The song “Auld Lang Syne” is derived from a famous Scot’s poem which is played with the start of every New Year. The title may be translated into English literally as “for the sake of old times.” While old times and good friends should not be forgotten, neither should your own financial resolutions.
When hearing this song at the stroke of midnight, many of us may reflect on where we stand with our job, life, health, money, retirement, family and relationships. Maybe there is something to be said about the urgency of the clock counting down and the calendar turning over to the next year.
Items topping most New Year’s resolution lists are typically led by eliminating bad habits to possibly starting new endeavors. We all know the usual suspects: stop smoking, drink less, lose weight, watch less TV, be less stressed, stop overspending, reduce clutter, get a better job, join a gym, read more books, start a new hobby and take a vacation appear on many lists.
The fact that most financial resolution checklists have very limited financial “to-do’s,” should not come as a surprise. A past study by Allianz Life found that 84% of adults left financial planning off their list entirely. Getting your financial life organized and up to date takes time, patience and work, especially after the past year.
Jon here. After enduring an unforgettable pandemic driven 2020 world where many factors have been permanently altered, rethinking our lives, money and retirement has never been so important. Human /tech amalgamation powered by data and deep learning is permanently changing our daily routines and behavior as America continues to reopen with millions of people continuing to work from home, to “zooming” into college classes, doctor appointments and sales meetings, to attending virtual cocktail parties.
As our world becomes more interconnected from the “sharing” to the “gig”-economy, staying ahead of the curve may involve a different way of thinking no matter what your age. A 2018 study by Intuit had predicted that by 2020, 40% of workers would be independent contractors. The impact of the coronavirus pandemic has significantly accelerated these trends.
Gig workers are independent contractors, contract firm workers, on-call workers and temporary workers. From freelancing (in any industry) to setting up your own shop and incorporating, the sharing economy, sometimes also called the “collaboration economy,” is taking off in all sorts of niches orchestrated by big data and the internet of things (IOT).
No matter your age, occupation or future calling before or after you retire – from law, nutrition, accounting, creative design, home repair, real estate, food, health related services to pet care- getting “tech-literate” is essential to compete. Today’s “new” office (accelerated by the pandemic) places greater emphasis on websites, social media presence and digital footprints – than brick and mortar locations when working to establish and maintain one’s brand and clientele.
Enjoy our top financial hacks blog that is updated annually with a few more tips, strategies and timely ideas.
Top 45 Financial Hacks
- Flex your entrepreneurial skills in today’s “gig- economy” and be your own boss.
- Develop a “side-hustle” that you are passionate about which may even continue through your retirement years.
- Become “tech-literate” and savvy – from home and personal health tools and trackers to digital marketing and analytics tools for small business owners.
- Stay active as you age. Your health effects your wealth and your wealth effects your health.
- Gain financial literacy, planning and education skills, as they are not often taught at home or in college.
- Manage and track your household cash flow, net worth and financial goals autonomously with a financial app such as Mint, Quicken or E Money.
- Develop a more disciplined money mindset in today’s “instant gratification” society where it is as easy as every to make purchases on credit right from our mobile/smart phones.
- Don’t financially compete with friends and family on social media. It’s not a competition! (see #7)
- Live within or below your means to help get – and stay rich. Remember, it’s not what you earn but what you keep.
- Budget in Hours: When making larger purchases, consider budgeting each purchase in hours not dollars. This unique perspective will help put your purchases and impulse spending in a new light.
- Refinance down any debts or obligations over +6% to a low fixed rate while you can. 30 year fixed mortgage rates are trending near 2.5%.
- Check your credit report three times per year for free. (Equifax, Experian and TransUnion)
- Freeze your credit online to help mitigate identity theft which can be a huge headache to overcome.
- Decrease pay-stub exemptions if your tax-refund is over $2K. (Do not lock up money for an interest-free refund!)
- Make your goals SMART: Specific, Measurable, Achievable, Relevant and Time-based.
- Multiply your (age x your income) & divide by 10 – to benchmark your net worth. (Millionaire Next Door). This is our fav financial hack as a rudimentary benchmark
- Retirement Savings goal: Aim to save at least 1x your salary by 30, 3x by 40, 6x by 50, 8x by 60, and 10x by 67.
- Limit your retirement income distributions to 4% or less of your savings. (4% Rule)
- Review your cable and other household and personal recurring bills and look for ways to cut back which could help to save you hundreds of dollars per month.
- Put your home on “automatic” with today’s new tech tools to save energy and money. (wifi-thermostats, sprinklers, pool devices and other “smart home” tech.)
- Subtract (100- your age) & invest the difference in stocks- as benchmark for your asset allocation. (Rule of 100)
- Implement a portfolio (and 401K) audit at least quarterly for strategy, expenses and performance.
- Don’t chase performance, star-ratings or published “best-of” lists when investing.
- Don’t invest in anything you don’t fully understand. There is no such thing as a free lunch!
- Don’t chase high income or high return investments or products. (see #24)
- Don’t follow the herd. By the time you hear about something good, its often too late!
