Best Money Advice for Each Phase of Your Financial Life

Best Money Advice for Each Phase of Your Financial Life

Gabrielle Olya   Tue, May 30, 2023  GoBankingRates

‘Set for Life’ Author Scott Trench Shares His Best Money Advice for Each Phase of Your Financial Life

Scott Trench is the author of “Set for Life” and host of the “BiggerPockets Money” podcast. He is an experienced real estate investor who now serves as CEO of BiggerPockets, where he helps everyday people build wealth through real estate.

Recognized by GOBankingRates as a Top Money Expert, here he shares the four levers to building wealth, and how to know which one you should focus on.

What’s the one piece of money advice you wish everyone would follow?

I wish that everyone would remember that the big expenses — housing, transportation and food — are what matters when it comes to saving money, and that a home, in particular, is not an investment — it is an expense. The less you spend in these three categories, and especially on housing, the wealthier you will become.

What’s the most important thing to do to build wealth?

The most important thing to do to build wealth is to recognize that there are four key “levers” — spending less, earning more, investing and creating assets — businesses, intellectual property, etc. There’s a time and place for each lever — a time and place on your financial journey where each is the most important.

Single 20-somethings likely should concentrate most heavily on earning more. A middle-class family with less than a few hundred thousand dollars in wealth likely needs to tightly control expenses. A millionaire needs to focus on investing. And, the self-employed/entrepreneurs need to focus on creating.

These levers aren’t perpetual, but too many people attempt to focus on levers that don’t apply to them — [for example,] the person with $25,000 who spends hundreds of hours thinking about investing is wasting their time, because even great returns on a $25,000 investment aren’t meaningful compared to what can be saved or earned. Folks need to realistically self-assess and focus on what is meaningful to their position, with where they are at currently.

What’s your best tip for fighting the impacts of inflation?

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/set-life-author-scott-trench-110007524.html

I Lost $400k of My Retirement Savings in a Roth 401k

I Lost $400k of My Retirement Savings in a Roth 401k

Nicole Spector   Wed, May 31, 2023

I Lost $400k of My Retirement Savings in a Roth 401k — and If You’re Not Careful, You Could Too

Finance and retirement planning experts are usually quick to recommend that one set money aside in a Roth account. And it looks like the vast majority of Americans agree with them.

A new survey hosted by Derek Sall, a personal finance expert and the founder of LifeAndMyFinances, found that 92% of Americans think they should be investing in a Roth IRA. Sall wasn’t surprised by just how many people are of the belief that Roths are a financial must-have.

High-yield savings account vs. investing: Which is right for you?

“I estimated that 95% of people would say they should invest in a Roth (I wasn’t too far off!),” Sall told GOBankingRates. “But why? Why did I think the percentage would be so high? Simple. It’s what I’ve heard all my life — from every smart investor, from every influencer.

Even Dave Ramsey himself tells his millions of listeners to invest in a Roth. ‘It’s tax-free growth,’ they say. ‘You’ll have tax-free money in retirement,’ is another common one, [and] ‘taxes will likely go up in the future, so it’s smart to invest in a Roth now.'”

It all sounds so wise and the insight comes from wise people in the realm of personal finance. But in Sall’s opinion, this is horrible advice. Speaking to his own personal experience, he estimated a $400,000 loss of retirement income by having invested in a Roth IRA versus a traditional 401(k). What exactly did he discover?

The Tax Rate You Have Now Likely Won’t Be the Same in Retirement

The root of the problem, as Sall sees it, is that people assume that if they’re paying 22% tax on the money that’s going toward a Roth today, they’ll likely owe at least 22% tax on other income in retirement. But that’s perhaps not how it will pan out.

