Ep. 170: Key Financial Elements to Focus on in 2023
Podcast 12/31
[00:00:00] Good day. This is Gabriel Shahin, certified financial planner and your host of More Knowledge, more Wealth here on every weekend, talking about all important topics of personal finance. My goal is to give you the knowledge you need to increase your wealth. Now to the listener, you could always reach out to myself or any one of our colleagues here at Falcon Wealth.
[00:00:17] Our phone number is (855) 963-2526. That's 8 5 5 96. Falcon like the Bird, or visit our website@falconwealthplanning.com. That's falcon wp.com For sure. Now I'm a principal of Falcon Wealth Planning. We are a fee only non-commissioned true fiduciary. . R A a. That's registered investment advisor folks, and we are independent registered investment advisors.
[00:00:48] Now folks, we handle everything that involves a dollar sign. We manage money as well, but we really focus on that comprehensive financial planning and that goes over where you are today. How are we talking about, looks like talking about taxes, investing insurance, estate planning, folks who name it, anything that involves a dollar time.
[00:01:03] We focus on now, tis the. Hope you've had so far a fantastic holiday season, but we are entering the new year, so happy new year in advance. But we are gonna talk about things that really should be doing in the beginning, beginning of the year. We should really be discussing the key elements of what you should be doing and focusing on.
[00:01:24] For this upcoming year, and so I wanted to give you some ideas for people in the new year. Now, everybody has resolution, new Year's resolution. As crazy as it sounds, I never really was big into New Year resolutions. I don't know what it was. I just, it was just never my thing, right? I just kept trucking along and doing things.
[00:01:41] As always, I like to think I'm always doing the right things, but you know, it makes sense to work out more. It makes sense to eat healthier. It makes. to save more. It makes sense to be kinder, to call family members. It makes sense to do a lot of these things to worry about you yourself. But I'm gonna focus, obviously cuz of the nature of the show about finance and I feel everybody should be doing this with the financial side of things.
[00:02:06] Now why is that you ask? Well, quite simply put is that everybody. With an extra amount of money, with financial security, with not having to worry about money, your stress level goes down and with a better least stress level, you have a better healthy life, a clearer life, and more successful life. So I wanted to focus on some ideas of what I've always recommended that people do for the New Years.
[00:02:35] And I'm gonna start off with something as simple as the obvious, and that is saving more. . All right. End of show. Easy as that. Thank you for tuning in with us. I'm kidding. I'm kidding. Let me be a little bit more specific, if I may. You may have a 401K at work. Maybe you should just try by upping your four allocation.
[00:02:56] By 1%. It's great to have a goal to max it out. I respect that. But how about you just try by 1% to raise it and after three months, which is if you get paid twice a month, that's six paychecks later. If it didn't really hurt you, try upping it another percent. This is the fantastic way to get you into the habit and get you in a situation where you can start saving.
[00:03:19] Towards your future. You notice I didn't say retirement, I said future. This is extremely crucial for you guys to make sure you have that success in your finances, but it's not just the 401k. Number one, what if you're maxing it out? Number two, what if you don't have one? Number three, so you get what I'm saying?
[00:03:38] Let's focus on the second recommendation is saving as little as $10 a month towards your Roth. I. , this is something that can make a lot of sense for you. So yet again, saving money towards a Roth IRA of only $10 a month, $10 a month, that's $2 a week. I think you can potentially spare $2 a week. . Another option is maybe the same $10 a month into if you're eligible, of course a health savings account.
[00:04:05] Now this actually saves you money in taxes. Now let me tell you, the Roth IRA is fantastic cuz what you put in, sure you don't get a write off for it. But all that future growth is tax free for you. That's fantastic. Who wouldn't want that, right? Exactly. So my point of course is an HSA is better cuz you get a ride off on the front.
[00:04:24] and then you could take it out tax free. Heck, you can even invest it if you like. So this is a much better option. Of course, this is all on the federal level. So this is important just with the $10 a month, cuz as you see that coming outta your account, you know that's for your future, that's for your need.
