#263 – [RERUN] Year-End Financial Checklist for Families: Year End Planning

Hey, money bosses, Anna's here, and welcome back to the Money Boss Podcast. Today, I want to chat about year end money goals. I know that many of you are heading into the holiday season, and it's almost around the corner, and the focus on money and how we plan for it is kind of be deviated for all of us, and that's okay. So I'm not here to show you the finger and say you're making the mistake, but I just wanted to share with you a few things that I am working on personally for the rest of the year. I talk a lot about money on this podcast, and the angles of where we can be taking certain steps. But money management is not just about saving and spending and investing. It includes other parts of our life that really closely tie to the money. So I want to focus on that angle here today, and here are a few things that I'm going to be working on for the next six to eight weeks. Number one, I want to spend some time and update our estate plan. We've created it when Liam was born, or really had a formal, formal estate plan where we had all of our document documents drafted. But I think it's time to revisit it, and it's been a few years, so I want to kind of re look at it. Nothing really changed in terms of what we want with it, but I've picked up a few new ideas about and thoughts, not really ideas, but maybe thoughts around Guardian selection. And this is really applies to those who have minor kids, and if you have family out of state, which is for me and Uri, we do, my family lives on the East Coast, and so the guardians that we selected are going to be coming from the East Coast, right if this ever has to be an issue. So I just, I just want to think through and make sure that if the situation arises, that Liam has the best plan for him laid out. So that's really what I want to focus on there, and also at Main Street financial planning, this year, we've just created what's called, I want to call it a one page estate plan summary document that we're going to give to all of our clients. And basically what it does, it outlines and highlights all the main pieces from various documents that you have in your estate plan. So for example, if you have a will or trust or durable power of attorney or health care form, there's certain things that on those documents right, certain parts that are worth highlighting. So we've created what we call a one page estate plan that helps to have that summary, and so I want to do that for Yuri and I, and actually share with folks that are going to be involved in helping us execute that estate plan. So that's my number one priority. Number two, I want to beef up our travel budget. We're planning a big family trip in February next year for my 40th birthday, and more on that to come, since I'm still kind of working through all the travel arrangements, but we also need to sit down and based on what we're trying to do, finalize what our actual budget is going to be, because I kind of done rough calculations, and I was also thinking that, because this Is happens to be all around holidays. How can we use this goal, right, on this, the trip that we're going on as a as a way for to share with friends and family. Say, Hey, I don't really need any gifts, but we are going on a trip, and it would be helpful, right? Instead of giving me, I don't know, a $20 something you have to maybe this, you know, the funding mechanism would be much more appreciated. So there are definitely, I haven't, I've looked at this briefly, but there are, as you can imagine, apps that or programs that allow you to, you know, receive money. I mean, the simple one would be them or allow you to receive money from friends and family. So I am just, I haven't really formalized how to do that, but at the very least, you know, I can tell, like my mom and dad, like, don't need any gifts. You know, money is always welcome instead of that. So just a one clever idea to beef up our travel budget, of course, saving and, you know, kind of looking at our expenses always help. I also wanted to in this kind of realm of conversation for travel, which I sort of tend to do more of last minute. But for next year, I want to put a concrete plan together on what we're going to do, because I'm starting to find out this is the first year for Liam being in preschool that we actually have a concrete calendar of when he's going to be out of school, what days he gets off, and holidays and all of that. So I have that for next year, and I want to specifically be more intentional in scheduling our travel and days that we're going to take off to. Work with, you know, around his school breaks, and also to for my calendar at work, because I do have certain times of the year where we get to be busiest, and like right now, end of the year tends to be that so kind of ramping that all into that category. My number three item is, I want to beat the crowds for all the Christmas and holiday shopping. I am not a big shopper for when, you know, when it's the most convenient or the most or the least expensive, which is like going out for Black Friday deals and things like that. So I want to, I don't, I don't enjoy that anymore. I used to do that when I was younger, but I do want to put some specific steps for myself to be intentional and actually put a list together what it is that I need. And you know, maybe even just shopping on Cyber Monday and ordering all of my gifts online, which at this point is, I think, the most preferred method for me, so and two like reaching out to your family members and friends, and maybe this year could be without gifts, right? Or maybe there's other ways that you can spend time for holidays that does not require this crazy running around trying to buy a gift or trying to come up with ideas for gifts that may not be so much appreciated. And I will link a few episodes that I've done in the past for this topic, but there are ways to give somebody a gift without necessarily spending money. So what are some of the ideas that you have where you can actually just put time? So number four, my list is to work on my taxes. Now this is also like end of the year stuff, but I have my bookkeeper finishing up all the business finances, and then your and I usually have schedule a meeting with our CPA, like in November or early December, just to kind of start the initial draft of what the tax situation will be like for next year. Because we we want to start to be ready. And the reason for sort of doing this in November, December timeline is because, for for those of you who are business owners or self employed, or you have ways to make adjustments to your you know, to your taxes, or how much you're deferring, or some of the creative