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/lost-400k-retirement-savings-roth-174006044.html

These Are the Best Ways To Transfer Wealth

These Are the Best Ways To Transfer Wealth

I’m a Financial Advisor Who Works With Wealthy Families: These Are the Best Ways To Transfer Wealth

Andrew Lisa   Tue, May 30, 2023

It’s one thing to make money, but building generational wealth requires strategic planning for what happens with your assets after you’re gone. GOBankingRates spoke with financial and estate planning professionals with wealthy clientele and found there is no one-size-fits-all solution.

“No two individuals or families are identical, so every estate plan must be as unique as the people creating it,” said Seth Bier, a Los Angeles estate planning attorney and founder of Bier Law. “We focus on planning for what’s most important for each client, but our universal goals are planning for people to keep as much of their hard-earned money as possible, keep them out of court, and bring their loved one’s closer together during tough emotional situations.”

Here are the best ways to make that happen.

Keep More Money in the Family by Minimizing Costs and Taxes

Expensive estate transfers shrink inheritances.

Bier explained that the costliest part of the process is usually probate, an often-lengthy legal process that validates wills. In his home state of California, for example, the so-called 4-3-2-1 law requires estates to pay a succession of attorney fees that pile on as the estate becomes more valuable. It’s 4% on the first $100,00, 3% on the next $100,000, 2% on the next $800,000 — that’s 9% on the first $1 million alone — then 1% on the remainder up to $9 million.

Depending on Where You Live, You Might Pay Taxes Twice

After the judicial system gets its bite, it’s the Taxman’s turn.

“In 2023, we each have a federal estate tax exemption of $12.92 million,” said Bier. “That means 97% of Americans who pass away this year will not have to pay any federal estate tax. For the very fortunate 3% who would have to pay a federal estate tax, advanced planning can help minimize the 40% tax by removing assets from their estate and taking advantage of the unlimited marital deduction and generation-skipping tax exemption.”

And the IRS isn’t the only one in line.

“While many states do not have an estate tax like the federal system, the savvy will determine if their state has an estate tax and implement a plan to mitigate those taxes,” said Robert E. Kabacy, an estate planning lawyer with the firm Kell, Alterman & Runstein.

Do What the Wealthy Do: Put Your Trust in Trusts

So, how do the wealthy remove assets from their estate, avoid probate proceedings and capitalize on unlimited deductions?

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/m-financial-advisor-works-wealthy-133542196.html

What I Think Heirs and Beneficiaries Should Know

What I Think Heirs and Beneficiaries Should Know

Sean Bryant   Tue, May 30, 2023   GoBankingRates

I Went Through a Generational Wealth Transfer: Here is What I Think Heirs and Beneficiaries Should Know

It’s expected that over the next two decades, roughly $84 billion will be transferred from Boomers to Gen Xers and Millennials. This generational wealth transfer will be one of the biggest ever.

This leaves both heirs and beneficiaries with the important task of understanding how to approach this great transfer of wealth. How do you balance leaving enough for your loved ones with gifting to causes that are important to you? Within this article, we’ll dig into everything you need to know to prepare yourself for the great wealth transfer.

1. Transparency Is Important

Most families hate talking about money. Many will do whatever it takes to avoid the topic altogether. However, when it comes to planning for the future, parents and children need to have these tough discussions.

According to an Ameriprise Financial Money and Family study, only 19% of people are transparent with their families about finances. To have a successful transfer of wealth, it’s important to discuss what the family’s finances look like and what the plan is going to be.

Will money be distributed equally between beneficiaries? Will anything be transferred to charitable organizations? Are there any requests from parents on how the money should be used or invested? These are all questions that should be discussed ahead and time to avoid potential conflicts down the road.

2. Understand Tax Implications

Depending on your relationship and the state where you live, you could be on the hook for an inheritance tax. This is slightly different than an estate tax because the beneficiary is responsible. Currently, there are only six states that impose an inheritance tax and that will be reduced on January 1, 2025, when Iowa eliminates the tax.

It’s also important to understand the tax implications you might have if you inherit assets other than cash.

