save money on your 2016 taxes

Save money on my 2016 taxes?  Isn’t it too late for that?  In a word, no.

Disclaimer: I am a financial planner, not a tax professional.  All illustrations are for examples only and are based on the best of my knowledge from looking at the tax table and understanding of what my tax professional told me (not what he knows, simply my understanding).  Do not take any of the numbers below as guarantees, but simply a look at how this works conceptually.  If you are a tax professional and see a major mistake, please send me an email at cameron@whollyanointing.com so I can get it fixed.  Now, here we go:

Up until you file your taxes there is a little known way to lower your taxable income.  It’s not hidden, it’s just that few people know about it.  The IRS allows you to make a contribution to a retirement fund up until the time you file your taxes.  You can put up to $5,500 into this retirement fund and that is $5,500 that you will not be taxed on.  The median household income in the U.S. last year was about $65,000.  If you’re married and filing your taxes jointly, that puts you in a 15% tax bracket (for the sake of ease I’ll stick with the federal numbers.  State taxes vary).  That means that this year you can save an extra $825 on your taxes, as well as put some money away for retirement.  Keep in mind that this is tax deferred, not tax exempt, which means you will pay taxes on it eventually, but if you want to save some money this year you can do that.

Here’s where it gets really cool.  Let’s say that your taxable income last year was $80,ooo.  That puts you in the next tax bracket at 25%.  If you were to put that $5,500 into the tax deferred retirement account, that would save you a total of $1,295 in taxes!  The reason for this is that your contribution would take you down into the lower tax bracket of 15%, thus saving you even more.  If you’re a math nerd, here’s how it works (if you’re not a math nerd, skip to the next paragraph).  At $80,000, you pay $10,367.50 + 25% of the amount over $75,300, which comes out to $1,175.  That total is $11,542.50.  Contributing $5,500 to your retirement account brings your taxable income to $74,500.  In that tax bracket, you pay $1,855 + 15% of the amount over $18,550, which comes out to $8,392.50 for a total of $10,247.50.  $11,542.50-$10,247.50=$1,295.  That’s a pretty good savings.  What could you do with an extra $1,295 (as the financial planner inside me screams “Nooo, not Disneyland.  Pay down your debt!!”)?

Disclaimer #2: There are limitations to tax deferred contributions based on income for those that are offered retirement plans at work.  Be sure to talk to your financial planner about this so you can take advantage of these savings before it’s too late.  If you don’t have one, give me a call and I can help you.  You can find my information on the contact page.

Blessings to you all and may you live in financial freedom this year.

3 Reasons You Need Life Insurance

As a financial planner, there are a lot of things I can do for my clients.  I can help you save money, create an emergency fund, invest for the retirement you want, and even help you make more money in some cases.  These are the things we discuss when I sit down with my clients.  From where I sit, the ones mentioned above are up to the client.  The one thing that I press hard on and think is the most important thing you can do for your family is life insurance.  Death comes to us all.  There is no avoiding it.  But most people don’t want to talk about it.  They avoid the subject like math class (no offense to mathematicians).  But by avoiding it, we set our family up for a truly miserable experience if we die early.  When my family couldn’t afford to invest in anything else, we still got life insurance.  Here are three reasons that I believe life insurance is the most important investment you can make right now (not right now as in the general time period, but right now as in call me as soon as you’re done reading this.)

    1. Your family needs to pay for your funeral

The average cost for a funeral is about $7,000-$10,000.  Does your family have that amount saved up in case somebody dies?  Probably not, especially if the amount of gofundme campaigns I’ve seen to pay for funerals in the last year is any indication.  Your family has just lost you.  They should be grieving, but instead they are standing on street corners or starting gofundme pages to try to pay for the funeral that has caught them off guard.  Maybe they open a new credit card or use an old one to pay for the expense and then have to pay down that debt for the next 10 years, a constant reminder of that day.  It adds to an already stressful situation when the family has to figure out how they are going to bury you.  Let your family grieve as they are meant to do.

2. Your family has to survive

This is especially true if you are the only one bringing in money every month.  How is your family going to eat and pay bills with you gone, especially in the immediate? Life insurance can help pay your bills for your family until they are finished grieving, and even beyond.  You can have your bills paid for multiple months with your life insurance and it doesn’t cost you as much as you think per month.  Think of the relief that your family will have knowing that they are taken care of and they can mourn without worry.  What greater gift can you give your family than taking care of them when you are no longer around?

3.  Your family has to pay off debt

Debt is a slave driver.  It looms over our heads, putting pressure on us constantly.  With life insurance, your family will be able to pay off all of their debt and just pay the monthly bills (see reason #2).  Life insurance can help pay off your house and your credit cards and let your family start from scratch with their finances.  Again, it allows them to grieve over losing you and not have to immediately think about how they are going to survive.