ways, right? Maybe you can save extra money in your retirement plan, or you can fund your health savings account. So I want to go through that with the seat, you know, with our CPA, so that he can give us concrete steps. Like, here are the things that needs to be done now and then before we file a tax return by April 15. So that's typically a standard item to do. But this year, I'm really intentional. I already got a meeting on a calendar, so we're ready to go there. And last item on my list is I want to invest more energy, time, money in my health. This year's theme for me is wellness. I stated that for my birthday in February, and I've really been intentional in focusing all my efforts at, you know, looking at what kind of food I eat, being consistent with my workouts, getting enough sleep, trying to manage stress, taking supplements. And so I've, I've really done a lot of things differently with this focus. And so this, this next few months before the year runs out, I'm looking forward to having more dedicated time to rest and, like, really mentally recharged. And I know it's not about just like not working, but sometimes you know, different types of activities you do at work, you know, stimulate you differently, or even stress out you more. So I want to be focused on that, because I really, truly believe that if you're healthy, you are wealthy at the same time. So it's, again, not just the dollars in your bank account, but how you approach all of that. So there you have it. It's not your typical financial planning year end checklist. And I know you can google for those, and they are pretty standard, but I wanted you to to be encouraged to think about,

what is it that you can work on one, two or three items by the year end, so that you can get started ahead for next year? Because I know professionally that money management, money goals, getting a financial plan done all of that is a great new year's resolution. And when you show up here in January, it's like you're a bit too late. So get yourself started on some of the stuff, and give yourself some time, if you have, you know, days off during holidays and extra time off to kind of plan for that. So, but I'm curious to hear about what it is that you're doing for your year end, money management and money goals. And do share with me, and let's stay accountable to each other, you are welcome to also send me some questions. I'm always curious to learn and see what other people are doing. I'm excited today to share with you five year end. Smooths you can make. Now, I know that December can be busy with all the holidays and things that we're spending our time on and money. However, I think you all would agree that it is better to have more money in your pocket than in someone else's, and I'm referring to our government. So here are some ideas of how you can strategically plan and still execute, even though there's only a few weeks left in this calendar year. Okay, so number one, I want us to think about long term. This is probably a financial planner hat that I'm wearing, or the way that my brain has been, you know, adjusted over the years to think ahead and to think long term, even though there's so many things I'd rather be doing now, and I know you're thinking the same way, but we need to have a long term goal, and one of those big goals for all of us is to retire one day, or work class or be financially independent. However you want to refer to this event I am talking about making sure that you've taken advantage of all the options you have in order to maximize your contributions for this calendar year. So, for example, if you're self employed, you have number of options of what type of accounts you can set up so that you can contribute and realize some deductions for those contributions. Now, if you're employed and you have a retirement plan at work, you're probably running against a really tight deadline if you haven't maximized your contributions. And I'm talking about a 401, K type, type of a plan. Maybe you work for the government and you have a Thrift Savings Plan, or you work for a nonprofit and for 3b type of plan, they're all the same in terms of what happens and how you can defer some of your income. It is safe for retirement, and you also get a deduction on your income in your taxes in this calendar year. So check your pay, pay stub. Okay, pull it out right now on the screen and see how much have you contributed this year? You you could have saved 20,500 and then if you're over 50, there's additional catch up contributions. So make sure that you're hitting those limits. Now, for self employed friends, you have an extra few months to make sure that you get all of your finances in order, because I know as as a self employed or business owner, things, things can get really crazy at the end of the year. However, it's not even that. It's because there's some deadlines that are associated with filing your business and personal tax return, you actually have all the way until April, when you complete your final tax returns to open and fund retirement type of accounts, such as traditional IRA or your self employed SEP IRA. So my point here right now is for you to if you haven't started making plans. At least look at where you are, put some funds aside, because this is going to come in handy when you're completing your tax forms very shortly. Okay, all right. So moving on to number two. I know we've had a very crazy year in the stock market and bond market as well, and just any market, really, I think probably should start by saying we had a very crazy year across the board. And I want you to start thinking strategically and maybe potentially benefiting from what has happened in terms of losses that we have seen right and on our statements, on our accounts. I know a lot of you are putting your heads in the sand and not looking in and checking on things, but I think the strategy should be, how can we capitalize on it? So what I'm referring to here is called tax loss harvesting. Now for this kind of exercise, I would urge you to connect with your financial planner, or rather, actually and to your certified public accountant or your tax preparer, someone who can model this for you on a tax return. But the point here is, how can you use the losses that exist on paper? So when you log into your account, and it's this is rather advantageous to do in your taxable account, not in your retirement account, but in your taxable or brokerage account. What do you have there? Are there any holdings that currently display as a loss that you can sell right now realize those losses right? The loss is not real until it's realized. So just because you log into your account, and you see negative balances because market