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Creative SALT Workarounds

Creative SALT Workarounds

One of the most hated tax provisions for people in higher-tax states is the so-called SALT limitation on state and local taxes. 

 

 

What is the SALT Limitation?

 

The provision was part of the Tax Cuts and Jobs Act, which only allows taxpayers who itemize their deductions to deduct a maximum of $10,000 on their federally taxed income for local property, sales, and income taxes paid to state and local governments. The limitation is especially punitive to joint tax filers because the $10,000 limit is the same for single and joint tax returns. 

If spouses file separately, each can only deduct $5,000 each of these local tax obligations.

 

Creative SALT Workarounds

 

Several states have proposed creative workarounds for this limitation. One possibly includes allowing state tax obligations to be paid as a charitable contribution, which would make them more likely to be deductible. The IRS publicly frowned on the charitable workaround. So, some states—Louisiana, Oklahoma, Rhode Island, Wisconsin, New Jersey, Maryland, and Connecticut—managed to find a different structure—and surprisingly, it looks like the IRS is going to go along.

The workaround only works for individual owners of pass-through businesses like a partnership or S corporation. The idea is that the company—not the individual taxpayer—could pay the SALT taxes. Then, they can take a deduction for these expenditures at the business level. The value of the deduction would pass through to the individual business owners.  

 

The Future of SALT Workarounds

 

Would that be legal? On November 9, the IRS released Notice 2020-75, which agreed that pass-through businesses could claim deductions at the business level for state and local income tax paid. There were state laws that would shift the tax burden from individual owners to the business entity. You can look for more states to follow the lead of the pioneering jurisdictions and for taxpayers to set up side businesses as a way to get all or part of this valuable deduction.

If you’d like to speak with a financial advisor, please give us a call at 619.255.9554 or email us to set up an appointment.

 

Key Financial Tips for Aspiring Entrepreneurs

Key Financial Tips for Aspiring Entrepreneurs

Many Americans retire from the office job that they held for several years and decide to go into business for themselves, becoming mid life entrepreneurs. Others don’t wait to retire but leave the corporate world to launch. Of course, some people never work for others but engage in entrepreneurship from the very beginning. 

The world of having your own business is quite different from the corporate environment. There are a few things to remember about business finance and personal finance when you leave your regular employer to hang out your shingle.

In honor of National Entrepreneur’s Day, we’re providing this checklist to assist new business owners. It’s an overview to help ensure that your finances stay on track even through the risky business of owning your own business.

 

Personal Finance

 

Don’t forget about retirement

Sometimes new entrepreneurs need to tap into their retirement accounts to get their idea off the ground. Or you may assume that you’ll eventually sell your business and fund your later years with the sale.

But the power of investing for retirement lies in the compounding of your annual returns. The longer your money has to grow, the less you need to save. If you get too close to retirement age without having saved enough, you’ll need to come up with a lot more money than if you had started earlier.

Fortunately, there are plenty of employer retirement plans available for business owners, whether you’re a solopreneur or you plan to gather a team. Start socking it away as soon as possible so you can allow the power of compounding to do its work for you.

 

Emergency fund

Your back up fund is especially helpful when you’re launching a business so that if anything goes wrong in your personal life, you have money to keep you going. No one wants to load up their credit cards unnecessarily. Give yourself some peace of mind by having this cushion in place before you launch.

 

Insurance

If you have significant assets like a house or brokerage account, you’ll want to form a business entity for your company. That way, creditors can’t pierce the corporate veil to take your assets to pay off business liabilities. You need to follow the rules of whatever entity you choose to stand as a corporation against unexpected legal confrontations. As an entrepreneur you might take risk with your ideas and creativity, but not with your ownership.

Protecting your assets through a corporate structure is one form of insurance. Naturally, the other is actual insurance products from the relevant companies: umbrella, vehicle, homeowner’s, and life. You might also want to consider long-term care and disability insurance, depending on your situation.

