Thank you for checking out Telos Financial’s financial planning blog. Telos Financial is Michigan’s Financial Planner for millennials and young professionals. The purpose of the blog is to introduce financial planning topics I believe are important. I want to start discussions about that will educate, benefit, and improve your financial life. Ultimately, to help you focus on your telos!

Folks I talk to have some area where they can take action to improve their financial welfare. Usually, that’s why they are meeting with a financial planner. A big piece of my job is helping people take action through coaching or reminders. It’s something they’re aware of; but put off until the never to come tomorrow. We all need coaches to help us along the way.

This summer, there are three moves that I recommend you take to help improve your family’s financial situation. My first recommendation is to do a comprehensive tax review of your 2017 return and comparison of the new tax code. My second piece of advice is to analyze your cash flow. My third piece of advice is to take the information from the first two exercises and review your savings strategy.

First, perform a comprehensive tax review. If you work with a tax professional, I’d advise you to schedule a meeting with them to make any changes needed now. Your CPA will be grateful, because they’d rather handle these types of planning discussions now, not during tax season when they are at their busiest. It will also help reduce potential surprises at tax time. If you prepare your own taxes, this is more complex, as the research and knowledge burden is on you. If you have a financial advisor, they may have suggestions for you. Like me, most financial advisors are not tax specialists. I have tax knowledge; but would defer to a tax professional since they’ll be the one signing your return. There are many sources you can look to to learn more about tax strategies and the new rules. It’s just a matter of learning what suits your learning type best.

I think this piece of advice is even more important for small business owners. The changes to the tax code were mostly geared toward businesses. There is a lot more to be learned and digested as a business owner. Secondarily to the new rules, for many business, this is an area that has room for improvement. You may not have been properly taking deductions before and you should consider the new rules in how you operate going forward. This is an area I have more knowledge as I have numerous clients who are small business owners and I also pay special attention to this area. Again, defer to your tax professional, but it’s worth looking at this area.

Next, analyze your cash flow. Just like spring cleaning is good for regularly cleaning out things you normally don’t, it’s good to periodically check up on your income and expenses. My advice here is to look for areas to cut back, reduce, or make more efficient. Did you subscribe to a streaming service and never cancel your subscription? Has your latte habit expanded past your comfort level? Have you shopped your home and auto insurances lately? If you can save a few hundred dollars each month and put in an investment account, it adds up. I recommend taking these things in small steps as well, I’m not recommending you necessarily give up cable, but just ask yourself if you use it and is there a more suitable alternative.

Lastly, let’s consider these in context of your saving strategy. Many people will have a lower tax bill this year and for the next seven years due to the tax cuts. That, combined with the savings you identified in step two should be considered in updating what types of accounts you are saving to. The average taxpayer will save around $1,600 in 2018; if you identified $75 per month in the cash flow exercise, that’s a little over $200 per month you can put somewhere. As a millennial or young investor, that will add up over time. Would you be comfortable directing some savings from traditional retirement funds to Roth funds? Yes, it will cost you more in taxes today, but have you reviewed your different investment accounts as they will be taxed in retirement? A strategy I’ve seen work for families is to estimate the amount you’re going to save on taxes by doing nothing and plan to move some pretax savings to Roth savings through a conversion. You don’t feel the impact, since you’re paying the same amount of taxes before the cut and you’ve improved your long-term investment strategy through getting more tax-free savings. Another strategy is to redirect your IRA or 401k savings to a Roth IRA or 401k. There are income and contribution restrictions that apply here, but it is another way to balance your savings allocation.

I personally like to tackle these sorts of items during summer. I find that enjoying the weather can offset the boredom of it all. Maybe sitting on the porch and having a drink or two will help with the frustration of waiting on hold with insurance companies.

As always, consult your tax professional and financial professional before making any investment or tax decisions as each individual’s tax situation is different and this information is not intended to be a substitute for specific individualized tax planning or investment planning advice. That’s why you pay them. If you don’t have an advisor or would like a second opinion, I would love the opportunity to sit together and talk with you about your financial situation.

If this interests you Telos Financial may be able to help you. Contact us to schedule an introductory meeting and we can talk more in person or on the phone. Telos Financial is a fee based, holistic financial planning firm located in Plymouth, Michigan serving young professionals and families. Dennis LaVoy, CFP®, CLU® founded Telos and serves clients around Metro Detroit, Ann Arbor, and across the great United States of America.

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