Money Rules Don't Rule

What is wealth?  Formally, it's the money you don't spend, that you amass and acquire, to afford opportunities.  But really, it's a moving target that is constantly changing as the Fair Market Value of assets and investments change.  We can't see wealth, so when and why do we hide it?  Tune in as we explore why talking about wealth makes us uncomfortable, how wealth is calculated, and when words matter when talking about wealth.

Donor Advised Funds are an efficient way to turbocharge your charitable giving while maximizing the tax benefits of doing so. You receive a charitable deduction on your tax return in the year you contribute money to the account, and then as you're ready you can allocate any amount of money in the account to a variety of 501(c)3 charities. Your recordkeeping is minimized as you don't need gift receipts from the charities receiving allocations, and the tax-free growth is a way to benefit your favorite non-profit organizations.

Get to know your hosts! In this episode, we each take the hot seat and answer thoughtful questions about our individual financial perspective, experiences, hard lessons, and more.

The Child Tax Credit increases in 2021, and eligible taxpayers can receive an advance of this credit instead of waiting until they file their 2021 return in 2022.

All taxpayers with children age 17 and under qualify for $2,000 per child if their income is under $400,000 (MFJ) and under $200,000 (S). But taxpayers are eligible for an additional $1,000 or $1,600 per child if their MFJ income is below $150,000 or Single under $75,000. The advance is for up to 50% of the total credit and you don't have to sign up anywhere to receive it. Just file your 2020 return as soon as possible. The IRS is expected to set up a portal on their website by July 1st where taxpayers can add dependents born in 2021, make changes to their expected income, update their filing status, etc.

Budgeting....ugh!  We know this is not a favorite topic, but they can be useful in helping to drive our behavior so we can get to where we want to go. Budgets are only as helpful if we stay disciplined to them. Budget forward, or in reverse, but don't forget to grow your revenues so that you can release some of your budgeting constraints. Budgeting is another way to help us live our priorities.

A Health Savings Account, or HSA, is more than what its name implies.  It is a little-known retirement asset with big upside.  Certified Financial Planner (CFP®), Matt Cooley tells us that it is the only Triple-Tax-Free investment vehicle that is a must-have if the following "rules" apply to you:

1) You have a high deductible health insurance plan (check with your insurance to determine this)

2) You pay for your OOP (out of pocket) health costs with your every-day cash

3) You, or your employer, fund your HSA account

4) You save your OOP health care receipts

That's it!  Then let your investment grow (instead of the sub-optimal savings account bank rates) and you can reimburse yourself down-the-road for those OOP costs in 5 years or 20 years, tax free.

It's triple-tax-free because you'll get a tax deduction for funding your HSA account, the earnings will grow tax-free, and as long as you can support your reimbursed OOP amount, the principle returns to you tax free as well.

What do we mean, Money Rules?  And why don't they rule?  

Money rules are just that: the rules of a game.  And like all games, the rules can be manipulated, stretched, and creatively applied, depending on your unique situation, preferences, and priorities. What you learned about money from your parents can affect how you think about money today. Know Thyself is an often overlooked "rule" of money, and one that we have the most influence over.  There are a lot of reasons to make a decision, and the financial impact is just one of them.  When someone tells you how you "should" manage/save/or spend money, watch out for their own incentives underlying that advice.  Some rules of money you may be familiar with are:  save more than you spend, when you retire, have 60% of your investments in stocks and 40% in bonds, payoff all debt, never finance a vehicle, draw-down your retirement portfolio at 4% per year.  But variables like interest rates, risk tolerance, accumulated savings, and personal preferences aren't factored into these rules: you have the choice to decide what works best for the ROYL (return on your life).

We believe that money rules are guidelines and that when we live intentionally, the money-rules can bend and flex to meet our needs, instead of the other way around.  We find examples for whether money buys happiness, and we encourage listeners to take financial advice with a healthy dose of skepticism.  Send use your questions and examples to [email protected] or [email protected] and we'd love to hear what you're thinking.

Introductory episode to the brand-new podcast that explores the underbelly of everything that's NOT talked about money.  Your hosts, Leah Haight, CPA and Matt Cooley, CFP® are industry colleagues located in Boise, Idaho USA.  Tune-in for an intentional conversation about money, wealth, and the unspoken aspects of these concepts in our lives: what is it, who has it, and why it's important to focus on the Return On Your Life (ROYL), and not just the Return On Investment (ROI).