“If you receive property as part of your inheritance, such as a house or land, be aware of potential property taxes,” says Michael Ryan, former financial planner and founder of Michael Ryan Money. “The value of the property may increase your annual property tax obligations, and you might need to budget accordingly.”

The same is going to be true with other investments.

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/went-generational-wealth-transfer-think-155345333.html

5 Best Money Tips From Top ‘Finfluencers’

5 Best Money Tips From Top ‘Finfluencers’

32% of Americans Trust Social Media for Financial Advice: 5 Best Money Tips From Top ‘Finfluencers’

Cynthia Measom   Mon, May 29,

According to a recent GOBankingRates survey of more than 1,000 Americans, 32% trust social media for money advice. If you’re not familiar with financial influencers — aka “finfluencers” — they are people who are typically not licensed investment advisors, but are able to influence their audience to take their financial advice or buy a product or service they promote on social media.

“Finfluencers” often find their influential power in the entertainment value they serve up to viewers along with their money tips. While there’s plenty of bad money advice on social media, there are also some solid suggestions coming from these TikTok and YouTube stars. Here are five best money tips from top “finfluencers” on social media — plus, additional insight from a certified financial planner.

Make Slow and Steady Progress Toward Your Emergency Fund

Taylor Price, also known as @pricelesstay on TikTok, is dedicated to helping Gen Z increase their financial IQ.

In a video posted to her YouTube channel, “8 Easy Steps To Get Your Emergency Fund Started,” Price says the amount needed for an emergency fund is not one-size-fits-all, but agrees that the “ideal” emergency fund is what many experts recommend — three to six months’ worth of expenses. If saving that amount seems overwhelming, Price recommends putting 10% of each paycheck aside to start building your emergency fund.

Divide Your Mortgage Payment in Half and Pay Biweekly

According to his LinkedIn profile, financial influencer Milan Singh has over 5 million combined followers across Instagram, TikTok and YouTube. In his Instagram video, “How To Save on Home,” Singh says you can make 26 biweekly payments on your mortgage instead of 12 monthly payments per year to pay off your mortgage early. The extra money will go toward the principal and save you thousands.

Jay Zigmont, Ph.D., CFP, founder of Childfree Wealth, said, “Using biweekly, or even weekly, payments for your mortgage is a good idea as long as there is no additional charge for that service. It evens out your budget and will help pay off your mortgage quicker. I do biweekly payments on my personal mortgage.”

Add Your Teen to Your Credit Card as an Authorized User

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/32-americans-trust-social-media-140917213.html

Most Important Financial Skill For Achieving Financial Freedom

Author Discovers 'Most Important Financial Skill' For Achieving Financial Freedom

Kerry Hannon·Senior Columnist  Sun, May 28, 2023

Most of us have fits and starts on our financial journeys. But in the end, it comes down to “prosaic prudence,” or to put it simply, a humdrum approach, according to Jonathan Clements, a retirement expert and author of the new book "My Money Journey."

Clements, who spent two decades at The Wall Street Journal, where he was the personal finance columnist, is also the founder and editor of HumbleDollar website. In his latest book, he shares the financial lives of 30 people, ranging in age from 30 to mid-80s, including a high school teacher, a minister, and a software engineer.

Kerry Hannon·Senior Columnist  Sun, May 28, 2023

Most of us have fits and starts on our financial journeys. But in the end, it comes down to “prosaic prudence,” or to put it simply, a humdrum approach, according to Jonathan Clements, a retirement expert and author of the new book "My Money Journey."

Clements, who spent two decades at The Wall Street Journal, where he was the personal finance columnist, is also the founder and editor of HumbleDollar website. In his latest book, he shares the financial lives of 30 people, ranging in age from 30 to mid-80s, including a high school teacher, a minister, and a software engineer.

"When we write about our money journey, we inevitably describe our life journey," Clements said.

He offered some advice, and some insights, in a conversation with Yahoo Finance about everything from the role that parents play in shaping their children’s future financial lives to recovering after financial mistakes.

Edited excerpts:

What Inspired You To Write This Book?

