Got Your Refund, Now What?

By
Jeff Motske, CFP®
April 17, 2019
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Now, I’ve mentioned before that I’m not a fan of large tax refunds (see March 1 blog). In fact, if you are consistently getting a large tax refund, you should probably adjust your withholdings so you can dedicate that money to your financial why’s every paycheck. After all, allowing the IRS to hold your money is a bad investment. If you should find yourself receiving one, though, you may be wondering how best ways to use it. It’s only normal to be tempted to do some retail therapy or splurge on a fun experience. However, it’s best to see how you can get your money to work for you before giving in to that temptation.

The very first thing to consider is how much debt you have. Large amounts of debt, whether it be student loans, credit cards or other outstanding financial obligations, can cripple you from saving for your goals. Using your tax refund to pay down debt might be the very thing to get you closer to saving for your goals.

You also want to make sure to bulk up your emergency fund. An unplanned repair, medical expense or job termination can all cost a pretty penny. Without an emergency fund, we may feel tempted to use our credit cards to cover the unexpected expense. As I just mentioned earlier, this simply takes us farther from our goals. Ensuring that we have an adequate emergency fund can make sure that we stay on target regardless of what life may throw at us.

Your tax refund can also be used to work towards your financial independence. Maximize your contributions. If you don’t have a plan, establish one. A little money can go a long way with the help of time and compound interest. Remember: there is no do-over when it comes to saving for retirement, so be sure to do as much as you can now because that time will be here before you know it.

I understand that using your tax refund check to indulge in something today can be quite tempting. More often than not, though, these distractions simply take you off your path to financial independence. You need to make sure that you’re making the money you receive today work to build the life you want to live tomorrow.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

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By
Jeff Motske, CFP®
August 26, 2018

There is one area of planning that gets glossed over, even by the many responsible people: long-term care planning. For so many, it is difficult to plan for something that seems so far removed from their current existence. Many also assume that their current health insurance or Medicare will cover most expenses associated with long-term care. Unfortunately, these mistakes leave them ill-prepared for the expensive reality.

As the US government estimates 70% of individuals who are currently 65 “will require some form of long-term care”.1 Therefore, this is more of an eventuality for most folks than it is a possibility. When an individual’s health starts to decline, hopefully, multiple levels have been put into place. Not only should you be concerned with who will care for you physically, you must all consider who will care for your finances.

Physical Care –The costs for long-term care can be surprising for many, with the average 65-year-old paying approximately $138,000 over his/her lifetime.2 As mentioned earlier, Medicare or private health insurance rarely covers all types and expenses of long-term care. Medicaid assistance varies by state and requires that an individual “must spend down his or her assets and meet other criteria.”3 Additionally, It is important to talk with your loved ones about long-term care options, not only about what one can afford but equally as important, what one prefers.

Ultimately, many end up paying for long-term care from their own finances – 50% according to the Bipartisan Policy Center report.4 To protect your finances and the finances of your loved ones, it is vital to prepare for these possible scenarios. There are many long-term care insurance policies that can provide you the assistance your particular situation needs. The premiums for these policies are much more affordable the younger you are. While some of these policies can get a bit confusing, a financial planner can easily go over these policies and help you determine which one would be best for your particular situation.

Financial Care – The key to financially protecting a client in declining physical or mental health lies in teamwork. The team, which consists of their financial team members (financial planner, tax professional or estate planning attorney), delegates and medical professionals. While we all continue to focus on our own particular role and duties, maintaining a professional relationship does give us the opportunity to share any concerning or unusual behavior concerning our client, as well as execute things quickly and as close to the client’s wishes as possible. Equally important is a Durable Power of Attorney (DPA), which legally allows an individual to designate someone to make financial and medical decisions on their behalf should they become mentally incapable to do so. Having these safeguards in place can save on time and hassle should health matters deteriorate and allow your delegate to focus on more pressing issues.

When so many of us pride our independence and self-reliance, declining health issues can be downright scary. I understand this well as I do my best to set my clients up for financial independence, so they can create the life they want to live. When circumstances step in and disrupt your life, it’s vital to know that you have people to rely on and safeguards to protect you.

1. https://www.usatoday.com/story/money/personalfinance/retirement/2017/11/17/retirement-planning-should-include-long-term-care-costs/866344001/

2. https://www.usatoday.com/story/money/personalfinance/retirement/2017/11/17/retirement-planning-should-include-long-term-care-costs/866344001/

3. https://www.consumerreports.org/elder-care/elder-care-and-assisted-living-who-will-care-for-you/

4. https://www.usatoday.com/story/money/personalfinance/retirement/2017/11/17/retirement-planning-should-include-long-term-care-costs/866344001/

By
Jim Young
July 21, 2022

Ok now that you’ve recovered from falling off your chair after reading the tile of this blog, let me explain.

Inflation is one of the biggest challenges in achieving, and maintaining, financial independence. The low inflation we have experienced for decades has made many of us lazy when it comes to spending.  Now is the time to put some great habits into place that will reduce your spending now and will help even more when inflation get’s back to historical norms.

Here are some tips:

  1.  The days of clipping coupons seems to be a thing of the past.  Time to resurrect this time-tested way to save money.  Now it’s done electronically.  Click here for a great article on coupon apps.
  2. Bargain shop.  The meat department is the best place to shop for deals.  Supermarkets would rather greatly reduce the price on meat than throw it away.  I’ve seen bargains at 50% off.  And not to worry, the meat is still good.
  3. Dump the name brands.  I am a big name-brand guy however that is changing.  You can save 30-50% on certain items by going with the store brand such as Kroger at Ralphs.  Just today we saved 30% on peanut butter and couldn’t tell the difference.
  4. Use those credit card miles.  If you fly Southwest use their Chase Rewards Card.  This year alone I flew two of us to Hawaii roundtrip and flew myself to NY and used my miles.  Pretty much all carriers have credit cards they use for miles.
  5. If you shop at Ralphs use their Ralph’s Reward Card.  They have a great app that shows you year to date savings.  We have saved $500 so far this year.  You also get fuel points that you can used at Shell Stations.  I’ve saved as much as $.50 per gallon!
  6. This one is real hard for me but try to walk out of restaurants with a doggie bag.  I’m the type of person that if something is real good, I’ll clean my plate (thanks mom!).  But with portion sizes so big you should have no problem making two meals out of one.  Your wallet and belly with thank you!

 

These are just a few habits to help get you through this time of high inflation that could help your plan when inflation gets back to “normal”.

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