to learn of course, but today I want to focus on personal investing. When it comes to your personal investments, you should be personally invested. What I mean: know what you are investing into, understand the risks and rewards and be comfortable with the potential outcomes. Any single investment can be very volatile or go to zero. Diversification can help save your dollars from catastrophic losses. Even a country or sector is not immune to drastic fluctuations. You may also want to consider your moral judgments when it comes to investing: do you want to invest in this country or that one? The major indexes are made up of many countries, so do a little research to understand where your investment dollars are flowing, what they are supporting. Resources: https://www.lifeandlibertyindexes.com/ (FRDM Fund) https://mortonfinancialadvice.com/captivate-podcast/what-is-freedom-investing/ (Freedom Investing)
Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
Megan Russell of https://www.marottaonmoney.com/ (MarratoaOnMoney.com) once again joins us on the podcast to discuss which is better for you: a SEP-IRA or a Solo 401k plan? The bottom line is, as Megan states right away: every business deserves a 401k. Tune in to hear why the solo 401k trumps the SEP-IRA and when the opposite might be true. Both a SEP-IRA and Solo 401k are employer retirement plans where the employer (and potentially and employee) get to contribute dollars in a tax-advantaged way. You definitely want to consider opening the right plan for you to take advantage of these tax savings! The solo 401k generally beats the SEP-IRA because the contribution limits are much higher, allowing you to save more in taxes. You can read https://www.marottaonmoney.com/is-a-sep-ira-or-solo-401k-better/ (Megan's thoughts on her blog post) about this post topic and tune in to hear all the details and why Megan believes the 401k wins. Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
In this episode, Matt and Mike discuss all the nitty-gritty details of Exchange Traded Funds (ETFs) and Mutual Funds. What are these funds? How are they similar? How are they different? But most importantly: Which should you choose? Tune in as we discuss: Why some investors were hit with a big tax bill for holding a mutual fund! Why you should invest in ETFs in your brokerage accounts. What are A, B, and C class shares of mutual funds? What is an index fund? The difference between an active and passive fund. Why are mutual funds and ETFs taxed differently? Can you exchange a mutual fund for an equivalent ETF?
Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
In this episode, Matt and Mike discuss all the nitty-gritty details of Exchange Traded Funds (ETFs) and Mutual Funds. What are these funds? How are they similar? How are they different? But most importantly: Which should you choose? Tune in as we discuss: Why some investors were hit with a big tax bill for holding a mutual fund! Why you should invest in ETFs in your brokerage accounts. What are A, B, and C class shares of mutual funds? What is an index fund? The difference between an active and passive fund. Why are mutual funds and ETFs taxed differently? Can you exchange a mutual fund for an equivalent ETF?
Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
A listener asks: "I was reviewing my Individual Retirement Account with my advisor and he said that there was a .25% maintenance fee, which is the lowest around. I was confused about what this meant since you have talked about expense ratios in the past. Can you explain?" Matt and I discuss what this fee is, but more importantly what does this mean for you? You might be losing out of tens of thousands or even hundreds of thousands of dollars that could be in your pocket. I'm certainly not saying that financial advisors shouldn't be paid or don't provide value - I'm one! But I do want you to understand what you are paying because so many times the fees are completely hidden. An account maintenance fee is an amount that you pay based on multiplying a small percentage times your account balance. That could add up quickly depending on the balance! And what's more, that small percentage could mean many thousands of dollars lost from compounding in your favor. But worse, the investments inside your account could be costing you even more on top of that fee! Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
A listener asks: "We've been saving for college for our three kids age 7, 9, and 12 for several years using 529 plans that are time to our kids' high school graduation. Up until now we thought we were doing well. This past year we had a great year and saved almost $60,000 for college, and also put away some for retirement. But now, we're thinking about switching to a private school that would cost almost as much for all our kids as what we saved last year. And we're probably not saving enough as it is to be able to afford the most expensive colleges. What should we do? Should we consider getting more aggressive with out allocation to try to warn more return? Should we forget IRA contributions and focus more on college 529s?" First of all, thanks for tuning in!! Below are the topics discussed in the video: Congrats on saving so much last year! Obviously, education is an important goal for you. You will be paying for this now and in the future. Recognize that it's an expense. Don't get too caught up in the accounts, savings, and logistics. First and foremost, it's a large expense that will come from savings and salaries. Contribute to your 529 for state tax savings, depending on your state. If you are not contributing for the future, you can still run current expenses through the 529 (contribute and take back out). If you are confident that you will spend your 529 for college, leave it invested in there.
Tune in to hear more! Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
A listener asks: "The current economic situation seems to be taking a turn with high inflation, interest rates on the rise, and the pandemic potentially slowing down, allowing the economy to reopen. Given that backdrop, I'm curious about how to choose investments for the future? Even for the long-term, 5-10 years, how do you perceive this macro environment and what investments will you shift?" Matt and I discuss this question and how to adjust your portfolio. Our discussion includes: Is 5-10 years really "long term"? If you have a thesis on how to invest given the current conditions, how do you implement an investment strategy
-How confident are you? -When do you re-evaluate your thesis or adjust your investments? -How much work and stress will that cause you? Why do I recommend low-cost index funds?
-80% of actively managed funds, trying to make active investments based on the current environment, fail to beat passive low-index funds. Are you confident you can do better? -You get better returns: a win-win! Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
The Fed has indicated that they will raise short-term interest rates this year, perhaps multiple times. Given that rates are on the rise, how might that affect your portfolio allocation? Is there something that you can do about it? First, you can always take the long-term view, have a well-balanced portfolio invested for the future, and just stay on course. You don't have to change anything. Target date funds, total bond market funds, total stock market funds if invested for the long-term future (10+ years) will be just fine. At least, they always have in the past! That said, it is a unique environment of rising rates which we haven't seen in a while! Recall that when interest rates rise, bond values fall. Why is that? Tune in to hear an example. We also discuss why you hold cash as part of your portfolio and maybe a couple alternatives worth investigating. Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
"I am turning 18 soon, I have an account shared with my dad, but are there specific funds I should invest in? For example, Roth IRA, Target Date Fund, and should I invest in foreign markets/am I even old enough to do that? Or should I stick to investing in companies I think will do well and stick to those?" Congratulations on having the interest and means to save and invest at a young age! I absolutely love helping people get started with investing especially at a young age. You have a super power on your side: time! Compounding interest really is the 8th wonder of there world. I recommend the following general points Roth: Use Roth accounts as much as possible. Tax-free-forever! Low-Cost Index Funds: Understand the different classes of assets and their historical performance. Individual Stocks: If you want to invest in companies, go for it! Learn about investing while you are not risking "too much" and more importantly, how you feel about making (and losing) money.