[00:04:41] Some of it even saving in taxes and more importantly, you now have a basis of getting to a situation and a point where you can retire comfortably. So really the New Year's resolution should be more of save first and spend. Think about that. Only save what you need to save. You should be talking and working with somebody, or at least just having a plan in place where you can just put in place a dollar amount of how much you need to save to be comfortable, and then anything after that.
[00:05:13] It's okay if you spend it. By the way, folks, if you're just joining us, you're listening to Gabriel Shahin, certified Financial Planner and President and Falcon Wealth Planning. We're here talking about all important topics of personal finance, so this is more knowledge, more wealth. . We are discussing ways that you can save just in general for financial future, just having a prosperous new year by doing these things.
[00:05:37] Let me kind of go over the second part, cuz remember I'm trying to teach you here to save first spend. Second is also putting a budget in place of how much you wanna save. This could be for the year, so this could be in your 401k. This could be in the Roth account. This could be a health savings account.
[00:05:53] This could be just your savings. Just whatever you have in the bank. Let's just say you have a thousand dollars in there. Let's say you want to get that up to $10,000. How much do you need to save on a monthly basis to get to that point now? $9,000. Okay, I get that. You need 9,000 more dollars. Now, if you're only getting paid, let's just say $500 a month, that's gonna be extremely difficult.
[00:06:14] right? So you have to understand your situation in general, and you have to be realistic with it. So Rome wasn't conquered in one day. You don't have to be extreme to get this done. So you could just focus truly on what you could save little by little. And by the way, you can spread it out. You can up your 401K by 1%.
[00:06:33] You could start putting $10 a month into a Roth 401k. You can put $10 a month into an hsa, and you could start saving by putting a hundred dollars a month in your savings. if, or paycheck. If you can afford it, I heavily recommend that you start doing that. If your goal is to get to $10,000 in savings, that's fantastic, because if you can do that, and once you get that goal, then you have to figure out what's set for.
[00:06:57] Is it emergency savings? Is it to buy a car? Is it by a house? And then once you figure that out, if it's truly for your future, then maybe you start looking at. and folks, that's where we can help with that. We are certified financial planners, folks. We've got offices all across. We help people nationwide.
[00:07:17] Our headquarters is here in Southern California. We can help you out. We can give you one to two hours, one to two meetings of our time at no cost. Folks, we'll offer a free financial assessment for you. Our phone number is eight five five nine six three twenty. 26, that's 8 55 96 Falcon like the Bird.
[00:07:37] Folks, we can help relate this show to your specific situation because finance, personal finance is more personal than finance. I can't just give advice and expect it to work for every single person listening, but what I can do is give advice to at least draw a point to have it relate to you where you should say to yourself, I can enact things to make my financial situation.
[00:07:59] these are the things you should be doing. There are additional strategies you could be doing as well, folks in the new year, I know a lot of people, uh, now these are for those who are over the age of 72 years old. They wait until the end of the year to do the required minimum distributions. And I respect that.
[00:08:15] Kudos to you. God bless you. But that's not the point. The point I'm trying to say is that why do you wait till the end of the. . Yeah, I knew you were thinking that. You're thinking that you want your money to grow more for the first 11 months because frankly, five outta six years it will grow . By doing that this year, wasn't one of 'em, or 2022 wasn't one of 'em, but historically speaking, it will grow.
[00:08:41] But why do you have to wait till the end of the year and procrastinate when everybody's taking it out? Technically what you could do is you could do it early in the. , but move the money. Take the required minimum distribution in stock and put it into a brokerage account. Now, that brokerage account can be just your name.
[00:09:01] It could be jointly held, it could be into trust. Whatever the case is, have it grow outside of the required minimum of the ira because that required minimum of distribution just has to be done this year and the calendar year, but, higher raises taxed at the highest of tax rates, which is your ordinary income.