 

Review for leakage and unnecessary expenses

Regularly sit down with your spouse (if you’re married) and review your expenses. Are you currently paying for subscriptions that you no longer use? Have costs crept up in any particular area? 

Your household should also review your investments regularly and make sure that you’re not spending extra on taxes or unnecessary fees.

 

Business Finance

 

The mindset that time is money

When you’re in a corporate job, it’s easy to spend whatever time you need to get the work done and not think about it too much. But when you’re running your own business, you need to account for the time the same way you account for money.

Every hour that you’re working should have a purpose and the same for your staff. You may only need a part-time assistant and not a full-time one, for example.

It would help if you had a reasonable estimate for what an hour of your time costs. That can help you decide where to prioritize your efforts. If your hour is worth $200, should you use it to work on a task that only costs $50? 

That also tells you which clients to go after with your marketing budget: only the ones that can afford your $200/hour services.

 

Measure the right numbers

When it comes to businesses, too many owners focus on vanity metrics such as revenue. Or base their marketing efforts on social media on “likes” or how many followers their account has.

The business should be making money for you at a certain point, which doesn’t necessarily happen in the first year. That means that you should think of your bottom line as the most critical metric. What profit is your company bringing in? 

What clients are your marketing efforts bringing in? Likes, follows, and the number of followers generally have nothing to do with your bottom line either. Engagement is the name of the game on social media, and visitors to your page or store are what counts in advertising.

If you’re not on top of what social media channels and metrics you should be following, be careful about whom you ask to help you. Make sure they understand that marketing is not about the superficial indicators but how many people are coming to your business to convert into customers.

 

Insurance

Not all businesses require business insurance. It depends on the field you’re in and what you’re doing. For example, financial firms usually need at least E&O (errors and omissions) coverage. If you’re not sure, ask the people doing similar work what they have.

Or look at what your potential clients might require. If not everyone in your industry has E&O, for example, but the larger clients all need it, you should probably get coverage too. It is an added expense but may end up being well worth your while.

Launching a business is risky in itself, given that only about half of new businesses survive their 10th year. Give yourself a little peace of mind when you can.

 

Manage cash flow and expenses

As a business owner, you’ll soon learn that cash is vital. If you’re not invoicing clients quickly enough and not following up on accounts receivable, your life will be more unpleasant than it needs to be. These administrative tasks may not have been a focus for you in your corporate job, but it is incredibly important in your own firm’s early years.

Similarly, keep an eye on expenses. Starting, you should keep your fixed costs as low as possible. Don’t rent an office that you don’t need or hire staff before you need them or can afford to pay for them. 

 

Want to review your finances before you launch your business? Give us a call at 619.255.9554 or email us to set up an appointment.

 

Keeping your team productive while working from home

Keeping your team productive while working from home

Since many of us continue to work from home, ensuring that employees stay productive is a key concern for many business owners. No doubt, you’ve hired mature people who get their work done, and find that micromanaging them is not only unhelpful but counterproductive. Here are some other ways to ensure that they’re able to stay motivated during this time.

Provide them with the equipment they need

 

Now that everyone’s working from home, they need the technology to succeed. Your firm should have a paid web conference account so that everyone can use it to meet virtually, without time or number of participant limitations.

In addition, if you don’t already have project management software, you might consider investing in it. This allows the team to collaborate on tasks and provides online forums to interact with each other. It also removes the manual need to rely on spreadsheets to keep current on shared tasks. Some of the management apps also include chat or messenger capabilities, but if not, there are other solutions that provide them for the team as well.
When people are back in the office, these software apps can help employees to continue to work together as a team.

Promote the use of dedicated workspace

 

When employees work from home only occasionally, it may be fine for them to sit on the sofa with their laptop. But once they’re working from home for multiple days in a row, they need to have an ergonomic setup to avoid injury. This normally requires dedicated space to work in.
In addition, having a space that’s separate and just for work helps both the employee and their family to distinguish between work time and home time. Which helps them be more productive at work.