Matt and Mike discuss the situation of this young person and how to get started. Resources include: https://paulmerriman.com/90-years-of-evidence-shows-investor-patience-leads-to-better-returns/ (90 Years of Performance) https://www.aaii.com/journal/article/13009-the-four-asset-classes-with-great-long-term-performance (Four Asset Classes with Great Long Term Returns)
Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
Target Date Funds (TDF) are one of the best inventions in the investment industry. These funds allow individual investors a one-stop purchase to invest in stocks, bonds, and cash across the US, International, large companies, small companies, and bonds. But even better, the rebalancing occurs automatically and is set to take on less risk as you approach retirement! The big downside to only using a TDF is that they are set up for the average investor. Are you average? They do not take into account your risk tolerance, particular job or industry or the economic cycle. They also assume a particular retirement date to put you into a default allocation. While there are drawbacks to TDF, if you can save and invest consistently into one, you are going to be great shape. Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
Net Worth is something very simple but it tells you a lot about your situation. By spending the time to aggregate your various financial accounts, home, car, business, or other valuable 'stuff', you can start to get organized. And it also helps surface ways of saving of making more money in the future! Maybe you have a fund with a high cost or can combine multiple accounts to simplify your life. The other thing that I like to do at the start of the new year is to come up with a Savings Plan. This is where you decide how much money you will save in 2022 and where to put it. This is important so you start the year with a proactive plan! Tune in to hear the details! Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
When it comes to saving money for the future, there are variety of accounts from IRAs, 401(k), 403(b), HSAs and more! How do you know which is best for you? 🤔 Megan and I chat about https://www.marottaonmoney.com/account-funding-priorities-for-2022/ (her recent article )which goes through exactly which accounts to fund for 2022. A brief summary: Pay off credit card debt Flow qualified education expenses through a 529 Contribute up to the match in your 401(k) or 403(b) Budget 10% for unknowns (emergency fund) HSA Roth IRA (or backdoor Roth IRA) Maximize your 401(k) or 403(b) Save into your 457 plan Contribute to a SEP IRA Maximize any other employer retirement plan Save into a 529 for future education expenses Roth Conversions Savings into a Brokerage account Pay down low-interest debt (student loans and mortgages)
Check out the https://www.marottaonmoney.com/account-funding-priorities-for-2022/ (entire blog post at Marotta On Money) to read the details. Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
Matt Robison and I take a look at what transpired during 2021 in the financial industry including a look at the stock market, ESG, Crypto and Inflation. The US stock market continues to rise, posting highs throughout 2021. It has been on a tear, posting 20%+ return the past two years and besting 16% annually over the past decade! Does this lead to any insights for market returns in 2022? Markets tend to go “up and to the right”, so it shouldn’t be surprising. Continue to stay invested with your asset allocation, and be ready for any future turbulence. ESG or Environment, Social and Governance investing really took off this past year. There are now so many funds focused on ESG that it’s really hard to understand exactly what they stand for and are invested in. Be wary. The companies that put together funds are for-profit and are capitalizing on this investing trend. What is the deal with Bitcoin, Ethereum, Dogecoin and crypto in general? Should you invest in this “asset class”? Listen to what Matt and I have to say on this topic. You can’t end the year without talking about inflation. We began the year with the typical story of trying to reach 2% inflation. Well, we blew right past that, recently topping 6.8%! Real wages are barely keeping up - but good news: you should ask for a raise. With the demand outstripping supply in many areas, now is a good time to evaluate your position and salary. Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
A Donor Advised Fund (DAF) is an account that you own and manage, just like your brokerage account. The difference is how it’s treated when it comes to paying taxes. Money that you put into the DAF is treated by the IRS as having been given away to a non-profit organization, even though it’s still under your control. That means you get to deduct it from your income and pay less in taxes! Eventually, the money in your DAF must be given out to charities, but you can do that over the next months and years. The big benefit of this account is when you have a year with a very high income. If you are charitably minded, go ahead and donate 3-4 years’ worth of giving into the DAF. That means you save more on taxes, while still supporting your favorite organizations over the coming years. Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
Near the end of the year, after the market has been up 20%+ for the past 2 years: now is a good time to check in on your portfolio balance. Do you still have the correct mix of stocks and bonds to meet your goals? 🤔 It’s important to understand your financial goals and have a portfolio balance that has the best chance to reach them. And if you had that dialed in (you did, right!?) - then it might currently be out-of-whack. The stock market has gone straight up, while your bonds have been stuck on idle. So you might find that your portfolio has too many stocks, leaving you at risk of a bigger fall. Check out your entire portfolio, not just your 401(k). Don’t forget about your brokerage account, your IRA and if you’re married: double those. Add it all together and see where you sit in stocks versus bonds. Does that match your goals, risk tolerance, and risk capacity? Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
Freedom Investing: Investing in Economically Free Countries“Would you rather put your money in companies founded in North Korea or in South Korea?” This is the opening thought experiment posed by Megan Russell of Marotta Wealth Management. The difference between the two is obvious. Do you want your money sitting in a state-controlled environment like North Korea or in a more economically free country like South Korea? It’s important to understand global investments and how they fit into your overall investment portfolio. About MeganYou can listen to Megan Russell and I chat about Freedom investing on a recent episode of my podcast. We explore Marotta Wealth Management’s ideology and strategy with regard to Freedom Investing. Megan is no stranger to the topic. On her blog, Marotta on Money, she has spent years exploring this topic and has an admirable history of openly sharing her strategy and results. Megan has done a lot of first-hand research in this area and shares her expertise on the show and in what follows. What is Freedom Investing?The simple thought experiment above was meant to give you pause for thought. What does it mean to invest in an economically free environment? For starters, companies without state control can pursue profits, hire and fire employees, and innovate without fear of retribution. Freedom to explore opportunities is not a given around the globe. It makes sense to avoid companies operating under a regime that can change the rules at a moment’s notice, potentially wiping out your gains.
How do you go about determining which countries are “economically free?” Luckily, you don’t have to figure it out on your own. https://www.heritage.org/index/ (The Heritage Foundation) has developed anhttps://www.heritage.org/index/ranking ( Index of Economic Freedom). Countries are evaluated on a number of criteria including, but not limited to, labor and monetary freedom, government spending, and tax burden. The list is updated yearly and offers results on a scale from 0-100 which allows you to take a deeper dive into the component parts.
In terms of strategy, the idea is to invest your money into countries where the operating environment is on the high end of the economic freedom scale and avoid those countries that fall on the low end. It makes intuitive sense that the local laws and culture will greatly impact the success of a company, but what do the numbers say? How does Freedom Investing Perform IRL (in real life)?Megan and the Marotta on Wealth blog offer insightful details about the specifics of Freedom Investing. You can read a variety of articles on their website that include backtesting and refining results if you want to immerse yourself in the details. I’ll give you some tips for implementing the strategy a bit further along in this article but let’s first explore just how much of a difference it could make. Megan found in her backtest of their current strategy that “basically the average advantage of freedom investing is a 2% annual advantage” over the MSCI EAFE index. In "https://www.marottaonmoney.com/a-25-year-review-of-freedom-investing/ (A 25-Year Review of Freedom Investing)", Megan explains how compared to the EAFE, "on average Freedom Investing has a 1-year advantage of 2.093%, 5-year advantage of 1.995%, 7-year advantage of 2.314%, 10-year advantage of 2.400%, 15-year advantage of 2.392%, and 20-year advantage of 2.073% over the EAFE Index." The https://www.msci.com/documents/10199/822e3d18-16fb-4d23-9295-11bc9e07b8ba (MSCI EAFE) Index is designed to represent the performance of large and mid-cap securities across 21 developed markets, including countries in Europe, Australasia, and the Far East, excluding the U.S. and Canada. It covers approximately 85% of the free float-adjusted market capitalization in each country. This is a good benchmark for comparison because the Freedom Investing strategy is investing in...