- For every buyer there is a seller on Wall Street. To paraphrase Buffet, you don’t’ need to swing at every pitch.
- Don’t let fear and greed dictate your investment decisions. Studies show many investors greatly underperform their own goals (and the markets) simply based on emotion, not logic.
- Plan wisely today for your tomorrow. You can’t put your retirement on a credit card.
- Earmark and utilize employer bonuses, vested stock and tax returns wisely such as paying down debt, increasing savings and or cash reserves.
- Don’t invest more than 5% to 10% of your liquid investments in any one individual stock.
- Maintain 12-24 months of cash reserves in your “short term bucket” for emergencies and necessary expenses.
- Don’t enroll in Social Security early at age 62 unless necessary or part of your family’s financial planning strategy.
- Do not take a loan from your 401K unless absolutely needed, or a last option.
- “Pay yourself first” by putting your savings goals on “automatic”-save at least 15% of each paycheck for your retirement by utilizing your employer “pre-tax” retirement plan (if available) as well as saving money in “after -tax” savings vehicles.
- Don’t leave a “free” 3%-5% employer retirement plan match on the table by not participating. (see #35)
- Eliminate debt and accumulating interest over a set time-period by making extra mortgage and car payments.
- Utilize a life insurance policy that’s at least 10X your gross income, with a term length that lasts for at least the number of years until your children are out of college or your mortgage is paid off.
- Update your Estate plan periodically or when you have a life event: remember that a Will does not help to avoid probate. Probate is the first step in the process of administering your estate under your will while providing public notice, resolving all claims and distributing your property.
- Execute an annual beneficiary review: How your assets, investment, and insurance accounts are titled and held can set precedence over your will and a court of law. Work with your advisor to review all investment, retirement (401K, IRA) and annuity accounts along with life insurance policies and any property and business ownerships.
- Advanced trust and estate planning may be applicable when dealing with minors, spendthrift adults, special needs planning, charitable giving, business succession planning or planning to help minimize estate taxation as some examples.
- Consider energy-efficient home upgrades to save on taxes. Some improvements could entitle you to tax credits such as installing solar or wind power, geothermal heat pumps, or for making certain other upgrades to make your home more energy-efficient such as impact windows.
- For small business owners, take advantage of deductions for business income. The 2017 tax Cuts and Jobs Act introduced a deduction for up to 20% of business income for qualifying businesses. The Qualified Business Income Deduction (QBID) could be available even for sole proprietors who earn income from business activities. So if you have a side gig or run your own company, find out if you’re eligible.
- Keep track of medical expenses to see if you can qualify for a deduction. If you itemize, you may be able to claim a deduction for medical expenses that exceed a certain percentage of your income. For 2021, you can deduct expenses that exceed 10% of your adjusted gross income.
- Consider a Roth IRA conversion as a financial hack to the elimination of the stretch IRA (2019 SECURE Act rule) for non-spousal beneficiaries. A Roth IRA conversion involves transferring retirement funds from a traditional IRA or 401(k) into a Roth account and paying income taxes at the time of conversion. Non-spouse beneficiaries who inherit an IRA now must distribute the entire IRA within 10 years of the account owner’s death. The only exceptions besides spouses are beneficiaries who are disabled or chronically ill, a minor child of the account owner (until age of majority is reached), or a beneficiary who is not more than 10 years younger than the deceased account owner.
The bottom line: Quarantined at home for the past year, many of us can get a bit carried away with online shopping as a bit of “retail therapy” while overindulging on social media and spending too much time online. Instead, we recommend to unplug from the web and start writing down your 2021 New Year’s health and financial resolutions. Remember the more you practice or employ a hobby a resolution, the more it becomes a positive habit and routine, just like brushing your teeth.
We wish all our clients, friends, and colleagues a healthy, happy and prosperous 2021, and hope our annual “financial hacks” content helps with the motivation and creation of your own financial New Year’s resolutions lists. Make sure to write down your goals and aspirations for the year and track your progress each month.
For more information on our firm or to request a complementary investment and retirement check-up with Jon W. Ulin, CFP®, please call us at (561) 210-7887 or email [email protected] Get Started Today: Contact Us.
Note: Diversification does not ensure a profit or guarantee against loss. You cannot invest directly in an index.
Information provided on tax and estate planning is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
The information given herein is taken from sources that IFP Advisors, LLC, dba Independent Financial Partners (IFP), IFP Securities LLC, dba Independent Financial Partners (IFP), and its advisors believe to be reliable, but it is not guaranteed by us as to accuracy or completeness. This is for informational purposes only and in no event should be construed as an offer to sell or solicitation of an offer to buy any securities or products. Please consult your tax and/or legal advisor before implementing any tax and/or legal related strategies mentioned in this publication as IFP does not provide tax and/or legal advice. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors. This report may not be reproduced, distributed, or published by any person for any purpose without Ulin & Co. Wealth Management’s or IFP’s express prior written consent.