May Client Newsletter
April was a month that brought together what I tell clients with real life situations in ways that I could have never imagined and have never experienced. To experience and live through the process of someone you love having a heart attack realigns thoughts and perspectives very quickly. Thankfully for us, God was very gracious and provided teams of highly skilled people and because of the work they did we now live with a story of survival. In the midst of the emergency there are many questions that if they haven’t been planned for, can cause additional stress or even delayed care. Questions like: who is your health insurance through, do you have advanced healthcare directives, have end of life decisions been made. These are not things that you want to wonder about in the midst of watching someone you love battling a heart attack or other medical emergency.
I also had a friend whose father had a major heart attack in April and in his case, God called this faithful servant home. He leaves behind a wife and three adult children and many grand children. He worked hard to care for his wife and had a lot of the recommended financial tools in place so that his wife will be fine. However, his wife was not involved in any of the financial decisions that were made and now it is a struggle to help her find user id’s, passwords, and even accounts. We also have discovered several instances of account titling that will require the assets to have to go through probate. If these accounts had been listed with a beneficiary, titled in the trust, or even just as a joint account, we would be avoiding probate.
Both of these experiences show the need for proactive planning in not just how you provide for the future and unexpected, but also to be diligent in reviewing your estate plans, account titling, and beneficiary listings. These are small things that are often overlooked and pushed out to future to do lists, however we never know when we or someone we love will be in one of these situations so the best thing we can do is to be prepared. These are not fun conversations, but they are necessary. If you haven’t reviewed your how your accounts are tiled, your estate documents, or need to create estate documents, please give me a call so that we can walk through this sooner than later.
May Element Focus is ...Tax Rate (TR)
Tax payments represent a significant percentage of your cash outflows, making taxes an essential part of your financial plan. So, it’s important to periodically review your tax situation to make sure that you are capturing all the opportunities available to you, reducing the percent of income going towards tax.
In order to assess whether your tax rate is appropriate, we need to look at the following 3 items:
1. Accuracy: please ensure the accuracy of the inputs for your tax rate 2. Assessment: I will assess whether the given tax rate is appropriate 3. Improvement: We will work together to identify areas of improvement
In a perfect world, the four cash flow Elements (Savings Rate, Burn Rate, Debt Rate, and Tax Rate) will add up to 100% of annual gross income. But Tax Rate relies on historical tax datadivided by current year income, so it can be difficult to obtain a perfect allocation of income. In many instances, your most recently available tax return is 1-2 years old.
Volumes have been written about tax planning and strategies to decrease tax payments now and in the future. This brief list will help you begin to get an idea of some of the ways we may be able to help you have a healthier tax situation.
1. What strategies can we implement to increase above - and below-the-line deductions?
2. Are there any tax credit that can be utilized to reduce tax payments?
3. Can we find tax savings in your:
Investment accounts
Charitable Contributions
Businesses
Roth Conversions
I have been in the process of reaching out to make sure that you have updated the information in the Tax Rate (TR) element to reflect the taxes that were paid for 2022. If you haven’t done this yet, please take a minute to login and add the total Federal and State income tax that you paid for 2022. If you have questions, please give me a call or use this link to set up a quick meeting: Schedule a Meeting
May Panning Opportunities
May is the month when we wrap up the focus on 2022 by reviewing your tax returns. Tax planning is just as important as investment management and is a necessity to be included with financial planning. There are many opportunities to dig into to look for ways to more efficiently approach both federal and state income taxes. This is especially important over the course of the next several years as that Tax Cuts and Jobs Act of 2018 is set to sunset which may have a considerable impact on your taxes.
Along with taxes, May is also when we take some time to dig into your monthly budget and cash flow for the second time this year. As you know, we are not necessarily looking for an exact line by line budget, but we are looking to make sure that you are on track with your estimated monthly spending plan that we set in January. If are monthly spending is greatly outside of our plan (either more or less) we need to spend some time looking at what needs to be adjusted and what actions can be take to make sure we realign your actual spending with planned spending.
Client Actions
Most of the Let’s Connect Meetings have been completed or are scheduled. If we haven’t scheduled your meeting yet, please be looking for another email and phone call from me so that we can make sure that we get you scheduled before the end of May. If you prefer to give me a call or schedule your meeting using this link: Let’s Connect Meeting.
If you haven’t yet submitted your tax returns for review to me, please take a minute and upload your 2022 federal and state tax returns into your document vault in Blue Leaf. I know that this might be an extra step than just sending by email, but this is the most secure way to transmit files and your data privacy is very important to me. If you need another refresher on how to utilize the Blue Leaf portal or app, please let me know.
Final Thoughts
As we push through the month of May, I am getting back into the rhythm of the weekly yard work. The lawn mower has been used several times and time is already being spent picking weeds. What I am really looking forward to is being able to get back out into my garden and to begin planning what it will look like this year. I have a few vegetables that I grow every year, and I always try to find something new to add - haven’t figured out what that will be this year.
It also is a time where hope springs eternal because you hope everything that you plant will survive and produce large quantities of amazing vegetables, but so much of it is out of my control. I can only plan well, do the work, minimize risks, monitor, and adjust and then I have to be patient to see the results. Kind of sounds like financial planning, investing in markets, risk management, and investing for the long term...
Have a great May!