One of the strengths of the website I run is that I have everyday Americans tell their financial stories. When they write for the site, they're writing about their personal experiences such as how they've dealt with retirement, how they've dealt with down markets, how they've dealt with financial emergencies. I invited the contributors to tell their full financial story. The message: If these everyday Americans and investors can reach financial freedom, so can you.

What Do You Mean By Financial Freedom?

It means money isn't a regular worry. It doesn't mean that you can buy anything you want, but it does mean that you have enough money to meet your wants and needs. If your financial desires are relatively modest, you could be financially free with a relatively small portfolio.

Only Five Of The Contributors Are Women. What Gives?

There's a less sinister answer. These are the readers who have followed me from the Wall Street Journal, and when I was there, it was mostly read by older white males. But I do think that there’s also a societal issue here, which is that for far too long, men have been in charge of financial issues in households, and women have taken the backseat. I think it's entirely unfortunate, and hopefully, generations to come will be much more balanced about it.

You are known for extolling frugality in your own financial advice, how does this play out in the book?

A thread that runs through is that these 30 people are disciplined. They've become very good at delaying gratification and living beneath their means. That is the most important financial skill. It's much more important than being able to pick good investments. It's much more important than being able to decipher Social Security or figure out the best credit card to use.

What Are Some Of The Other Major Themes In These Money Essays?

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/author-discovers-most-important-financial-skill-for-achieving-financial-freedom-115918521.html

My Journey of Becoming Minimalist 15 Years 15 Lessons

My Journey of Becoming Minimalist

Written By Joshua Becker   15 Years 15 Lessons

It’s almost unbelievable to me to think that this weekend marks 15 years since that Saturday morning in Vermont when I was first introduced to the word: minimalism.  In a world that continually exclaims “more is better,” the idea of intentionally owning less is countercultural—almost as if the idea must break through the noise. For me, it was a conversation with my neighbor. For others, it was a parent, a friend, or even this blog.

But regardless of how we came to be introduced to minimalism, the lifestyle begins to change us.

These last 15 years have been a journey of learning, understanding, and growth for me.

Whether you’ve been reading Becoming Minimalist all 15 years (thanks mom!) or just started today, I’d like to celebrate by sharing 15 lessons that minimalism has taught me over the last 15 years.

1. The power of less.

Our society often equates more with better, encouraging us to amass things in the pursuit of happiness. At the heart of every advertising message is the foundational message that this product will improve our lives.

Maybe the most profound lesson minimalism taught me was the power of less. Having fewer possessions has not only decluttered my physical space, it has allowed me to redirect my precious (and finite) resources toward things that matter.

2. Real wealth is intangible.

There is more than one definition of the word wealth. Merriam Webster offers three:

1. abundance of valuable material possessions or resources

2. abundant supply

3. all property that has a money value or an exchangeable value

When most people think of the word wealth, they define it (and usually desire it) in terms of financial or material resources.

But there are other things in the world that we should desire in “abundant supply:” relationships, love, faith, and impact all come to mind.

Very often, the pursuit of material wealth leaves those other pursuits lacking—rather than in abundant supply. Given the choice, I’ll prefer richness in relationships, faith, and love over dollars any day.

Minimalism helped me see that even clearer than before.

3. Contentment cannot be purchased.

To continue reading, please go to the original article here:

https://www.becomingminimalist.com/15-years-15-lessons-my-journey-of-becoming-minimalist/

10 Brilliant Ways To Reduce Your Taxes in Retirement

10 Brilliant Ways To Reduce Your Taxes in Retirement

John Csiszar  Mon, May 29, 2023

Though taxes might not be the first thing you think of when it comes to how you want to spend money in retirement, planning strategically can mean more funds for the things you love. That's why when you're budgeting for retirement, it's important to factor in how much of your money will be going to the IRS each year.

Reducing your taxes after retirement can help you reduce the savings you need to retire in your state. See how you can maximize your retirement savings.