fluctuates, whether it's a stock, a bond or any other types of investments, until you actually press sell button and you realize that loss, it's really not that existence. So if you're thinking that you can do that, this, this. Calendar year, then these losses can help you offset some of the gains that you may have realized early in the year, or these losses can be carried forward, which then in future years you can use to offset more capital gains, some of it, not a very big amount, $3,000 can be used to offset your ordinary income. So it's a strategic move, but again, given the timing of it, this is something to definitely take a look. Now, for those of you who are charitably inclined, this is another way that you can defer some of your income, is if you can group some of your charitable contributions in one large sum. In this calendar year, lots of brokerage houses, such as Vanguard of fidelity have something that is called donor advised fund. So it's an investment type of an account where you contribute an X amount of dollars depends on, you know what, what amount you really want to contribute for charitable contributions this year, but you can put larger sum into that account and take a deduction on your

on your tax return for this year. So think about maybe you can group your contributions for 2022, 2023, or next five years, and take our la rather large deduction. And what's what's interesting about these types of accounts is that you take a deduction in this calendar year, but you don't have to distribute the funds right to the charities you have all the time in the world. You don't even need to know or have an idea right now what charities you want to fund, all you really need to do is think about, can I afford, right? So this is supposed to be a line item in your budget to Can I do this this calendar year, and won't worry about making sure that you get these funds into that account before December 31 okay, I would if anything, this is probably one of the most urgent items, if you wanted to jump on it to do in the next couple of weeks. Now, number four item on my list would be for those of you who are parents and saving or grandparents too, or saving for your kids or grandkids college education. And I am talking about funding, or pre funding, your 529 college savings accounts. There are about 35 states offer some sort of tax deductions for the contributions into these accounts. Now for those of you who live in California, unfortunately, we do not get a state tax deduction for the contributions, even though we pay very high taxes here anyway. Those are sunshine taxes that I am used to paying, right or I've had a you know, over the years, sort of growing into paying here. But there are other benefits of living in California. So back to the subject, if you're contributing to a 529, plan, and your state offers a tax deduction, maybe you can pre fund some of these contributions, or make sure that you at least fund to what your goal is. So I want also remind you to come back and look at or think about, what is what kind of college are you funding? Are you funding a college that's going to be a four year in State University, or you're going to fund a four year private university? So what are those contributions on annual basis or monthly basis needs to be if you have an ability to pre fund that that's also great, but hopefully this is just a reminder for you to make sure that you do that if your state does not offer a state tax income deduction, that's okay. Contributions in those accounts are also going to grow tax free, which is probably the biggest advantage of all, because down the road, when you take funds out those accounts and one account to two, however many you have to find your kids college expenses. You're not paying any taxes, so even if you don't get a big deduction right now, also think about future, because you're giving yourself an opportunity to grow those contributions tax free. And my last item for you today is to think about what deductibles bills you can pay in advance. Now I think for this particular step, we may want to pull out our tax return and take a look if you were itemizing your deductions last year, or if you are a candidate for using a standard deduction. Now I know that from year to year, these things can change. Maybe you did itemized, and this year you're going to look at standard deduction. It makes the most sense. But I want you to know that depending how you file your tax return, whether you're filing it as a single person, as a married couple or as a head of household, these limits are differ. So for example, single person. Has $12,950 a married couple has $25,900 dollars, and then has head of household is $19,400 as a standard limit deduction. So in order for you to kind of fit into that amount, or if you adding up all your deductible expenses and they exceed that amount, then you would be a good candidate for using itemized deductions. So what goes into that itemized deductions pile? Because the higher that amount, the more you can deduct. So for example, number one biggest expense for all of us is a mortgage interest. So can you prepay an additional mortgage interest ahead of time to beef up that category? Okay? So can you make one extra payment, right? Or whatever it is. Next category that's popular would be unreimbursed medical expenses that exceeds 7.5% of your adjusted gross income. Now this tends to be a real tricky because let's say you have adjusted gross income of $100,000.07 and a half percent of that is $757,500 so you need to have more than that in actual medical expenses that weren't covered by insurance that you have to pay out of pocket to deduct. So this is, this is for some some people may be a tricky to meet, but it's an item that's available. Property taxes is the next one. Now, however, we do have a limit of 10,000 for state and local taxes, but it's definitely worth to consider, if you haven't hit the limit of 10,000 maybe you can prepare your property tax bill for next year. And my last idea here is for parents of college students who may want to prepay either a first quarter or a semester of tuition, even though you may not itemize your deductions or take advantage of what's called the American opportunity tax credit that is worth of $2,500 it is subject, however, to adjusted gross income, or what's called modified adjusted gross income, and it's about 160,000 for married couples. So here's a list of items that you can work on immediately and probably give yourself a substantial savings in terms of deferring some of your taxes, saving for long term goals, making sure your Kids college education is funded, and perhaps saving a few extra dollars. Let me know if you have any questions and happy tax planning.