[00:09:23] Why is that important to note? Because if you had that money in a brokerage account, it's always a lower tax bracket. Assuming you held it for over a year, you're gonna be in a more favorable tax situation. So even if you take your require minimum distribution, let's just say the markets are down 20% going into 2023, you take your money out of the rmd, you think you're selling low.
[00:09:47] Okay. You take it and move it into a brokerage account? Well that, and you have to pay taxes on that amount. That growth, once it grows outside, let's just say it earns back to what it did. You're not back at 20%, you're at 25%. Right, because a hundred thousand that went to 80,000. to make 20,000 on the 80 is a 25% increase.
[00:10:06] That 25% comes outside of the retirement account, and you're subject to capital gains taxation, which oh by the way, is a much lower tax rate. Our industry has it backwards, folks, where all this time they've been telling you to wait until the end of the year. I swear that's the IRS's ploy, so you pay more taxes.
[00:10:26] It frankly makes no sense, or it comes from a point where the, these broker houses. Don't want to open up a separate account because they're commission based and they're not making any additional commissions. It's just costing them more money. Well, if you open up at a discount brokerage firm, folks, it doesn't cost you any more money, right?
[00:10:43] They don't charge for those. So I recommend that you do this, folks, and if you need help with this, and this sounds right, if this sounds like something you may be interested in, folks, we can help. We do this on a daily basis. Folks, give us a call. Our phone number is eight five five. 9 6 3 25 26. That's 8 5 5 96.
[00:11:03] Falcon like the bird, or visit our website@falconwealthplanning.com. That's falcon wp.com. For sure. Now, there are a few more techniques to go over with you guys. I just talked about a required minimum distribution. Folks, there are a few more techniques to go over with you that could save you lots of money on your taxes and just make a lot of sense for you where you could start this planning.
[00:11:27] early in the year. Forget the savings plans, even though that's important and you should do it, but these are straight strategies that could save you a lot of money, folks. So I want you to just stay tuned with us. We got a lot more to go over with you, and we're also gonna discuss other ways for charitable giving and planning.
[00:11:42] That could make a lot of sense. Folks, I want you to stay with us. We'll be right back after a few words.
[00:11:48] Welcome back folks. This is Gabriel Shahin, certified financial planner and your host of More Knowledge, more Wealth here on every weekend, talking about all important topics of personal finance. Now, today we are talking about New Year and New Year's plannings, and we talked about saving plans of just saving an extra 1%.
[00:12:05] 401k starting off the year, see if that even affects you. If not, move it up 2%, maybe three months later. That could be six paychecks later. We talked about saving as little as $10 a month into a Roth ira. And listen, if you say you're low income and I get it, and it's very hard for you, or if you truly are low income, the government gives you up to $500 $10 a month.
[00:12:25] It's $120 for the year. The government will give you up to $500. I'll go as far as saying, doing $40 a month with the tax savers credit that are given for low income individuals. And the best part about that is you can put your money in a Roth and it grows tax free. You don't need the right off for it.
[00:12:40] If you're no low income, who cares? You should be doing a Roth ira if that's in fact the case you li, it's free. There is no cost to do it because the government gives you that money. . So in addition to that, you have the hsa, uh, and the Roth IRA as well. As we just discussed, um, we talked a a little bit as well about savings and just putting the budget out.
[00:13:02] Folks, I wanna go in more detail of that before I talk about the additional strategies that could help save you money for doing early in the year planning versus end of the year planning. So the next part is putting a budget out just on how much you spend on restaurants. Just say, Hey, listen, I'm not gonna spend more than a hundred dollars a.
[00:13:19] or a thousand dollars a month, or some of you crazy people out there, 5,000 a month or more, whatever the case is, just put it on paper that's saying, this is all that I can spend. And if you have a credit card and they itemize it for you, it's very easy to track your food expenses. This could be your Costco expenses, this could be your Kroger expenses or wherever it is, uh, smart and Final or Albertons or Ralph.
[00:13:43] So the idea for you is just to make sure you have something on track. And this could be something for allocating midyear expenses such as birthdays, ho, uh, holidays, anniversaries. This could be something as travel. So a lot of you might already do this, which is great, but then are you proud of yourself of where you're saving your money?