You might consider offering your employees a stipend to purchase necessary equipment, such as a computer desk and chair that can be adjusted to the correct height for ergonomics. The space may be temporary during coronavirus, but at this point in summer 2020, it certainly seems that working from home is going to continue for several more months.

 

Institute short daily check-ins

 

Because there’s no longer a space for people to catch up or talk to others about how they’re doing, a daily check-in is beneficial. (Agile project management teams use their “stand-ups” to great benefit during project sprints.)

The check-in helps employees stay connected to the team as well as manage their priorities. You might choose to have one-on-one check-ins with direct reports, or a small group check-in so that everyone knows what everyone else is doing.

Teamwork is a little harder when the team isn’t co-located with each other, so the more you can foster connection the better.

Encourage self-care and the establishment of regular “office hours”

Many workers, while they may enjoy certain aspects of working from home, may also become overwhelmed. Particularly those who have small children, since they’re unlikely to be able to find care at the moment.

Therefore, encourage them to take breaks. This helps employees come back refreshed. It also allows them to spend time with loved ones, which may help them feel less overwhelmed. Support exercise, nutrition and sleep as best you can without adding to the concerns that employees are already feeling.

Managers need to be more visibly available than usual to provide support and handle questions that come up in this new environment. Setting virtual office hours lets everyone know when they’re available for help, and they can also use the messaging apps so that employees know they’re ready to help.

 

Remind employees to dress for work

 

Having them sit down at a dedicated workspace in the clothes they would normally wear to the office helps maintain normalcy, so you should promote business casual even at home. People tend to be more productive in work clothes than when they wear sweats or PJs. Plus, they’re already dressed if a client or colleagues asks for a video call.

Team building that’s not about work

 

In the office, managers typically create some space for their employees to discuss hobbies, the news, and other topics. It helps everyone bond and also relieves some of the work-related stress that tends to build up. Just because your employees aren’t in the office at the moment doesn’t mean that you can ignore team-building and the strengthening of relationships.

You might consider leaving a few minutes open either before or after a video call to give everyone a chance to catch up. Or host a virtual happy hour occasionally after work or some other online team-building experience. It’s a great time to be creative and help employees feel like they’re part of a team that cares about them.

 

Tailor internal communications

 

You might be surprised to find that 62% of employee emails aren’t important. Do your part to reduce the amount of emails you send them. Segmenting your internal audience for a marketing or communication campaign, just as you normally do for external communications, can help reduce email overload.

Give workers the right information that they need, without too much bulk from irrelevant data. Understand what they like and what’s actually important for them to know. Make sure your messages are mobile-friendly so your employees can access them no matter what device they’re using.

 

Mutually set expectations

 

You and your workers are dealing with an unforeseen pandemic, which means that both employee and employer are venturing into unknown territory. Setting expectations accordingly will help you both feel more comfortable while they’re working from home. This helps avoid stress and disagreements, which will make an already overwhelming situation worse.

Decide what is acceptable and what is unacceptable on both your parts. For example, the employee is expected to attend the daily huddle at a specific time in the morning.
In turn, you will not spring an unannounced video call on your employees. They’ll have the time as they may need to make child-care arrangements or resolve some other issue before turning on the video chat.

You may want to institute time-tracking and communication policies as well. Having these determined ahead of time will help everyone work together more smoothly.

 

Is the work-from-home setup making you concerned about your finances? Feel free to give us a call at 619.255.9554 or send us an email. We’d love to hear from you.

Are you on track for retirement?

Making sure you will be ready for retirement can be overwhelming. Funding your retirement accounts over the years is just one part of your journey to the retirement of your dreams. A Certified Financial PlannerTM can help you navigate the complexities of financial planning. Talk to a Financial Planner>

Dream. Plan. Do.

Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.

The Secrets of 401(k)s

The Secrets of 401(k)s

 

The 401K, a widely used retirement vehicle offered by employers, is well known. But there are a few facts that you might not already be aware of.