1. Pick Your Retirement State Carefully

If possible, try to retire in one of the most tax-friendly states for retirees. Not all states are created equal when it comes to taxes in retirement. Nine states have no income tax at all, and Tennessee and New Hampshire only tax interest and dividends. 

On the other end of the spectrum, California has a top tax bracket of 13.3%, meaning the Golden State isn't topping the list of retirement-friendly places to spend your golden years.  You almost certainly have other factors to consider when deciding where you want to spend your retirement years aside from which places are tax-friendly states for retirees, but it could be an important factor.

2. Contribute To or Convert To Roth Accounts

If you haven't finished working yet, consider whether you should be contributing to a pretax retirement account -- like a traditional IRA or 401(k) -- or an after-tax retirement account like a Roth IRA or 401(k). If you expect to have more taxable income once you retire -- whether that's from dividends, Social Security payments or selling investments -- you can reduce your taxes by contributing to a Roth account so the distributions won't be taxed.

Or, if you expect that income tax rates will increase in future years, convert a portion of your retirement savings to a Roth IRA. You'll pay taxes in the year of the conversion, but the later withdrawals from the Roth account will be tax-free.

3. Roll Over From a Traditional IRA to an HAS

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/10-brilliant-ways-reduce-taxes-130058921.html

‘I Got $300,000 in a Personal Injury Settlement. What Do I Do With It?’

‘I Got $300,000 in a Personal Injury Settlement. What Do I Do With It?’

MY TWO CENTS APR. 27, 2023 By Charlotte Cowles, the Cut’s financial-advice columnist

About three years ago, I was in a car accident. It was 100 percent the other driver’s fault (he had been drinking), and it left me with multiple injuries. Basically, I had to learn how to walk again, and I will probably have screws in my leg for the rest of my life. I was in school for nursing at the time and I had to take medical leave. I couldn’t work or even shower on my own. I moved back in with my mom while I did physical therapy and recovered.

While my life will never be quite the same, I recently won a personal injury settlement from the accident that awarded me more than $300,000 after attorney’s fees. This is a ton of money, more than anyone in my family has ever seen. I’m overwhelmed by it and I don’t know where to start. I want to give some of it to my mom, because she took care of me and housed me while I got back on my feet (literally).

But I also want to be careful. I know that a lot of people mismanage large amounts like this, and I don’t want to be one of them. I’m now back in nursing school and set to graduate next year, but I’m still living with my mom. How much should I give to her? Should I use the rest to pay off my student loans? Should I invest it? Should I save it? Should I use it for a down payment on a home? My lawyer told me to hire a financial adviser, but I’m not even sure how to find one. What do I do?

First of all, I’m so sorry you went through this hellish experience. No amount of money can make up for a painful accident and difficult recovery, not to mention the life stuff that got sidelined because of it. But this settlement can provide you with some comfort and security going forward, especially if you manage it well. I hope that things only get better from here.

I agree that sitting down with a certified financial planner is a smart idea. No one — including me — can or should give you specific advice without reviewing the details of your life. I’ll give you some pointers on finding a professional you can trust, and then cover the topics that you can discuss with them.

But first, as you mentioned, there’s a lot of bad advice out there about how to handle a big windfall like this. A quick Google turned up a bunch of stuff about annuities — don’t fall for it! You might also have people coming out of the woodwork to ask you to invest in their business or tell you to buy a house or a car or a pony or cryptocurrency. Practice some version of this statement: “Thank you. I’d actually rather talk about something else. This has been a lot to deal with.” And then either give them a nice smile or a hard stare.

To continue reading, please go to the original article here:

https://www.thecut.com/article/personal-injury-settlement.html

Here’s What To Do If You Inherit a House

Here’s What To Do If You Inherit a House

Crystal Mayer   Fri, May 26, 2023

Real estate is a valuable investment almost anywhere you go, so inheriting a property can have a significant positive impact on your finances. However, if you are not prepared, it also can strain your resources. Houses are not cheap.