Want to save on taxes? Matt and I discuss 8 different strategies that can help you keep more money in your pocket. We cover the first 3 tips in this first podcast, followed by 5 more in the next podcast. Use Index funds over actively managed funds. This is generally great advice, but also better at saving on taxes due to less turnover of holdings. Use ETFs instead of mutual funds. ETFs are a unique “wrapper” that avoids you from paying taxes on interest and dividends. Hold the right asset in the right account. Tax-deferred and Tax-free accounts (401k, IRA, etc) are great for bond funds because you avoid paying taxes on the interest and dividends each year. Tax-loss Harvesting. Make lemonade out of lemons by intentionally taking a loss and deducting it from your taxes or offset other gains and pay no tax. Tax-Lot Management. It’s important to sell the correct shares so that you take advantage of short-term or long-term gains/losses in your account. Savvy Rebalance. Use additional funds or tax-deferred/free accounts to do your rebalancing and avoid paying capital gains. Long-term Investing Horizons. Long-term capital gains are taxed at a lower rate than short-term. Invest for the long run! Charitable Giving. Donating appreciated assets helps you avoid paying taxes on capital gains.
Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
Want to save on taxes? Matt and I discuss 8 different strategies that can help you keep more money in your pocket. We cover the first 3 tips in this first podcast, followed by 5 more in the next podcast. Use Index funds over actively managed funds. This is generally great advice, but also better at saving on taxes due to less turnover of holdings. Use ETFs instead of mutual funds. ETFs are a unique “wrapper” that avoids you from paying taxes on interest and dividends. Hold the right asset in the right account. Tax-deferred and Tax-free accounts (401k, IRA, etc) are great for bond funds because you avoid paying taxes on the interest and dividends each year. Tax-loss Harvesting. Make lemonade out of lemons by intentionally taking a loss and deducting it from your taxes or offset other gains and pay no tax. Tax-Lot Management. It’s important to sell the correct shares so that you take advantage of short-term or long-term gains/losses in your account. Savvy Rebalance. Use additional funds or tax-deferred/free accounts to do your rebalancing and avoid paying capital gains. Long-term Investing Horizons. Long-term capital gains are taxed at a lower rate than short-term. Invest for the long run! Charitable Giving. Donating appreciated assets helps you avoid paying taxes on capital gains.
Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
It’s not often that you are in the position to donate 100% of your income to charity. However, if you find the capacity and willingness to give, this year has special tax rules that you should be aware of. The IRS is allowing a 100% deduction off your taxable income for charitable donations. This means that you are left with $0 in income and owe $0 in taxes! While that sounds wonderful, please don’t stop there! You want to take advantage of the following opportunities while your income tax bracket is low: Roth Conversions: Consider moving money from your Traditional account to a Roth account. You must pay taxes on the converted amount, so do that while your bracket is low! Capital Gains Harvesting: If you have no income, you can sell appreciated stock with up to $80k of capital gains and pay $0 instead of your typical 15-20%. Withdrawals from Tax-Deferred accounts: This counts as income, so it’s a good year to pay taxes on that income while giving money away. Portfolio Rebalance: Again, a good time to sell appreciated stock and rebalance your portfolio when your income is low.
Note: The 100% deduction must be made in cash directly to charities (not Donor Advised Funds or Private Foundations). This may not be the best tax strategy if you do not have cash and need to sell appreciated assets. Check with an advisor first! Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
In today's radio broadcast, Matt and I discuss two major topics: I-Bonds and Pledged Asset Line of Credit. I-Bonds are issued by the US Government directly on https://www.treasurydirect.gov/tdhome.htm (TreasuryDirect.gov.) While you can only purchase $10k in a single year, the current yield is over 7%! This could be a good place to park part of your emergency savings and get a good return, however https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_ifaq.htm#cash (be aware of the fine print which includes:) You can only purchase $10k each year. The interest rate (yield) does change every 6 months. You must hold them for at least 12 months time. If you cash them in prior to holding for 5 years, you lose the last 3 months of interest.
On the flipside, if you are looking to borrow money, you might qualify for a loan against your investable portfolio. If you have accounts at brokerages such as E*Trade or Charles Schwab, they offer a line of credit with low rates. This is very similar to a Home Equity Line of Credit (HELOC) as an interest-only loan. You can potentially negotiate these rates if you give them a call (or perhaps threaten to take your money to another brokerage🤫). These are two tools in the kit that might apply to your financial situation. Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
The last few years have been awful in so many ways - we’re all well aware of that. But it’s also exposed us to a new environment to consider what is truly important in our lives. It’s forced a new perspective and we gain a new understanding. This is one factor that has lead to the Great Resignation: the strange phenomenon that has more workers on the sideline and a great many switching jobs. But in this time of change, make sure to stay grounded and consider the impact on your finances both now and in the future. In particular: Priorities: Understand what is truly important to you now and in the future Savings: How long can your savings support you if you are out of work or switching jobs? Long-Term: Make sure to consider long-term effects of your current savings (or spending). You don’t want to short-change your future self. Leaving a job?: Make sure to consider benefits both at your current and future employer.
Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
Today I discuss Congress’ proposal of taxing unrealized capital gains for individuals with over $1B in Net Worth. I’m curious how this will work and if the government will collect anywhere near the $250B that they predict. Matt Robison is an expert in public policy and capital hill, so it’s the perfect chance for us to discuss this topic. Enjoy the wide-ranging discussion on the intersection of public policy and personal finance! Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
It’s smart to review your tax strategy and planning to keep more money in your pocket. Use the checklist below as a starting point to see what might apply in your situation. Maximize contributions to your employer retirement accounts (401k, 403b, etc) ✅ Maximize contributions to your Individual Retirement Accounts (IRA) ✅ Top off your Health Savings Account (HSA) ✅ Take your Required Minimum Distributions (RMD) ✅ Consider making a Qualified Charitable Contribution (QCD) ✅ Use a Donor Advised Fund to implement a bunching strategy. ✅ Consider a Roth Conversion (or multi-year Roth Conversion strategy) ✅ Tax Loss Harvesting: sell investments at a loss to offset gains. ✅ Tax Gain Harvesting: sell gains if you are in a low tax bracket. ✅ Make sure to use your Flexible Spending Account (FSA) money. ✅ Can you defer income to 2022 to save on taxes? [might not be a good idea based on potential increasing tax brackets]✅ You can give away 100% of your income as a Cash donation in 2021! ✅
Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
Julie heard about a real estate investment idea on the radio and was curious: Should I invest in this advertisement? We break down the topic into two parts: Should you invest in Real Estate? How do you evaluate an investment opportunity that you are considering?
Bottom Line Up Front: Yes, I believe that Real Estate has a place in a well-diversified investment portfolio. Pause, research, and understand how a potential investment fits into your strategy and goals.
Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
I often recommend using your Health Savings Account (HSA) as another retirement account with tax benefits. This is different than the way most people approach the HSA because it starts with the word “Health” and you can pay for medical expenses. But you can invest the money for the far future allowing it to grow and compound tax-free. The best part is that you can even pay yourself back for medical expenses that you are incurring now! Listen as Julie and I discuss how to actually use this account including: How to choose the right health plan for you Who contributes money to your HSA and when How to pay for current medical expenses and what to track How to invest your HSA for the future How the HSA can be used as an emergency fund!
Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
Did you know that your investments cost money? Those mutual funds, ETFs, brokerage accounts, etc - are not free, despite the marketing. It takes people and companies to produce those products, so you better believe you are paying for them somehow. It pays to understand the costs. The biggest one I want to cover today is called the “Expense Ratio” for a mutual fund or ETF because this is a yearly fee deducted from your investments. For any fund that you own, you can quickly look up the expense ratio which will be somewhere between 0% and 2%. If all your funds are in that 0-.2% range, you are doing well. There are legacy funds that charge up to 1% or 2% but invest in the same universe of stocks as funds costing just .1% ! Do a quick checkup to confirm you aren’t in one of those. Tune in to hear: Why do funds have different fees? When might it be OK to invest in a fund with a higher expense ratio? What other fees are beyond the expense ratio.
Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
Do you recall how you felt in March 2020? You felt terrible. How do I know? Everyone did. The news was bad, the future uncertain, the death toll rising and current events were spiralling downwards. The market had fallen 35% in 3 weeks. There were no bright spots. With the news and environment unchanged, the stock market started going up. And it kept going. Why? The participants could see over the chasm of closed and failing businesses to more online shopping? For every turn in the market, on a daily basis, the talking heads will give you a reason why. It’s always written after the fact. And the lesson I learned first-hand last year was this: there is no reason. Sure, maybe over years of economic growth and stability, the markets go up. But any given day, month or year - no one has any idea what the market will do. So, what to do? That’s the important part: be ready for anything and take what the market gives you. It goes up? Rebalance back to bonds, be slightly more defensive. It goes down? Rebalance into stocks, be slightly more aggressive. Ignore the news, look at the numbers and take what you’re given. Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
We all know that you can barely get any interest, or return, on your savings account. The Fed is keeping the interest rate very low, which translates into low returns on savings and safe assets like money markets and government bonds. With so little return in the traditional fixed-income side of your portfolio, does that fundamentally change the way you should consider risk? It used to be that you could get 4-5% interest on fairly safe investments like your savings account and money market accounts. Therefore, to invest in more risky assets like an individual stock or the entire stock market, you would expect to get more than 5%. Seeking risk wasn’t the safe thing to do, avoiding it was. But now we’re in the opposite regime: you have to actively seek out risky investments in order to get a decent return. It’s important to understand the associated risks of your investments. Make sure that you know what the range of future outcomes could be, and how that might affect your ability to reach your goals. Be confident with a plan on how you will proceed in any given market event. Resources: https://www.wsj.com/articles/what-youve-lost-in-this-bull-market-11630677610 (What You’ve Lost in This Bull Market)
We all know the risks, we understand how to think about the pros and cons of a decision. But when it comes to the stock market, are you certain you’re thinking about it the right way? The risk isn’t that your portfolio goes down in value, the risk is that you can’t reach your goals. What are your goals and when do you want to reach them? When do you expect to spend the dollars that you put into the market today? I think about risk as either: You permanently lose money
OR You do not reach your goals
If you have long-term goals that require money, the biggest risk you take is not investing in the stock market. It’s one of the safest places to make a long-term investment and not lose purchasing power.
Borrow, Buy, Die. That’s how billionaire’s avoid paying much in taxes. When your assets are growing quickly (10%+ / year), you don’t need to sell stock or pay yourself a salary, you just borrow money at 2% interest / year. If you have significant wealth, and it continues to grow, you can take advantage of borrowing money at low cost. If there is a downturn in the economy or the market, you have enough wealth to “bridge the gap”. In other words: you can take advantage of “average returns” over decades because you have the risk capacity. How does this apply to the rest of us? You are already doing this with your mortgage. You borrowed money and have investments in the stock market. While the current high market might not be the best time to “borrow for lifestyle”, have financing ready (HELOC, refinance, margin borrowing) in case the market drops significantly. You want to buy while it’s on sale. Understand that your mental wellbeing trumps all. Sure, you might “make more money” buy leveraging your house and investing in the market. But will you worry too much? Nothing beats a good night’s sleep.
Resources: https://www.wsj.com/articles/buy-borrow-die-how-rich-americans-live-off-their-paper-wealth-11625909583 (Buy Borrow Die: How Rich Americans Live Off Their Paper Wealth [WSJ]) https://www.propublica.org/article/the-secret-irs-files-trove-of-never-before-seen-records-reveal-how-the-wealthiest-avoid-income-tax (The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Income Tax)
Finding a financial advisor is daunting because you know it’s important and yet it’s so hard to figure out. Bottom line up front: Start with finding Certified Financial Planners (CFP®) that understand your situation; do a little online research and then interview a couple. Tune into this week’s podcast to learn more about: Hiring a CFP®. This should be a minimum bar. There are plenty of planners out there and it shows a commitment to doing your best job for clients. Who calls themselves advisors? It could be a broker, someone working at a local bank, a wealth manager or an insurance provider. Unfortunately hanging out a shingle of “financial advisor” is not distinguishing enough. Look for domain knowledge. Not only knowledge of financial planning, but also your specific situation. Are you close to retirement? Are you starting a family? Have you just taken your first job? Understand compensation: make sure that you know how the advisor is paid. Is she paid by how much money she manages? Or paid a commission if you invest in a certain mutual fund or buy life insurance? Make sure you know how your incentives are aligned
Resources: Find a CFP®: https://www.letsmakeaplan.org/ (Lets Make a Plan) Find a Fee-Only Fiduciary Planner: https://www.napfa.org/ (NAPFA.org) https://www.marottaonmoney.com/ten-questions-to-ask-a-financial-advisor/ (Ten Questions to ask a Financial Advisor) [Marotta on Money] Another: https://www.nerdwallet.com/article/investing/10-questions-ask-financial-advisor (Ten Questions to ask a Financial Advisor) [NerdWallet]
In this bonus episode, Matt and I continue our conversation about stock market bubbles and in particular behavioral economics. We discuss how the future investing models might change based on more studies of human behavior. Smarter people than the two of us will study and dissect the market in new ways based on human participants. We also chat about different areas of the markets, different aspects of bubbles, and how various investment strategies can work. Be sure to listen to the end where I reiterate why I pound the table on simple portfolio allocations! Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
The stock market is reaching new all-time highs, which begs the question: Are we in a market Bubble? There are two areas to review when thinking about “bubbles” in the stock market: the market fundamentals (valuations) and investor sentiment (or behavior). Both of these are looking quite hot. On the fundamental side, the popular Shiller PE Ratio currently sits at 38.5. The only time this indicator was higher was in 2000, and you know how that ended. And investor sentiment, in general, is pretty happy, or dare I mention exuberant? From https://mortonfinancialadvice.com/articles/should-you-invest-in-bitcoin (cryptocurrencies) and NFTs, to Meme stocks - investors are bidding up assets to new heights every day. Although corporate earnings are doing very well, the rest of the news is fairly bleak. Given that backdrop, I’d say investor appetite is pretty strong. So, what should you do as an investor? Unfortunately, that’s the hard part. I know that the stock market will go down but I don’t know when and I don’t know by how much. Without that knowledge, what should you do? Continue to take a defensive stance with your portfolio. If you generally invest 75% in stocks (and 25% in bonds), keep that allocation or tweak it to 70% stocks. Recall the last drop of 30% in March of 2020? Stocks were on sale you that’s when you want to buy. So be ready to take advantage of the next downturn, whenever that comes. Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
BONUS Episode! Matt and I continue our conversation. Listen in to the discussion on Zombie investors: how the massive uptick in index investors may be affecting markets Is it Good? Are the capital markets still good for companies and investors? Have we gotten away from the point of investing? Complexity: If you can't explain it, don't invest in it.
Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
I absolutely love what software can do for us, freeing up our time and energy to focus on the less mundane. And when Robo-Advisors first launched, with simple portfolios of low-cost index funds, they were great. Taking away the human emotions, keeping you invested correctly with a massively diversified portfolio - what's not to love? However, I've recently come across a few problems that stem from both the Robos themselves changing and how to handle distributions and tax situations with my clients - some first-hand information that I want to pass along. Robo-Advisors are getting more sophisticated and complex - which is never in the client's interest. You want simple, easy-to-understand investments. Robos that used to create portfolios of 5-10 funds are now are holding 15-20 funds. And they are holding more complicated investments such as risk parity funds. You simply don't need this level of complexity to be successful. But a bigger problem is Tax planning. The Robo-Advisor has no idea of your unique situation. They do not adjust rebalancing based on your outside assets (401k, IRAs, etc), nor your changing tax situation (i.e. wait until you are in a lower tax bracket next year due to a life change). I've had client situations where these are easily over $30k in taxes that could have been avoided. I haven't researched all the options, so there may be some simple Robo-Advisors that just buy-and-hold for you. Unfortunately, I can no longer recommend those that I have interacted with for my clients.
On today’s show, Meg Bartelt, CFP®, MSFP joins me to talk about how you should think differently about your total compensation in order to take advantage of your employer benefits. Meg is the founder of https://flowfp.com/ (Flow Financial Planning), LLC, a fee-only, virtual financial planning firm dedicated to women in their early-to-mid career in tech. She specializes in https://flowfp.com/take-home-pay-too-tiny-to-live-on/ (equity compensation) and not making people feel bad about their finances. Many employees of large tech companies are not taking full advantage of their employee benefits and leaving significant money on the table. If your employer offers after-tax 401k contributions and/or an Employee Stock Purchase Plan (ESPP), you need to understand those benefits. But what if you cannot afford to save more from your paycheck because you are already just barely covering your living expenses plus vacations, home improvements, etc? Take another look by understanding your total compensation and account balances. Do you get an annual bonus? Do you receive RSUs? You have to think a little differently: your total compensation is available to spend on living expenses, not just your bi-monthly paycheck. Maximizing your after-tax 401k contributions may reduce your paycheck, but you can make that up using your quarterly RSUs. Sell the stock and transfer the cash to your everyday checking account to fund monthly expenses. Your future self is going to thank you.
How do you make your money work for you? Do you take it to the casino and bet on black? Do you have fun at the race track? Do you save into your 401(k) and put the money into an index fund? Or do you buy individual companies each week on Robinhood? Each activity may win or lose you money in the future. Does that make it investing, speculating, or trading? Each word means something different and it’s important for you to understand how you are using your money. Let’s give a quick breakdown: Trading: Exchanging assets of value in the hopes someone will pay more than you did. Speculating: A wager that you will receive some payoff in the future Investing: Using knowledge and research to make an educated allocation of resources.
I see a lot of speculating under the guise of investing - and that’s dangerous. The risk of speculation not only includes the potential to lose money but also confusing luck with skill. That can lead to risking too much of your hard-earned money in irresponsible ways. Make sure that you understand how you are putting your money to work. Resources https://www.wsj.com/articles/you-cant-invest-without-trading-you-can-trade-without-investing-11623426213 (You Can’t Invest Without Trading. You Can Trade Without Investing)
You need to have a plan in case of an emergency and typically you need some money to go with that plan: your Emergency Funds. First, let’s define Emergency: something which happens unexpectedly, which you could not easily predict would occur at this moment. Examples include losing a job, having a severe accident or having to take care of a loved one. As you can tell, these mostly include losing or temporarily leaving your job, which means no income for some period of time. Emergencies are not the fridge breaking down, car maintenance or a new roof. All of those you can easily predict will happen in the future and you need to plan and budget for those separately. So, what to think about in terms of this emergency fund? Typically it should be 3-6 months of required expenses, in case you lose a job. You can increase or decrease that depending on job stability, income stability and your employability. This fund should be mostly in cash. Cash is King. If your brokerage portfolio is large enough, you can have this money invested as part of your overall portfolio.
Mostly you need a plan for when the sh*t hits the fan. Make sure you are prepared.
With the advent of the index fund in the 1970s, the battle began: actively managed funds versus passive index funds. Which belongs in your investment portfolio? Actively managed funds have people responsible for deciding which companies to invest in and include in the fund. These funds will typically have a strategy to invest in a certain sector or style such as US large-cap growth companies or emerging market companies. Passive funds, on the other hand, use rules that define which companies to include in the fund. Examples include the S&P 500 (500 largest US companies) or the Russell 2000 Index (the smallest 2,000 companies in the Russell 3,000 index). These funds typically have very low ongoing expenses since no one is employed to actively research and make investment decisions. This obviously begs the question: which is better for your investment dollars? The research is in: the chances of you picking an active fund that outperforms a passive index is very small. In virtually every category of public investments, the index funds outperform a majority of the actively managed funds. Investing in low-cost index funds has other benefits as well: You don’t waste time researching which manager to pick You don’t worry about a year of underperformance and if you should switch managers You can automatically add funds each month with no ongoing effort
It’s comforting to know that you will not only make more money over time but also spend less energy using passive index funds. Not often in life do we get such a win-win scenario. Other topics discussed include: Should you pay a wealth manager or financial advisor to “actively” manage your portfolio? Are there scenarios where you recommend using actively managed funds? Why do so many people still invest in actively managed funds?
Resources: https://www.spglobal.com/spdji/en/research-insights/spiva/#/reports (SPIVA Reports)
The majority of advice online is too generic to take seriously for your personal finances. The 60/40 portfolio (60% stocks and 40% fixed income) is used in academic research and might be the median portfolio for retirees - but that doesn’t make it appropriate for you. How should you construct your own portfolio for now and the future? Think about when you are going to spend your money and divide it into three categories: 1-2 years: Invest this in CDs, checking/savings accounts or money markets 3-7 years: Invest in a mix of bonds (or a bond fund) 7+ years: Invest in stocks
I recommend taking out a piece of paper, dividing it into 3 sections and write out the actual dollars you might spend in each section, beyond what your income will cover.How might this apply to you? If you are young, just starting your career maybe you want $30k for a home down payment (1-2 years) and the rest is for retirement (7+ years) Middle career with a young family: Maybe $50k towards college costs (3-7 years) and the rest for retirement (7+ years) Near or in retirement: Living expenses (1-2 years and 3-7 years) and the future (7+ years).