History and a brief overview of 401(k) plans

Now the prime retirement account vehicle for full-time employed workers whose companies offer the benefit, the 401(k) was not originally designed to be the retirement account for the masses.

It was created as a way for executives and others to avoid taxes on their deferred compensation. Later, a benefits consultant wanted to find a way for employees to save while receiving an employer match, and in 1981 the IRS allowed employers to fund these accounts through payroll deductions. That kicked off the account’s popularity.

A 401K eligible employee can set aside up to $19,500 in 2020 into the plan. If over 50, they can also add a “catch-up” up to $6,500. Some firms provide a matching contribution up to a certain percentage or dollar amount, free money to the employee, and tax-deductible to the employer.

The match is always pre-tax, but if the option exists in the plan, the employee can choose whether their contribution is pre-tax, known as Traditional, or after-tax as a Roth. Typically, the plan sponsor (usually an investment services company) provides a menu of conservative to aggressive options so each employee can invest according to their particular strategy.

Because they are employer plans, 401(k)s are strictly regulated. A third-party administrator or TPA usually oversees the plans, so the employer has no influence over an employee’s account and can’t monitor it. Requests for withdrawals and rollovers are generally sent to the TPA to take care of. 

 

401(k) Overall defined contribution plan limit

Many people tend to think of the $19,500 (or $26,000 for those 50 or older) to be the limit. You can add to that the employer’s matching contribution for the total investment for the year.

Investors can also set aside $6,000 in an IRA, plus $1,000 catch-up for the 50+ crowd. (This money may or may not be tax-deductible, depending on the investor’s income, but it can tax-deferred even if you can’t take a deduction for it.)

That’s $25,600 or $33,000 to be set aside tax-deferred, depending on your age. But is that the maximum allowable? Not necessarily.

As they used to say on the informercials: But wait, there’s more!

The IRS caps the total amount of defined contribution plan limits at $57,000. The missing component, after the employee’s 401(k) contribution and the employer’s match, if any, is an after-tax contribution to the plan. Not all plans allow for this, but some do. This is the limit for solo 401(k)s and SEP IRAs as well.

Imagine that you’ve contributed $19,500 to your plan. Your employer match has kicked in $6,000, bringing the total to $25,500. For the $57,000 plan limit, the catch-up contributions don’t count.

Therefore, you can add to that $31,500 after-tax to reach the upper limit of $57,000. Why would you add in additional funds that are not tax-deductible? You may not get the current year tax deduction, but it will grow tax-deferred until it’s time to take the money out.

 

401(k) fees and retirement withdrawals

It’s essential to consider the fees in your plan and the options. If your plan sponsor is an insurance company, you may be paying an additional “separate account” charge that may go by the name Variable Account Charge or Mortality & Expense (M&E).

Plan sponsors, whether insurance companies or not, may charge the employer additional fees as well, which may or may not be passed down to you. They may offer other services such as “advice” for an additional cost, but you can most likely find similar advice more cheaply by asking your financial advisor.

When choosing your funds, look at the expense ratios and the share class (if you’re investing in mutual funds.) Those with high expense ratios and share classes that are not labeled “institutional” or “load-waived” aren’t good for your bottom line.

Also, read your plan documents to see what kinds of withdrawals are allowed once you’ve reached age 59 ½ and can withdraw without penalty. Some plans don’t allow you to withdraw monthly, and may restrict you to annual or quarterly withdrawals.

 

Are you on track for retirement?

Making sure you will be ready for retirement can be overwhelming. Funding your retirement accounts over the years is just one part of your journey to the retirement of your dreams. A Certified Financial PlannerTM can help you navigate the complexities of financial planning. Talk to a Financial Planner>

401(k) Rollovers

In some of our previous articles, we’ve mentioned that you should consolidate your like-kind retirement accounts, i.e. Traditional with Traditional and Roth with Roth, rather than having a number of accounts from previous employers sitting in old 401(k)s.

Some 401(k) plans allow for rollovers into the plan itself. This might not be a bad idea if you’ve investigated the plan in detail and know that the fees are low. And that you can withdraw funds whenever you want after you’ve reached 59 1/2.