Stay ahead of the market

While not all inherited properties come with mortgages, they do all come with some sort of expense. Utilities, property taxes, upkeep and maintenance are all costs you will have to factor in if you are set to receive an inherited home.

There are several things to consider when inheriting a home, including whether you want to live in it and how you are going to pay for it. From getting the deed changed to preparing for taxes, there is a long list of stuff that should get done before you accept the keys. To ensure that you don’t end up in a money pit, you need to do your research and follow these five steps.

Make a Plan

When you find out that you are set to inherit a property, you have three options. You can move into the home, you can sell the home or you can rent it. If you are inheriting the house with others, you need to speak to them and arrive at an agreement on how to move forward.

Inheriting a house is often more complicated when more people are involved. If you and the people you are inheriting the house with do not agree, there may be a number of options on how to handle it. For instance, you may want to consider a buyout from or to the other party. You also can decide to sell the house or rent it and split the profits.

Meet with a Professional

The average price of a home in the United States was $348,079 in 2022, according to The Zebra, an insurance comparison site. For most people, a house is the largest asset they own. It also can be the most significant source of debt.

Unless the home you inherit is paid off, you will have to prepare for the financial burden of another mortgage. Even if there is no mortgage, there may be additional costs that you will need to factor into your budget.

A professional can help you understand what an inherited home may mean to your bottom line. A pro can research whether the property has any liens against it and can help anticipate what the cost of the house will be each month. The expert also can review the pros and cons of keeping the house, renting it or selling it. The more information you are armed with, the better decision you can make in the long run.

To continue reading, please go to the original article here:

https://www.yahoo.com/finance/news/inherit-house-180017927.html

6 Things Millionaires Are Doing With Their Money To Prep for an Economic Downturn

6 Things Millionaires Are Doing With Their Money To Prep for an Economic Downturn

Gabrielle Olya   Wed, May 24, 2023

The majority of Americans (67%) believe the economy will enter into recession later this year, a new Northwestern Mutual study found. It also found that among those anticipating a recession, three out of four expect it to have a high or moderate impact on both their near-term (78%) and longer-term (75%) finances.  Even the ultra-wealthy don’t believe they’ll make it through a recession unscathed, so many are taking preemptive steps now to be ready when the downturn hits, the study found.

Here’s a look at what millionaires are doing to prepare, plus, what the average American can learn from these behaviors.

The Majority of Millionaires Are Building Up Emergency Savings

The study found that the No. 1 thing high-net-worth individuals are doing to offset the effects of a potential recession is building up their savings and emergency funds — 50% of millionaires are taking this action.

“The strategy of putting some money aside to have some dry powder aside for both opportunities, or for potential unknown challenges, is a sound one,” said Tim Harrison, founder and CEO of Harrison Financial Services – Northwestern Mutual Private Client Group in Omaha, Nebraska. “Higher interest rates are making it harder to borrow for big purchases, but they also make it easier to save and invest for goals tomorrow.”

Harrison notes that building savings has been a proven strategy for the ultra-wealthy to make it through past downturns.

“Many high-net-worth individuals accumulated their wealth through running a business and they are often fairly aware of the economic and business cycles,” he said. “These individuals have been through a few recessions and have ‘muscle memory’ and intuition around what is necessary in tightening cycles.”

Nearly Half of Millionaires Are Cutting Costs

Even those with money to spare are tightening their purse strings. The second-most common action millionaires are taking to be ready for a recession is cutting costs — 46% of high-net-worth individuals said they are currently reining in their spending.

“I am not surprised that high-net-worth individuals are cutting costs,” Harrison said. “This is analogous to an athlete knowing you have an event coming up and so you train, you focus and save up your energy for the event, and you try to get mean and lean to be able to perform through the challenge. The HNW look at a recession the same way: they conserve their strength and energy for the potential for rainy days ahead.

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/6-things-millionaires-doing-money-110059710.html