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Four Tax Planning Tips For 2021

Four Tax Planning Tips For 2021

We'll start with the ever-important disclaimer that this blog post is not intended to be tax advice, and you should consult with your tax professional regarding your particular situation before considering any of the tips discussed πŸ™‚ Before we get into the tips, it's...

The Number ONE Element In Making Work Optional πŸŽ™οΈ

The Number ONE Element In Making Work Optional πŸŽ™οΈ

On this Do More With Your Money podcast episode, I'm going to share with you the number one element in making work optional. The path to both building and maintaining financial independence is built on this crucial concept. The earlier you can master it and build it...

Diamond Hands

Diamond Hands

One of my favorite sayings in investing is, "no pain, no premium." Corey Hoffstein popularized this phrase in his commentary, "No Pain, No Premium," where he discusses the limits of diversification and how ultimately, without risk, there should be no expectation of...

How I Manage My Money As A Solopreneur πŸŽ™

How I Manage My Money As A Solopreneur πŸŽ™

On this Do More With Your Money podcast episode, I discuss how I manage my money from the perspective of a solopreneur. As always, personal finance is personal, so keep that in mind when you're listening and considering what may or may not apply to your personal...

T.J. van Gerven

T.J. van Gerven
Tax rates will likely be going up in 2022. In this podcast episode, I share four tax planning tips to consider for 2021 in anticipation of increasing rates. Disclaimer: This podcast is not intended to be tax advice, and you should consult with your tax professional regarding your particular situation before considering any of the tips discussed.
Four Tax Planning Tips For 2021
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Buying a meme stock because someone says it’s going to the moon is, in fact, gambling. Which is cool if you understand that and are treating it as you would a gambling expense. Just don’t trick yourself into thinking it’s something it’s not.
Should You Spend Your Time Trading Stocks?
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In this video, I share why cash is best held in a cash reserve, not in an investment account.
Cash is for your cash reserve. Not your investment accounts.
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Today I'm going to share with you the number one element in making work optional. The path to both building and maintaining financial independence is built on this crucial concept. The earlier you can master it and build it into your financial habits, the sooner you can build towards a work optional lifestyle.
The Number ONE Element In Making Work Optional
YouTube Video UCxejrzu3vF5dc9V3tb9uOoQ_OdX7cPLGaz4
On this Do More With Your Money podcast episode, I discuss if you should be worried that the stock market is in an 'epic' bubble. Whenever someone claims a stock market bubble or bottom, it's crucial that you take it with a grain of salt and always defer to your personal financial plan. Remember always to consider the incentives of the person making strong claims about where the market is headed. We live in a world of clickbait and soundbites used to gain our attention to push us towards products and services. When you understand your personal financial situation and what's in your control, you should invest with confidence regardless of outside noise. Always maintain the perspective of the big picture. Major stock market corrections and bear markets allow you to accumulate wealth during your prime earning years. As always, the key is that you’re able to maintain discipline within your financial plan in any market or economic environment.
Should You Be Worried About An 'Epic' Stock Market Bubble?
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"I have money going to my savings account each paycheck that I don't know what I should be doing with; what should I be doing with it?" Let's start with the ever-important caveat that personal finance is personal, and as always, "it depends." With that out of the way, let's talk about some ideas, habits, and strategies you should be thinking about if you feel like you're sitting on too much cash. It may seem trivial at this point but having a sizable cash reserve is crucial for many reasons, some of which provide a "hidden return" like having the flexibility to search for better job opportunities or be more selective with investment opportunities. At a minimum, you should have at least three months worth of living expenses in cash at all times. This should range as far as eighteen months of cash reserve depending on a variety of factors such as if you're self-employed, how economically sensitive your job is, or how many income sources you have in your household. Personally, I strive to have twelve months' worth of living expenses in cash as it provides me the peace of mind to run my business and invest (in personal investment accounts) long term with confidence. If you're still working towards building towards your ideal cash reserve, don't feel bad about not investing additional cash flow. The opportunity cost of building a sizable cash reserve is well worth the peace of mind. When you're determining your ideal cash reserve, you can base it on your baseline spending needs or what you're currently spending. The lower your baseline spending needs, the lower your cash reserve can be, and in turn, the more cash flow you can use to grow your net worth on an ongoing basis. If you've determined you're "sitting on too much cash" relative to your cash reserve requirements, here are some things to consider: Are there any major short-term expenses or purchases you anticipate to have in the next 6-18 months? Generally speaking, you want to avoid investing in the stock market for any money that will be needed within the next three years (ideally five years +). However, if you have a sizable cash reserve, stable income, and a high tolerance for risk, there is some flexibility. If you don't anticipate having any major short-term purchases and are looking to maximize the value of your hard-earned money to grow your net worth, here are some ideas: Are you maxing out your 401(k) at work? You can contribute up to $19,500 (under age 50) in employee contributions for 2020 and 2021. Why would you want to contribute more to your 401(k) than is necessary to receive your employer match? Because contributions to a Traditional 401(k) reduce your taxable income and can be invested to grow tax-deferred until you need to pull them out after age 59 1/2. If your employer offers Roth 401(k) contributions, you should strongly consider taking advantage of these "after-tax" contributions (no income tax deduction) to increase your tax-free investment assets. In addition to maxing out your 401(k) at work, you should also be taking advantage of an individual retirement account (IRA). You can contribute up to $6,000 (under age 50) for 2020 and 2021 and receive the same tax-deferred benefits as investing in your 401(k). However, if your income (MAGI) exceeds ~$124,000 (2020), you'll want to consider a backdoor Roth IRA. If you're taking advantage of all your tax preferential accounts and still have additional cash flow, you should consider investing in a taxable brokerage account. The specific investment selection should align with your overall investment strategy. Meaning, you should invest in a taxable account that factors in your investment holdings across your various retirement accounts. A taxable account is more flexible in that you always have access to the money penalty-free. However, unlike a retirement account, you'll be subject to taxes. Consider holding most of your equity allocation in your taxable account (as it grows in proportion to your other accounts) as stocks will have more tax flexibility with capital gains and/or tax-loss harvesting. If you're sitting on too much cash, the most important thing is that you have a plan for how to maximize the use of additional cash on hand. Getting in the habit of investing regularly is the most important factor for achieving long-term financial success as it puts the odds in your favor. Although cash is safe in the short-term, it becomes risky long-term as the purchasing power is eroded from inflation. Make sure you're doing all you can to preserve (and hopefully grow) your hard-earned wealth.
Am I sitting on too much cash?
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