The point is: apply this to your situation with actual dollars. At that point you can figure out the percentages in each category: stocks, bonds and cash. Resources: https://mortonfinancialadvice.com/articles/where-should-i-save-money-401k-hsa-529-ira-oh-my (Which Accounts Should I Fund First?) https://mortonfinancialadvice.com/articles/how-to-create-a-paycheck-in-retirement (How to Create a Paycheck in Retirement)
As Independence Day approaches, it makes me think about all of our freedoms including the choice to make work optional. It’s a modern convenience, to be sure: retirement is a very modern idea. The interesting thing about financial independence is that it leads to other freedoms. Not only can you choose how to spend more of your time, you can speak your mind without fear of being cancelled. Ever notice how older friends tend to “tell it like it is”? As we gain wisdom, and freedom in life, we are more free to be ourselves in all things. What does it take to become financially free? Consistently saving and investing throughout your career. I recommend that everyone reach a savings rate of 15% of your gross earned income. If you can start that with your first job, you will easily adopt a lifestyle to live on the other 85%. Everyone’s road to success is different, but knowing you are on the right track will help you stay consistent. One rule of thumb is that your retirement portfolio will need to be 25x your yearly expenses (not including social security and other pension income). This is only a starting point. And realize that the road to 25x starts slowly, but compounding will kick in heavily at the end. This weekend make sure to celebrate all of life’s freedoms. Resources: https://www.marottaonmoney.com/how-much-should-i-have-saved-toward-retirement/ (How much should I have saved towards retirement?)
Bitcoin and other cryptocurrencies are all the rage. But should you invest your money in them? I recently received this listener question: “There is a lot of talk going on about Bitcoin and Dogecoin. Are they good investments?“ Bottom Line Up Front: I do not currently recommend putting money in cryptocurrencies, because it would be mostly speculation and not investing. Realize that if you do not participate there’s a good chance of FOMO with the constant news and watercooler discussion (is that still a thing?) Julie and I discuss the following: A well-diversified, low-cost index fund portfolio will serve you well. There’s no need to speculate with cryptocurrencies. Realize if you put money into Bitcoin, it’s not an investment, but a speculation. There are no fundamentals - you are hoping that someone else will pay more in the future. The entire value right now is an implicit societal agreement that it’s worth something. Cryptocurrencies are built on the Blockchain. This technology is a massive breakthrough and will be heavily used on the internet. Speculation in crypto is not an investment in Blockchain. Bitcoin and other crypto assets are not currencies: they are too volatile. Currency exchanges do fluctuate, but not that fast. And when they do, it’s not a good sign! There are a lot of risks with putting money into cryptocurrencies: Regulatory, Security, Insurance, Fraud, Market and Liquidity. Be aware.
Resources: https://paulmerriman.com/how-to-plan-for-a-successful-and-secure-retirement/ (Larry Sweadroe discusses his view of investing in crypto at the start of this podcast).
Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
Inflation is all over the news: it’s a scary subject encouraging you to read more headlines. But how should you actually prepare your investment portfolio for potential inflation? As always: it comes down to planning. If you have a well-diversified portfolio of stocks and bonds then there’s good news: you can do nothing. Be ready to make adjustments as those investments go up or down, as you typically rebalance. There are two potential action items below, but first let’s consider: Gold: It’s not a given that gold does well in inflationary environments. I don’t typically recommend gold because its long-term returns are fairly average and well below stock returns. Crypto: Is this the new “store of value” and replacing gold? Not with all the current volatility. Commodities: They typically will rise ahead of inflation, and we’ve seen that over the last 12 months. Will they continue to climb? Unknown. Real Estate: Your home is a great investment during inflation periods because you have a fixed-rate mortgage where dollars are worth less in the future. REITs and rental properties might increase in value or not, depending on increasing rents which are not always guaranteed with inflation
Two areas to consider making changes: Refinance your Mortgage: If you can borrow more or refinance at today’s low-interest rates, that could be a good idea when inflation kicks in. The fixed dollars that you pay back 5 years from now will be worth less than they are today. Short-Term Bonds: If rates rise, as is often the case during inflationary periods, then bond prices will fall. Stick with short-duration bonds that get reinvested more often.
Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
How can you create a financial plan before you know where to aim? Your unique goals in life, what drives you, what you want to accomplish and what’s truly important - those are the targets. Not simply “retire someday”. You don’t have to read a ton of self-help books or try to discover this on your own. There is a process that has been refined by the https://www.kinderinstitute.com (Kinder Institute of Life Planning) to help individuals and couples discover their most important desires and how to live the best life possible. https://www.tafoyabarrett.com/brad-tafoya (Brad Tafoya) is a Registered Life Planner and joins the podcast to discuss this process and how you can apply it yourself. Our discussion includes: Why the process of figuring out what is truly important to you comes before the technical stuff: budgeting, accounts, portfolios, investing, etc. When you discover what fulfills you, it creates massive energy that empowers you to effect change in your life. The 3 questions that are at the core of the process for discovering what truly matters to you How to use what you discover to create a vision and overcome obstacles
This is financial planning done right. Resources: https://www.kinderinstitute.com/ (Kinder Institute of Life Planning) https://www.lifeplanningforyou.com/ (Life Planning For You)
Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
Congratulations! As you approach retirement, your investment portfolio has grown to a size that you suspect you’ll be fine to stop working and live the good life. But…. how do you actually generate income from those retirement accounts? And how should you invest now that you’re so close to retirement? I use a bucket strategy to talk about investing in retirement. There are three mental buckets: CASH: This is money you need in the next 1-2 years. It should be held in cash or money market accounts and ready to spend. INCOME: This money you will want to spend in years 3-8. It should be invested in a mix of bonds to keep up with inflation, but not lose much value in a volatile market. GROWTH: This money you’ll want to spend in 8+ years and can be invested in a well diversified portfolio.
How do you decide how much you need in each bucket? Simple: Calculate your expenses for each year and then subtract any income (social security, pension, etc). Total years 1-2 for the first bucket, 3-8 for the next bucket and the rest is for the third bucket. After all the calculations, you should be left with a mix of cash, stocks and bonds to invest your overall portfolio. Find out more about Mike athttps://www.mortonfinancialadvice.com/ ( https://www.mortonfinancialadvice.com) and connect athttps://www.linkedin.com/in/mwsmorton/ ( https://www.linkedin.com/in/mwsmorton/)
You don't often think of a retirement account for your children, but the Roth IRA is too appealing to pass up. Once you get money into a Roth IRA, it grows tax-free forever, which is a very long time for a young child! https://www.marottaonmoney.com/staff/megan-russell/ (Megan Russell) from https://www.marottaonmoney.com (Marotta Wealth Management) joins me to discuss the myriad of benefits of this amazing account. Tips covered in this episode include: How Young?: You can start this anytime that your child can independently do tasks that you're willing to pay her for. You can open up a Roth IRA for any age child and contribute any amount (yes, as little as a $1!) Earned Income: Your child has to have earned income to contribute to a Roth IRA. That income can come as a household employee which has a lot more relaxed rules from the IRS. All those chores that you already give your child can count. Keep Records: The IRS can be a stickler for records, so make sure that you keep track. Record when the job was done, how long it took and how much you paid. File that spreadsheet along with your regular tax information each year. Contributions: Do you think your child will contribute the money that you gave him to his own IRA or spend it on candy? The parent actually wears two hats: the employer gives money to the child (who is going to spend it!) and the parent gifts money to the child who puts it into his Roth IRA (of course, you can transfer it directly). Other topics include: What it takes to actually open the Roth IRA (custodial account) What investments to choose in the Roth IRA Benefits beyond contributions - such as your child learning about money, investing, working, etc Tax implications (none if your child makes less than $1,100 from all sources)
Resources https://www.marottaonmoney.com (Marotta On Money) https://www.marottaonmoney.com/staff/megan-russell/ (Megan Russell) https://www.marottaonmoney.com/do-children-need-to-file-a-tax-return-to-fund-their-roth-ira-2020/ (Do Children Need to File a Tax Return to Fund Their Roth IRA?)