Another option is to roll all your 401(k) plans into an IRA once you leave the companies that sponsor them. Typically IRAs have lower fees, fewer restrictions, and a bigger menu of investment options than employer 401(k)s.

Either way, you’ll probably have some paperwork to fill out. The best way to roll funds into or out of a plan is to perform a direct rollover, where the funds go directly from one service provider to another. Many can do this transfer electronically, which is safer than having checks mailed out. Sometimes, the check will be mailed to your address but made out to the new financial company, FBO (for the benefit of) your name.

In an indirect rollover, the funds come to you instead. You have 60 days to deposit all the money back into a retirement account. If you don’t, it will be considered a withdrawal, and you’ll owe taxes and perhaps a penalty if you’re under 59 ½. If you only invest a portion of the money back in, the remainder is also considered a withdrawal and taxed and potentially penalized.

 

Stay in the game

You likely already know that staying invested is the name of the game, so we can’t call this one a secret.

However, it can be difficult when the market is volatile. And even when the market is relatively calm!

The key to staying invested is to have a diversified portfolio with enough aggressive funds (stocks) to reap the gains when the market is rising. And enough conservative or noncorrelated money (bonds) so that you can sleep at night when the market is dropping.
Since no one has a crystal ball, it’s important to diversify at an investment level: international and US, small, large and medium-sized companies, government and corporate bonds.

Do you need some assistance with your 401(k)? Or are you thinking about opening one up for your own business, whether you’re self-employed or have some staff? Give us a call at 619.255.9554 or email us to set up an appointment.

Dream. Plan. Do.

Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.

Paycheck Protection Program Update

Paycheck Protection Program Update

The U.S. government has extended The Paycheck Protection Program (PPP). Here’s a brief overview of what you need to know.

 

Paycheck Program Basics

 

Authorized by the CARES Act and administered by the Small Business Administration, the PPP helps employers cover the cost of their payroll so more people can remain employed during the COVID-19 pandemic. The new deadline to apply is August 8, 2020, with applications reopened on July 6.

Eligible companies have fewer than 500 employees, or meet a revenue-based size standard for their industry, or have a tangible net worth of $15 million or less AND the average net income (excluding carry-forward losses) for the preceding two years was $5 million or less. 

Independent contractors and sole proprietors are eligible. Seasonal businesses are as well, as long as they were either operating on 2/15/20 or in 8 weeks from 2/15/19 to 6/30/19. And therefore would be presumed to have done the same in 2020, absent the coronavirus.

PPP comes in the form of a loan, which may be forgiven as long as the employer meets specific criteria. Loans are offered through existing SBA lenders and additional participating institutions such as banks, credit unions, and Farm Credit Systems. 

Loans of up to $10 million are available, and businesses must spend the funds by the end of this calendar year.

If you’re interested in applying, click here for the SBA page on PPP.

Paycheck Protection Program Eligibility

 

For lenders to forgive the loan, businesses must spend at least 60% of it on payroll. Other costs that you can use the money to cover include mortgage interest, rent, and utilities. It’s available for the first 24 weeks of these costs.
The new loans will have a 5-year maturity. Those issued before 6/5/20 have a 2-year maturity. The interest rate is 1%, and you can defer payments for six months.
You don’t need collateral or guarantors for the loan. Neither the government nor the banks charge additional fees for small businesses.

 

Details on Paycheck Protection Program Forgiveness

You’ll need to submit an application to the lender to request loan forgiveness. In addition, you must meet the following criteria.

  • The 24-week timeframe

Fortunately, since not all payroll cycles sync up with the first day of loan disbursement, the SBA has an alternative payroll covered period. It begins on the first day of the pay period after the loan has been disbursed.

 

However, payments outside this timeframe are not eligible for loan forgiveness.