[00:14:04] If not, you need to re. . So we also talked in this first segment about the require minimum of distribution. How a majority of people, nine outta 10 people, wait until the end of the year to take out the required minimum distribution, which is logical, cuz most of the time people cash out their RMD and put it in their bank account.
[00:14:22] and five outta six years, yes, you are gonna make money by letting it wait, but have you ever thought about doing a required minimum distribution of just stock? You can RMD only stock into a brokerage account and let it grow outside of the ira, which is more tax favorable for you. This is another strategy to do, and I love this strategy.
[00:14:43] We did it for a lot of our clients in the middle of the year. Why? Because the markets were down 30 plus percent. It made a lot more sense to do the RMDs when the markets were down. This, of course, is for those who don't need the money. I must specify if you need the money, then you've probably already taken it out earlier in the year, or you're taking a monthly systematic withdrawal throughout the year.
[00:15:06] But I wanna go over some recommendations of Roth conversions. A lot of people wait till the end of the year to see what their tax situation's like, but what I like to recommend is why don't you take a look at and do yourself a tax projection. Your tax accountant may be qualified to do it. Most accountants out there what's called a tax preparer, okay?
[00:15:25] But you really need to do some. Planning. This isn't an accountant that you only meet with once or twice a year. This is somebody that you meet on a regular basis that does ongoing tax projections for you. This isn't just for business owners. This is mostly for people on the personal side. Why? Because your situation could yield of where you should save money, should you save it in your.
[00:15:45] Four traditional or your 401k Roth, should you be saving and withdrawing more out of your brokerage accounts. And for some people you can sell those gains and pay no taxes on it, depending on your tax situation. And then lastly, the Roth conversion. It actually makes more sense to do a Roth conversion in the earlier in the year.
[00:16:03] Why you ask? Well, the same reason you're waiting to do a required minimum distribution at the end of the year, five of outta six years, you will make money from January to December in addition. We're coming off a year where it's down 20% plus, depending on the INDs, you can convert early and the rebound happens in a Roth tax free.
[00:16:26] That could be huge for you. Unfortunately, I see a lot of people. Missing out on that. By the way, folks, if you're just joining me, you're listening to Cape Sheen, certified financial Planner and your host of More Knowledge, more Wealth here and every weekend talking about all important topics of personal finance.
[00:16:43] And today we're talking about just the year. And planning and beginning of year planning. And right now, these are the things you need to know what you could change next year, do the planning early in the year. This is why we're offering a free financial assessment, folks that can help relate this show to your specific situation.
[00:17:00] We are offering one to two meetings, one to two hours. Of our time at no cost, folks, there's no reason not to do it. There's always an excuse. Oh, tired after the holidays. Oh, you know, after MLK weekend, oh, you know, I'm preparing for taxes. Oh, we're going on summer holiday. Oh, we're dealing. There's always an excuse.
[00:17:18] I don't want to hear it. Okay, so this is the time. Starting the year. You need to take control of your financial situation, and by doing that, you are assuring yourself financial success. And that's why we're offering those meetings. If you need help, give us a buzz. Our phone number is (855) 963-2526. That's 8 5 5 96 Falcon like the bird, or visit our website@falconwealthplanning.com.
[00:17:47] That's falcon wp.com for short. We can help relate the show to your situation to answer the questions that you may have, and God willing finding a way to save you money that is the priority is finding legal. To help strategize, not play games with the tax system. No. Strategize is the proper way to talk of reducing your tax burden, and so by doing what's called a Roth conversion could make a lot of sense for you when you're in a low tax bracket.
[00:18:20] The other thing is just charitable. and so a lot of you like doing charitable giving. This makes a lot of sense and God bless you for doing so. But with the new tax laws, a lot of people aren't getting the write-offs you used to get because of salt limitations and the standard deductions being where they're at.