Find out more about Mike at https://www.mortonfinancialadvice.com (https://www.mortonfinancialadvice.com) and connect at https://www.linkedin.com/in/mwsmorton/ (https://www.linkedin.com/in/mwsmorton/)
Yes, you can turn $3,000 into $50 million dollars. What's the catch? It takes a long time. So, unfortunately, you won't be around to spend it. But this is a great way to think about setting up your kids or grandkids for long-term financial success. It's really simple math that relies on compound interest to generate significant growth over many years. The basics: Invest $3k into a Small Cap Value Index Fund when your child is born. Assume 12% growth of that fund (which is the historical average for the last 100 years for SCV funds) As your child has earned income, slowly transfer the account balance to her Roth IRA to grow tax-free forever. At age 65, your child now has a balance of $4.75m. She starts taking out 5% / year from the account and it continues to grow at 12% / year. When she dies at age 95, over the last 30 years she has taken out and spent roughly $20m (5% / year) and the balance is $30m = $50m
Ok, does that seem far-fetched? Well, it could have easily happened over the last 95 years (if there had been a small-cap value index fund in 1926! There are a number of ways to think about this for your own life: Invest some amount, whatever you can afford, for your child or grandchild. Let it ride for a long, long time. This could be for their retirement, or for a home down-payment or something else. Think about setting aside a small amount each month for something "down the road" for your kids, or grandkids. Invest in a single stock when a child is born for their high school or college graduation gift (whatever it grows to!)
The point is the earlier you can invest, the more compounding kicks in. The longer the child can stay invested, the more compounding works for them. Resources: This post is inspired by https://paulmerriman.com/turn-3000-into-50-million/ (Paul Merriman's fantastic work on this topic). Check out https://paulmerriman.com/ (his entire site) for great investing resources. Find out more about Mike at https://www.mortonfinancialadvice.com (https://www.mortonfinancialadvice.com) and connect at https://www.linkedin.com/in/mwsmorton/ (https://www.linkedin.com/in/mwsmorton/)
If you are thinking about investing in individual company stocks, what should you consider? In today's episode we discuss: Risk versus Reward: A company that does well has the potential to have its stock price go up over time, making you a lot of money. However, the opposite is also true: you can lose all your money if it goes out of business. Diversification: Owning a single company makes you tied to their individual success or misfortune. Even if the sector or economy does well, you may not make money. Portfolio: You can create your own portfolio using individual stocks - but it takes quite a few (20+) to get real diversification. Or you can invest a majority of your portfolio into low-cost index funds and use a small portion in individual stocks.
What are the pros of owning individual stocks? No trading fees Complete control: own exactly what you want to Tax management: Buy and sell for tax advantages, when you want.
What are the cons of owning individual stocks? Diversification: it's harder to diversify your holdings Time: it takes time to monitor your portfolio fees: there are trading fees including spreads Emotions: It's hard to not get carried away by emotions when evaluating your stocks
Ultimately it's up to you to decide if you want to invest in individual stocks. Just make sure you understand the risks and go in with eyes wide open!
A listener asks the following question: "I’ve luckily survived the pandemic so far and my job has continued to be busy. Through the last few years, I’ve found that my savings have grown quite nicely but I’ve been hesitant to invest the extra cash into the market. Now I realize I have about $200,000 in cash that I can invest for the future. How do I get that invested when the market seems high? I know that I should do it, but it’s hard to pull the trigger. "The academic research shows that the short answer is to put it all into a low-cost total stock market index fund. But we're not robots, and this person is a N of 1 and that just feels really hard. Therefore I typically recommend for clients to divide the amount into 3 or 4 "chunks" and put a chunk in every 2-3 months. After the first chunk if the market goes up you feel good because you've made money. If the market goes down, you feel good because you have more to invest at lower prices. It's a win-win! My recommendation is to put $50k into the market today. Mark the calendar for 3 months from now and put in another $50k on that date. Do not look at what the market does, or where it is, just do it on that day. Of course, build a massively diversified portfolio of stocks and bonds, US and International. Have a plan for your money and stick with the plan. We also discuss: Automation is your friend. Automate your savings and investing. The research about putting it all into the market at once Even if you invest at market "tops", you still come out ahead in the long term. What to invest in: low-cost index funds. Have a plan!
If you have a question, please get in touch! financialplanningpod@gmail.com Resources: https://awealthofcommonsense.com/2020/12/what-if-you-only-invested-at-market-peaks/ (A wealth of common sense: What if you invest at market peaks?) https://mortonfinancialadvice.com/articles/is-the-market-overpriced (Is the market overpriced?) https://mortonfinancialadvice.com/articles/where-should-i-save-money-401k-hsa-529-ira-oh-my (Account Funding Priorities)
Find out more about Mike at https://www.mortonfinancialadvice.com (https://www.mortonfinancialadvice.com) and connect at https://www.linkedin.com/in/mwsmorton/ (https://www.linkedin.com/in/mwsmorton/)
I tell all my clients: you have to protect yourself from financially catastrophic events before we can plan savings and investments for your future goals. Insurance involves thinking about "the bad things" that might happen, so it's not a fun topic. But it's very important to ensure nothing comes along and wipes you out financially. In today's show we chat about: What to consider when reviewing health insurance? What are the premium, deductible, and out-of-pocket maximums? Who should consider Long Term Care Insurance (hint: in your 50s is a great time to consider it) What to look for in Home and Auto coverage? How to increase your liability coverage with Umbrella insurance. Save money on premiums by increasing your deductible.
While insurance might not be a sexy financial topic, it's critical to have the right coverage. Find out more about Mike at https://www.mortonfinancialadvice.com (https://www.mortonfinancialadvice.com) and connect at https://www.linkedin.com/in/mwsmorton/ (https://www.linkedin.com/in/mwsmorton/)
Would you like to have more $$ growing in a tax-free account forever? Let me show you how: Maximize your 401(k) contributions, $19,500 for 2021 into your Traditional 401(k) [or maybe the Roth 401k] Add after-tax contributions to your 401(k). Maybe 5%, $10,000 or even $30k. Whatever you are allowed within your employer's plan. Immediately roll those after-tax contributions to the Roth "side" of your 401(k) plan. Enjoy tax-free compounding growth and tax-free distributions in retirement!
Your 401(k) account is a great place to save money for your retirement. These accounts are typically used to save from your current income, get current tax deductions and grow your money for retirement. You are limited as an employee to contribute $19,500 to your 401(k). But some employer plans allow you to put in more money "after-tax", which means you don't get the tax deduction on those contributions, but they can grow tax-free towards retirement. But the best part is if you can immediately roll these after-tax contributions over to the Roth side of your 401(k) plan. Since you have already paid taxes on these contributions, there is no change to your tax situation. Now instead of having money growing in a taxable account, it's hidden in a tax-free account! Resources: https://mortonfinancialadvice.com/articles/individual-retirement-account-ira-roth-vs-traditional (Individual Retirement Account (IRA): Roth vs. Traditional) https://mortonfinancialadvice.com/articles/where-should-i-save-money-401k-hsa-529-ira-oh-my (Where should I save money?)