When I sit with a family to talk about life insurance, I generally look at 4 things, using DIME as a mnemonic device.  I look at Debt, Income, Mortgage, and Education.  I don’t just pick a random number out of a hat and try to sell you that much life insurance.  You choose which of the four you want your life insurance to pay for.  I can also help you plan out your future by giving you a road map for how to get from where you are to where you want to be, including savings, retirement, and emergency fund.  Best of all you never pay me anything out of pocket for these services.  If I’m able to help you, the product providers pay me.  Visit the Contact Us page to set up a time to talk with me about these things.  The last thing that I want to mention is this: many people think they have life insurance through their job when what they actually have is Accidental Death and Dismemberment insurance.  They are not the same thing.  With ADD insurance, you have to die in a pretty specific way in order for it to pay out.  Make sure you know what you have and don’t assume.

Be blessed everybody.

3 Steps To Financial Freedom

One of the things I love doing is helping people find financial freedom.  So many people are living in hopelessness and don’t know how to make things change.  One of the things that we are slaves to in this country is debt and financial instability.  Financial concepts are not taught in schools anymore (with the exception of 4 states) so we grow up not knowing the things that will help us out in life.  For example, how many of you know what the rule of 72 is?  Some of you do, most of you probably don’t.  I didn’t know it until I got into financial services as my career.  The rule of 72 states that you take the interest rate you are earning and divide it into 72.  That will tell you how many years it will take for your money to double.  The higher the interest rate, the more times it will double before you retire.  The more times it doubles, the better off you will be at retirement.  Here are a few quick tips and steps to getting you on the road to financial freedom:

  1. Budget: Even a simple budget on a piece of paper is better than nothing.  But you have to be diligent with it.  You have to do the budget every month and discuss it with your spouse.  It can’t be fuzzy math.  Fuzzy math has gotten my family in trouble more times than I can count.  Pay cash for as much as you can and stick as tightly to the budget each month as you can.  Things happen, which is why until you have a fully funded emergency fund, you have to be prepared for incidentals.  Your budget should equal zero at the end.  That means you are telling every dollar where to go, rather than wondering where it went.  When you input your income and all of your expenses, you should have zero left over.  Any leftover should go into the saving box.
  2. Pay Yourself First:  This is pure psychology.  When I describe it to you, you’re going to think, “how can that possibly work?”  I thought the same thing, but believe me, it does.  You have to do it right though.  Most people, when they get paid, put their money into their checking account.  They then pay all of their bills out of that account.  When they are done paying the bills, if there is any left over, they figure that is extra money for either fun or for buying that thing they were thinking about buying but weren’t sure if they had the money.  Then something happens and they need money to pay for a car repair or something else and they are out of money.  Here’s how paying yourself first works.  When you get paid, you put your paycheck into your savings account.  Then you transfer only what you need to pay for your expenses (see Budget above) into your checking account and pay for those expenses from there.  Whatever is left over stays in your savings account.  This allows your savings account to grow, slowly at first, but you will see the results.  This will be difficult at first if you are paid twice a month or more.  Until you build your savings to the point where you can transfer the full amount for your expenses into checking, you will have to transfer it a little at a time as it becomes available, using your budget to keep good track of how much you’ve transferred and how much you have left to transfer.  It takes a lot of discipline, but it pays off in the end.
  3. Get out of debt:  The dreaded D word, debt.  It is possible to live debt free.  It again just takes discipline (the other dreaded D word).  One of the mistakes many people make is making minimum payments on credit cards (or any other loan for that matter).  The credit card companies set those minimum payments in a way that is going to earn them a ton of money.  Always pay more than the minimum payment on your credit card and work as hard as you can to pay it off.  Once you have the credit card paid off, cut it up.  You don’t need it.  Work on paying cash for everything.  Credit cards are nothing more than a really expensive loan.  If you have more than one loan, snowball the debt.  Basically that means that you pay the minimum payment on all but one of your debts.  Pay as much as you can on that one debt until you pay it off.  Once you pay it off, move on to the next debt and the entire amount that you were paying on the first one goes to paying off the second.  Then you do the same for the third and so on. If you are $10,000 or more in debt, there are other options to help you pay those off.  I won’t discuss those here, but if you need help with that you can contact me.

If you’re serious about finding financial freedom, we are here to help.  These are three steps to get you started but there is more you can do once you’ve mastered these.  Some of them are hard to understand from reading a blog.  I can describe them to you better in person.  Visit the contact us page for our information.  I am a financial planner with World Financial Group and am here to help.  I’ll do a FREE financial check up for you that will show you where you are and where you want to be and how to get there.

Until then, be blessed.