[00:18:37] This is important because you are, some people are not taking advantage of the strategy of a donor advised fund where number one, you can put in appreciated. , that's number one. And then number two, you can get a full writeoff for the year if you prefund your writeoff. And how do you do that? By putting into a donor advised fund maybe multiple years worth of what you would give to a charity.
[00:19:03] Let me give you an example. Let's just say you were giving $5,000 a year to charity, which is a lot of money, and God bless you for doing so, but let's say it's not enough to get a ride off. For it. Now, my wife gets upset when I say this, but you giving to charity does not help you from a tax point of view, which I know that's not why you give, but our job is to make sure you can maximize off it.
[00:19:24] So what you could do is you could pre-fund. 3, 5, 10 plus years. That's unlimited. You can put a hundred grand in there if you want, and you can get a write off all in that one year for that a hundred grand. This makes sense for, number one, making sure you don't get standard deductions going forward, right?
[00:19:41] Because you, you're losing out on those charity. And number two, if you're in a high tax bracket, you can write that off while you're in a higher tax bracket. This could make a lot of sense for you. A lot of people don't take that into account. They don't look into that, and it's unfortunate that they.
[00:19:56] Another strategy that you can look into, and this might be one of my last ones, but this is what's called a qualified charitable distribution. Now, this makes a lot of sense for those who are over the age of 70 and a half, where you could take, what's your requirement of distribution, and you can, don't take it, put in your bank account and then write a check to the charity.
[00:20:16] Have that qualified charitable distribution. The rmd, have it go and remember, it's at 70 and a half, not 72. You can still do it at 70. , it goes directly to the charity. Now you need a qualified custodian that knows what they're doing to do this. Um, not all custodians, uh, are good at this, but by doing this, it doesn't even hit your tax return.
[00:20:39] which is fantastic because it doesn't affect your agi. Your AGI doesn't affect your Medicare premiums, your social security withholding tax on that. It doesn't affect your agi. Other withholdings, which is for medical expenses and other other factors, it doesn't affect your 3.8% Medicare SUR tax as well.
[00:20:56] So I know a lot of people say, well, if I just give enough to charity, you get the ride off on the back end and that is. , but it does affect a lot of things on the front end. And by not understanding taxes and not doing proper tax planning, this is why it's extremely important to note that you have to look at your situation to deem what makes sense for you, what doesn't, what it may not be you, it might be somebody else.
[00:21:22] So it could make sense for, so my point is, this is why it's important just to talk to a professional to see what you should be. To make sure that you are saving the proper amount of money and not having the IRS win of this battle. So this is why I recommend giving us a call. Folks, we would love to help.
[00:21:38] We got offices all around. We help people all across the country, folks, and we hear, here's located our headquarters in Southern California, but we can help no matter where you are, folks. Our phone number is (855) 963-2526. That's 8 5 5 96. Falcon like the. where we can help relate this show to your situation because there are no one answer fits all.
[00:22:07] All I can say is for people who saved money, who saved first, spent later, most of the time, they do better than those who spend first and saved later, because whatever's in the bank account is what you're gonna have to. and you have to stay disciplined on the credit cards. And if you cannot cut 'em up, I hate to say it, but you gotta cut 'em up.
[00:22:27] You can't be continuing to get into these financial issues because of credit cards. So my recommendation is to you is to be disciplined. My recommendation is to be on top of your financial situation. And my recommendation is to work with somebody who can hold you accountable. Work with somebody who can make a partnership with the relationship, not just say, we're gonna manage your.
[00:22:51] Not just the sell you chunk, not just to take advantage of you. Here at Falcon North Planning, we are a fee only non-commissioned true fiduciary planners, and we would love to help folks. Give us a call. Our phone number is (855) 963-2526. That's 8 5 5 96 Falcon like the bird, or visit our website@falconwealthplanning.com.
[00:23:17] That's. wp.com for sure. Folks, that was a fast, fast show. I want to thank you for tuning in with us this weekend. Feel free to reach out to myself or any one of our colleagues here are at Falcon Wealth Planning. Would be happy to help folks. Have a fantastic week. Have a great new year, and God bless.