Find out more about Mike at https://www.mortonfinancialadvice.com (https://www.mortonfinancialadvice.com) and connect at https://www.linkedin.com/in/mwsmorton/ (https://www.linkedin.com/in/mwsmorton/)
You could use your Health Savings Account (HSA) to pay for current medical expenses. However, if you can, I recommend that you invest the full HSA amount into the stock market and allow it to grow and compound. The HSA is the only account that has triple-tax benefits: you don't pay taxes on contributions, growth or withdrawals (for qualified medical expenses). Did you know: You can save your receipts for current medical expenses and pay yourself back in the future? You don't have to have the money in your HSA currently, as long as the account is open, start saving receipts. After the age of 65, you can withdraw money from your HSA for any reason and pay taxes on the gains? This is like having an additional 401k account! Qualified medical expenses include dental, vision, hearing aids, chiropractic care, eyeglasses and more! You can contribute up to $3,600 as an individual or $7,200 as a family Plus an additional $1,000 as a catch-up if you're over age 55
Resources: https://mortonfinancialadvice.com/articles/health-savings-account-what-is-an-hsa-and-how-to-use-it (What is an HSA and how to use it?) https://mortonfinancialadvice.com/articles/where-should-i-save-money-401k-hsa-529-ira-oh-my (Where should I save money?)
Find out more about Mike at https://www.mortonfinancialadvice.com (https://www.mortonfinancialadvice.com) and connect at https://www.linkedin.com/in/mwsmorton/ (https://www.linkedin.com/in/mwsmorton/)
A backdoor Roth is a way for high-income earners to be able to contribute money into a tax-free Roth IRA account. It is a matter of contributing non-deductible money to a Traditional IRA and then converting that to a Roth IRA. The tricky part comes during the conversion: If you have any money in an IRA that has not yet been taxed, you're going to owe taxes on that. In today's episode we discuss: The difference between a Traditional IRA and Roth IRA A simple example of a backdoor Roth when you have no other IRA accounts. How taxes work on a conversion How you can still do a backdoor Roth even if you have other IRA balances A potential way to save on taxes if you can roll your existing Traditional IRA balance into your current 401k account.
Resources: https://mortonfinancialadvice.com/articles/individual-retirement-account-ira-roth-vs-traditional (Traditional vs. Roth IRAs)
Find out more about Mike at https://www.mortonfinancialadvice.com (https://www.mortonfinancialadvice.com) and connect at https://www.linkedin.com/in/mwsmorton/ (https://www.linkedin.com/in/mwsmorton/)
From savings to brokerage, 401ks, HSA, and 529 accounts: there are a lot of accounts to choose from! Where should you focus your savings? What is the "right" account to put your money to save on taxes and grow it for the future? Today we discuss the order of account funding, which accounts to focus on first, second and third. Listen as we discuss: Paying off high-interest debt first Saving for Emergencies Finding free money (401k match and 529 state-tax deductions) Health Savings Accounts (HSA) Roth IRA and backdoor Roth contributions 457 deferred compensation plans SEP IRA, 529s and more
Resources: https://mortonfinancialadvice.com/articles/individual-retirement-account-ira-roth-vs-traditional (Traditional vs. Roth IRAs) https://mortonfinancialadvice.com/articles/health-savings-account-what-is-an-hsa-and-how-to-use-it (Health Savings Account (HSA))
Find out more about Mike at https://www.mortonfinancialadvice.com (https://www.mortonfinancialadvice.com) and connect at https://www.linkedin.com/in/mwsmorton/ (https://www.linkedin.com/in/mwsmorton/)
A listener asked the following question: "My company just went through an IPO. I have been working for a large technology company for the past 7 years. I am 34 years old, single, and find myself in an entirely new situation. My stock is now worth over $4m dollars and I have no idea what exactly I should do next! How do I think about this new wealth? Do I sell some of my stock or all of it? What else should I be thinking about? I’m still working at the same company but might leave soon to explore other opportunities or take some time off work. Any suggestions or advice would be so helpful. Thanks!" Listen in as Julie and I discuss how to think about a windfall, including: Congratulations! It takes a lot of hard work, sacrifice and some luck. How do you navigate friends and family as you're suddenly a multimillionaire? Emotions are real. How to think about $4m in a single stock portfolio. How to handle taxes? What do you really want to do and who do you really want to be? Have a plan.
Resources: https://mortonfinancialadvice.com/articles/portfolio-allocation-how-to-think-about-your-investments (Portfolio Allocation) https://mortonfinancialadvice.com/articles/is-the-market-overpriced (Is the Market Overpriced?)
Find out more about Mike at https://www.mortonfinancialadvice.com (https://www.mortonfinancialadvice.com) and connect at https://www.linkedin.com/in/mwsmorton/ (https://www.linkedin.com/in/mwsmorton/)
What is a Donor Advised Fund? How does it work and why would you want to open one? What exactly are the tax savings? And be sure to listen to the end where I review some real-world strategies used by clients. We cover topics such as: A Donor Advised Fund is simply an account that you own. How to open a Donor Advised Fund How to transfer money into a DAF Why most Americans do not get a tax deduction for their charitable gifting How to use a "bunching" strategy. How to use a DAF in high-income years such as a bonus or exercising stock options or an IPO
Find out more about Mike at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
In today’s episode, I’m interviewed by Matt Robison in his on-air radio show Your Money - where we discuss Traditional IRA vs Roth IRA. Where should you invest your money? Which one makes more sense? And be sure to listen to the end where we talk about Roth Conversions and Back-Door strategies. We cover topics such as: What is an IRA? What is the difference between a Traditional IRA and a Roth IRA? Which type of account is best? If I’m young and starting my career, should I use a Roth? What if I’m in the middle of my career or about to retire? What is a Roth Conversion and when should I do that? What is a Backdoor Roth?
Find out more about Mike at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
In today’s episode I’m interviewed by Matt Robison in his on-air radio show Your Money - where we talk about Health Savings Accounts or HSA. What is this type of account? And how does it work?. And be sure to listen to the end where we talk about how investing in your HSA can save you thousands of dollars. We cover: What is a Health Savings Account (HSA) How do you qualify to open an HSA? How do you contribute money? How do you invest the money in your HSA? What medical expenses qualify for use in an HSA? How much money can you save? What is the best way to use an HSA?
Find out more about Mike at https://mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
In today’s episode I’m interviewed by Matt Robison in his on-air radio show Your Money - where we talk about Investing and Portfolio Allocation. What is a stock or bond? How should you think about diversifying your portfolio? And be sure to listen to the end where we discuss how to think about your portfolio and investing future.
In today’s episode, I’m interviewed by Matt Robison in his on-air radio show Your Money - where we talk about the latest Stimulus package. Have you received your checks? Does the unemployment benefit continue or increase? What are the changes when it comes to taxes and deductions? And be sure to listen to the end where we discuss what wasn't included this time.