4 Tranel Tips for Saving Smart in 2019January 8, 2019 4:09 pm
Happy New Year from The Tranel Financial Group Family!
We know you have great plans for 2019, so we want to help you achieve them with these 4 financial tips.
Whether you want to
- Learn powerful (or just fun!) new skills
- Give your kids a great education
- Travel to exciting places
- Begin a healthier and happier lifestyle
- Jumpstart a new career
- Bask at Lake Michigan’s beautiful beaches more often (just remember sunscreen!)
- Spend more time with the people you love
- Or plan something completely different and unique!
You’ll need a sound financial plan in order to enjoy 2019 for all it’s worth.
So once you’ve put these 4 strategies into practice (preferably with the help of your friendly neighborhood financial advisor!) you’ll have the knowledge and confidence to dominate 2019 with fewer worries and more security
1. Track & Estimate Taxes on Your Investments
Taxes are right around the corner, so don’t let them catch you off guard. Set aside enough for not only your income tax, but also your estimated investment taxes.
And when estimating how much to set aside, keep in mind the difference between realized gains and unrealized gains.
(Optional, depending on whether Tranel thinks their readers will already know this: Unrealized gains are those investments you’re still holding on to. Although their market price fluctuated during the year, you didn’t actually make or lose money on them because you didn’t sell them. So these unrealized gains and losses only exist "on paper" and don’t affect your taxes at all.
Realized gains are created when you actually sell investments. Since you make or lose money at that point, those gains and losses become real.)
Unlike unrealized gains and losses, realized gains and losses can affect your taxes owed -- for better or worse.
(Optional: They affect your taxes for the better if you ended up with a net loss at the end of 2018 (where your realized losses were greater than your realized gains). In that case, you can lower your taxes by deducting the remaining losses from your taxable income!
On the other hand, they affect your taxes for the worse if you sold your investment at a profit. Although that’s clearly good in the long run, you are required to report that profit as income. So you’ll end up paying capital gains taxes on it.)
Either way, estimating these taxes will help you know what to save comfortably for April.
Then, throughout the year, your advisor should be happy to keep up to date on your portfolio’s performance. They’ll advise you when to sell and when to hold on to your investments for maximum profit.
Most people will enjoy lower rates and taxes than in 2017, so chances are that you’ll be pleasantly surprised!
But don’t just assume that - the exact benefits will vary by individual and some will end up paying more instead of less.
For example, people whose 2018 taxable income is $250,000 must pay 35% bracket in taxes this year instead of the previous 33%.
If you do happen to fall into those brackets, your financial advisor should give you ideas on how to lessen the hurt. For example, it might be possible to re-allocate part of your portfolio into tax-exempt bonds, which could reduce your income tax.
(Optional depending on Tranel’s preference: Another reason to check your bracket is that, depending on your bracket, you might find a Roth IRA or 401K account more attractive than before.
That’s because, unlike traditional IRA or 401K’s, Roth accounts require you to pay tax on income now instead of during your retirement.
While this might lead to penny-pinching in the moment, you could end up paying less in the long run, since the current tax breaks are only in effect until 2025.
So check out the new brackets and talk to your advisor - if you contribute towards those accounts now, you might pay at a lower rate than if you waited until retirement.)
3. Plan your 2019 Required Minimum Distribution (for 70+ Citizens)
If you’re over 70½ and have a retirement plan or IRA, make a plan - and follow through on it - to ensure that you take the correct amount of RMDs from your account in 2019. Not keeping on top of this could cost you big-time, since the IRS has steep penalties for those who don’t take out the minimum amount.
Your financial advisor should be happy to calculate and plan your RMD amounts with you so that you don’t have to think twice about how much to withdraw!
4. Game Plan a Solid Investment Strategy for 2019
If you’re fortunate, you might already have your end-of-year bonus, raise, and/or decent (estimated) tax refund, as well as a regular monthly income.
What to do with all of this?
Make it work as hard for you as you’ve worked for it.
First, ensure that you and your family’s basic needs, 3-6 month emergency fund, and credit card debts are taken care of.
Then put your money to work by opening an investment account.
Because in the end, a secure future for you and your kids isn’t just the result of hard work.
It’s the result of hard work and smart investing.
So how do you ensure that you invest wisely?
(After all, we’ve all heard the horror stories of people who lost fortunes by doing the opposite.)
The best way is to put your portfolio into the hands of an experienced financial advisor. Good financial advisors will cultivate a professional relationship by communicating with you regularly (not just once a year!) They’ll give you frequent updates and counsel about your investments, ensuring that your money’s exactly where it will benefit you and your loved ones the most.
And right now, it’s a brand-new year - what better time for a free financial consultation to see how you and your family can enjoy prosperity and security not just through 2019, but for many years to come!