 

  • Payment of payroll (not just payroll incurred)

The business needs to pay their employees from the loan to be eligible for forgiveness, not just incur the payroll costs. Payments incurred during the last two weeks of the 24-week timeframe must be paid no later than the next pay period to qualify for forgiveness.

 

As a reminder, 60% of the loan proceeds must be used for payroll expenses in order for the loan to be forgiven. Sick leave and family leave costs are included in payroll. Payments to independent contractors and sole proprietors are excluded from payroll, as they can apply for PPP themselves.

 

  • Payment of non-payroll costs

Similarly, these types of expenses must be incurred and paid during the 24-week timeframe in order to be eligible for forgiveness. If they are incurred inside the timeframe but not paid until later, they must be paid no later than the next billing date to qualify.

 

The SBA has made clear that it will not forgive advance payments of mortgage interest, but as of yet has made no statement regarding such payments for rent or utilities. Double tax breaks are not allowed.

 

  • Continuation of the same number of full time equivalent (FTE) employees

Since the CARES Act did not define what a FTE is, the SBA ruled that it’s an employee who works an average of at least 40 hours per week. The loan forgiveness will be reduced, but not necessarily eliminated, if the employer doesn’t follow the rule of having the same number of FTEs during the 24-week period as it had at the beginning.

 

For part-time employees, the employer can choose one of two methods of calculating their FTE.  They must apply this method to all employees.

 

One is to calculate their average number of hours worked during the 24 weeks and divide by 40. The other is to assume that all part-timers who worked less than 40 hours on average is 0.5 FTE.

 

  • Allowable exceptions to the FTE rule

There are several exceptions to the maintenance of FTEs that will not reduce the loan forgiveness.

 

If an employee voluntarily resigns or asks to reduce hours, or if they’re fired for cause, the FTE reduction rule does not apply.

 

If the employer reduced FTE between February 15 and April 26 of this year, but restores the FTE before the end of the year, that temporary reduction doesn’t count against them.

 

Another exemption is based on employee availability and must be documented by the employer to avoid a reduction in forgiveness on the PPP loan. One factor is if the employer is unable to rehire former employees who are qualified or hire qualified ones for unfilled positions by 12/31/20.

 

The other is if the business can’t return to its activity level as measured on 2/15/20 due to guidance from OSHA, CDC, or HHS during the period from 3/1/20 to 12/31/20.

 

  • Maintaining same rate of pay for salaries and wages

A reduction in salaries and wages of 25% or more results in a loan forgiveness reduction.

 

However, if that reduction occurred between February 15 and April 26 of this year and pay was restored to its previous levels by the end of the year, there is no forgiveness reduction.

 

  • Eligibility of bonus and hazard pay

The CARES Act includes salary, wages, commissions and similar compensation in its definition of “payroll costs”. Therefore, hazard payments and bonuses (as supplements to wages) are eligible for loan forgiveness as long as the employee’s total compensation is equal to or less than $100,000 annually.

 

The $100,000 limit on employee compensation is limited to “cash” compensation and does not include benefits such as employer retirement contributions.

 

  • Retain loan documents for six years

After the loan is either paid in full or forgiven, the SBA retains the right to examine the loan documents for the following six years.

 

If you’d like to discuss your business finances, give us a call at 619.255.9554 or send us an email. We’d love to hear from you.

 

4 Ways to Simplify Your Business and Finances

4 Ways to Simplify Your Business and Finances

It seems like so many of us tend to over complicate things, whether in finances or life or business. As we move through life, we accumulate more, and we get entrenched in routines that no longer serve us. However, keeping things simple is essential at any stage of life.

 

Having less to keep track of is freeing! In honor of National Simplify Your Life Week, which is celebrated the first week in August, let’s take some steps to simplify our business and finances.

Simplify your business: Do the big rocks first

At this point, you probably automatically prioritize your workday routine. Taking care of the top three priorities that move the needle every day is an effective way to make sure you get the essential things done. 

One way to think of it is the “Big Rocks” theory from Stephen Covey. Suppose you have a certain amount of sand and a certain amount of big rocks to put in a bucket. When you fill the bucket first with sand, none of the big rocks will fit in the bucket. 

