Showing posts with label tax optimization. Show all posts
Showing posts with label tax optimization. Show all posts

December 26, 2014

Resolutions and checklists. Starting a new path to financial freedom doesn't need to just be a New Year's thing

Paula Pant wrote this great article recently. I think it follows up on some of the ideas I've laid out on my site and goes into detail about things I don't focus on. It is worth taking a look and making sure to bookmark to check up each decade.


Below is a short excerpt of the bullet points I found most helpful. Credit Paula Pant
In Your 20s
  • Build your savings. This includes an emergency fund and funds for any special savings goals like vacations, holiday gifts, etc.
  • Start saving for retirement. The earlier you start, the more time your money has to grow. Start off by opening a 401(k) or Roth IRA and see if your employer offers matching contributions. 
  • Avoid consumer debt like the plague. Nothing you're thinking of purchasing is worth spending the next few decades of your life repaying. Find a way to pay for your purchases in cash, and avoid the "everyone has debt" mentality.
  • Get insured. Even though you're fairly carefree right now, you should absolutely have renter's insurance, health insurance, car insurance and life insurance. Don't cut corners; skipping insurance is penny-wise and pound-foolish. If you think owning insurance is not cost-effective, please educate yourself on insurance more. Owning it actually increases your wealth through leveraging.
  • Live within your means. This is interpreted as "Buy what you earn."
In Your 30s
  • Up your savings game. Your savings goals are bigger now –- paying for a wedding, putting a down payment on a house, having a baby. 
  • Continue your retirement contributions. Aim to put aside 10 to 15 percent of your income.
  • Invest. You don't need to be a stock market whiz. 
  • Start estate planning. Create a power of attorney, healthcare proxy (also known as a living will) and a will that outlines who will get your assets should you pass away.
  • Avoid lifestyle inflation. As your salary increases, channel those funds towards goals like savings and retirement, remember?
In Your 40s
  • Save for your children's education. If you haven't already done so, it's time to start, pronto. Open a tax-advantaged account like a 529 College Savings Plan.
  • Check your retirement goal progress. You should be able to replace 70 percent to 85 percent of your current income when you retire. Are you on track? Use an online tool to see how close (or far) you are from your retirement goals.
  • Maximize your tax savings. You're likely paying the highest taxes of your life, but you may also qualify for some great deductions. Meet with a CPA to make sure you're claiming everything you can.
In Your 50s
  • Gather an advisory board. As you near retirement, you want to make sure all your ducks are in a row and your retirement and investment strategies are ready to take you through the financial stretch. Research and meet with fee-only financial advisers and CPAs for professional advice. Make sure your financial adviser is bound by a fiduciary obligation"to you, meaning that they legally must give you advice that's in your best interest, not theirs.
  • Evaluate your portfolio. Review your asset allocation-are you being too conservative (or taking more chances than you're comfortable with).
In Your 60s+
  • Review your estate plan. Does anything need to be changed with your will, health-care proxy or power of attorney?
  • Create a retirement budget. You'll lose some expenses, like that mortgage you'll have paid off, but you'll gain others, like additional medical expenses or the need for someone to help you with the yard work. Work out a budget to make the most of your retirement funds in this stage of your life.
  • Plan out your withdrawals. How will you make use of your retirement assets? In what order will you withdraw your funds, and how much will you withdraw at a time? Sit down with your financial advisors to discuss what makes the most sense for tax purposes.
  • Downsize. Stretch your funds further by moving to a smaller home or apartment. You'll save on maintenance, property taxes, utilities and more.

While it may seem daunting to stay on track and working with all the obstacles life throws at us, this is an excellent guideline from Paula to help you stay on track! Check out her blog, Afford Anything