Relocating The ‘You Are Here’ Marker On Your Own Financial Map

Posted @ 10:07 pm - Filed under 401(k)'s & IRA's, Financial Planning, Financing, IRS, Purposeful Planning, Retirement

To be fair, this post is my annual end of the year, ‘you should take stock’ post. Or, ‘time to take inventory’. Or, ‘figure out where ya stand’. Gettin’ the drift? So, I’ll make it short and as pain free as I can.

Start with your gross vs net job income(s). Are you satisfied you’ve done an effective job reducing your income tax bill? If not, where might you improve? I can give you some pretty cool ideas that don’t involve dollar one leaving your bank account. Oh sure, now yer payin’ attention.

Proceed immediately to your monthly expenses. Any trimming to be done? No? Really? Most folks can find something they either don’t need/want any longer or suddenly realize they’ve been auto-charged for a service they haven’t used for a year or more. That last one happens more often than you’d imagine. It’s happened to me. Don’t ask.

In our recent office move we literally saved about $3,000 a year by switching phone companies. We also saved in the neighborhood of $10,000 a year in overhead without even trying. This was a happy coinky dink due to the local market for office space. Also, we lucked out with the new building’s owner. A very cool guy.

Next, and this one is no doubt gonna cause most folks some pain, is this: Compare your net worth now compared to last year at this time. Don’t make a huge deal of it, just do it. It’s merely a bench mark. In a few years you’ll be doing the same thing and puff yer chest out with pride.

If you’re a relatively high wage earner and think your paycheck is a bit smaller than it should be, here’s a potential remedy. If you already own real estate investment property, and you make less than $100,000 annually, increase the number of exemptions you’re claiming at work. Depreciation is no different than kids when it comes to tax shelter. You hafta claim ‘em to get the dang shelter. Duh. So if you have say, $20,000 of depreciation you apply every April to your return, go to your employer and significantly increase the number of exemptions. It’ll have the affect of immediately increasing your take-home pay. It gets you your tax savings every pay period instead of once a year when you file your returns. Now tell me that isn’t cool.

Check all your real estate loans, both primary residence and otherwise. Home loans can now be had for under 5% at just one point. For most folks that’s a no-brainer — refi now. A $200,000 home loan at 6.25% with payments of around $1,230/mo. will drop to about $1,058/mo. at 4.875% which is readily available. Without goin’ through all the math, at one point plus a few other expenses, that loan will have paid for itself in about 18 months or so. That’s pretty good.

Tired of losin’ your caboose in the stock market under the guise of a retirement plan? Consider converting your 401k to a self directed IRA. You can then begin to make up for your market losses through real estate investment if you’re so inclined. Regardless of what the media would have you believe, there are regions out their with real estate values higher today than 12 months ago. Yeah, it’s true.

OK, that’s enough. See? Not too painful, right. I left much of the big list out, but you get the gist — review and update your understanding of where you are financially. Avoiding this exercise is an exercise in denial. That mindset rarely leads to anything good. But you already knew that, right?

Here’s another approach. Hit the Contact BawldGuy thingamajig and we’ll figure this out together. Purposeful Planning isn’t just a phrase — it’s a concept that works. It’s been working for decades now. Let’s see what your retirement can really be when it’s been turbo-charged. I’ve always liked the sound of that. Have a good one.

This entry was posted on Friday, December 26th, 2008 at 10:07 pm and is filed under 401(k)'s & IRA's, Financial Planning, Financing, IRS, Purposeful Planning, Retirement. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.