But if you start with the big rocks first, the sand fills in around them. With limited time in the day, it’s important to fill the hours first with the big rocks, which are your top priorities, and allow the smaller tasks to fill in around it.

Simplify your business: The Eisenhower decision matrix

 

Too bad it’s not possible to know how any company will perform in the future, especially a start-up! All founders and employees of newly launched companies assume that the stock will be more valuable in the future, otherwise they wouldn’t be working there. Your financial planner can talk you through this election, so you can make an informed decision.

Another way that those in business determine their most important tasks is to consider a 2x2 matrix with one axis being urgent and the other important. You might also know it as the Eisenhower decision matrix after President Dwight D. Eisenhower. 

You can sort all your daily tasks into one of the four boxes. Urgent tasks are what you need to do right now, and people typically react to them. Important tasks are the ones that lead to success, and people are responsive to them. 

The main problem is that people often tend to confuse urgent for important.

  • Not important and not urgent

These tasks should be removed immediately from an executive’s list. Delegate these is you want them done or deleted them completely.

 

  • Not important and urgent

They may demand attention, but ultimately these tasks don’t help achieve any goals and should be delegated or eliminated. 

Phone calls and texts often fall into this category. They may be relevant to others, but not to you, and so you should limit your time in this quadrant.

 

  • Urgent and important

Crises and problems fall in here. Perhaps counter intuitively, you should also try not to spend too much time here! Develop solutions that prevent the crisis from happening. Planning and organizing are good ways to reduce the tasks that fall into this quadrant.

 

  • Not urgent and important

Here’s where you want to spend your time. Not reacting to crises, so these tasks are not urgent. However, they help you achieve your goals and mission. 

Are you on track for retirement?

Making sure you will be ready for retirement can be overwhelming. Funding your retirement accounts over the years is just one part of your journey to the retirement of your dreams. A Certified Financial PlannerTM can help you navigate the complexities of financial planning. Talk to a Financial Planner>

Simplify Your Finances

Needlessly complicating your financial life usually involves paying more in fees as well. You have even more motivation to streamline here. When index funds solve your need for diversification, there’s no reason to add in other types of investments, for example

Simplify Your Finances: Consolidate

 

It’s also helpful to consolidate your accounts with one financial advisor where possible. The exception possibly is your 401(k), which typically needs to stay with the management company until you leave the firm.

Your financial planner should be able to view all your accounts so they can properly diversify it. When you split your funds among different advisors, none of them have an overall picture, so you’re not getting the diversification you need.

It also helps to consolidate your traditional (as in, non-Roth) retirement accounts into one. Many investors who have worked at several firms maintain one traditional IRA account. They roll all their 401(k)s into it with no tax consequences when they leave each firm. All their pretax retirement money is in the same pool, making life much easier when it comes time to take required minimum distributions (RMDs) at the age of 72.

The IRS considers all your pretax accounts when calculating RMDs. If you have several traditional retirement accounts and you lose track, you could accidentally underpay your RMD.
Underpayment will result in a 50% penalty on the amount that you should have taken out but didn’t. It is much easier to have everything in one place and receive one notice from the custodian of the amount you need to take out.

Similarly, you can consolidate your checking and savings accounts. Pick the highest interest rate savings account net-of-fees to put all your money in, and the cheapest or no-fee checking account.

You don’t need more than one credit card for your personal life, and probably only one for your business. When there’s no reason to maintain multiple cards and accounts, consolidate down to one.

Simplify Your Finances: Revisit retirement goals

If you haven’t revisited your financial goals in a while, now might be a great time to do it. You may want to adjust your retirement goal and drill down to the goals that need focus. The fewer major goals that you have to focus on, the easier it will be to achieve them.

 

If you want to talk to us about simplifying your financial life, please give us a call at 619.255.9554 or send us an email. We’d love to hear from you.

Dream. Plan. Do.

Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.

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