Tagged: retirement

How to Buy Gold: A Beginner’s Guide

There has been a lot of discussion about buying gold in the media over the past several years.  You may have wondered how exactly do you go about making such a purchase.  Mark Griffith, a former floor trader with the London International Financial Futures Exchange, gives a concise introduction in this topic. In this EHow video, Mark outlines the options available in purchasing gold in the marketplace.

Further aspects of using precious metals for achieving financial freedom will be presented in future editions of FFN.  FFN Editors

(Disclaimer: The views expressed in the above video are strictly those of the presenter.  They do not necessarily represent those of FFN.  Please use due diligence prior to applying the concepts, recommendations and/or in purchasing any products or services from the presenter). FFN Editors

Don’t Retire, Strive for Financial Independence Instead, Part 2

Our featured writer, Richard Eisenberg, continues his analysis of the benefits of planning for financial independence instead of retirement.  This, the second part of his article, includes a review of several retirement calculators. These calculators can give you a sense of what sort of capital is needed in order to realize the type of retirement you wish to have.  As you will see, not all calculators are the same.  So, choosing the right one is important. FFN  Editors

Plan For Financial Independence, Not Retirement (Continued)
Richard Eisenberg, Contributor to Forbes Magazine, Personal Finance Section (www.forbes.com)

Two Types of Retirement Calculators

If you’re trying to figure out your Financial Independence day, should you bother using an online retirement calculator? I think it depends on the tool.

Most retirement calculators are actually best for people in their 20s, 30s and early 40s who have years to save furiously once they see their “number.” The electronic number crunchers typically ask few questions, partly because younger people can’t possibly determine for sure their retirement income sources or expenses.

“When you’re further away from retirement, these calculators are directional in nature,” says Kent Allison, a PwC partner and leader of the firm’s financial education practice, based in Florham Park, N.J. “When you get closer to retirement, you really have to get into a nitty-gritty cash flow analysis.”

He’s right. If you’re three to 10 years away from retirement, that’s the time to figure out where the money will come from to cover what Pat O’Connell, executive vice president for the Ameriprise Advisor Group, calls the three types of expenses:

Essential expenses that’ll be covered by guaranteed income sources, like bonds, Social Security and a pension.
Lifestyle expenses purchased with money from your investment portfolio.
Unexpected expenses, like health care and long-term care costs, paid for out of your emergency savings fund.
Three Good Calculators for People 50+

There are, however, a few excellent calculators – not always free – that are specifically geared for people in their 50s and 60s. They can help you firm up a retirement cash-flow analysis.

One is Retirement Works2 for You, created by retirement adviser Chuck Yanikoski primarily for what he calls “nonaffluent people trying to play their cards as smartly as they can.” It costs $189 for the first year; annual renewals are $44.50.

RW2, as it’s sometimes called, asks a lot of questions; Yanikoski says you should plan to spend one to three hours answering them. (“Retirement is an extremely complicated thing,” he says.) But the results can be valuable.

As soon as you input your data and answer the questions, you’ll get an online report card with retirement planning advice and letter grades telling you how well you’re set under “normal” circumstances, if you live an extra long lifetime, if your investments don’t perform well, if inflation shoots up and if you run into high medical expenses, including long-term care.

You’ll also see how your cash flow would be affected if you delayed retirement and lowered your standard of living.

Two other calculators worth considering:

The free Ballpark E$timate from the Employee Benefit Research Institute’s Choosetosave.orgsite and the American Savings Education Council; Next Avenue has a link to the Ballpark E$timate calculator.

E$Planner, created by Lawrence Kotlikoff, an economics professor at Boston University. There’s a free version of E$Planner Basic as well as one that costs $40, with “what if” investment scenarios and Social Security options. The downloadable $149 product also offers “retirement spend-down” strategies, helping you determine how much to withdraw from your portfolio.

Use an Adviser to Plot Your Findependence

Whether or not you use a calculator to come up with your Financial Independence Day, I strongly suggest you work with a financial adviser to run the numbers.

“The decisions are major,” Allison says. “A wrong one could cost you a lot. So even if you don’t normally want to spend money on a financial planner, this is the one time to do it.”

Richard Eisenberg is the senior Web editor of the Money & Security and Work & Purpose channels of Next Avenue. Follow Richard on Twitter @richeis315.

(This article is available online at: http://www.forbes.com/sites/nextavenue/2013/07/01/plan-for-financial-independence-not-retirement/)

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(Disclaimer: The views expressed in the above article are strictly those of the author.  They do not necessarily represent those of FFN. Please use due diligence prior to applying the concepts, recommendations and/or purchasing any products or services offered by the author).  FFN Editors

Don’t Retire, Strive for Financial Independence Instead, Part 1

Our featured article in this edition of Financial Freedom News recommends a very different approach to the idea of planning for retirement.  Richard Eisenberg, a contributing writer for Forbes magazine, recommends that we focus on attaining financial independence instead of planning for retirement.  In this two-part article Richard outlines his views on how to make this goal a reality. 

In this article, we are given the 5 rules for declaring our financial independence.  The second part of this article, in our next edition, will discuss several types of retirement calculators and their role in the planning process. FFN Editors

Plan For Financial Independence, Not Retirement
Richard Eisenberg, Contributor to Forbes Magazine Personal Finance Section (www.forbes.com)

 Declaring your Financial Independence Day is a better idea than trying to come up with “the number” you need to retire, especially if you’re in your 50s or 60s and don’t have much time to pump up your savings.

What exactly is financial independence or, as some call it, financial freedom? That depends on your own definition.

In a new Capital One 360 survey, 44% of U.S. adults said financial freedom meant not having any debt, 26% said it meant having enough saved for emergencies and 10% defined it as being able to retire early.

I go with Jonathan Chevreau, the Toronto-based author of the new U.S. edition of Findependence Day, a “fictional finance” book, and creator of the Findependenceday.com site. His novel is about a young debt-ridden couple, Jamie and Sheena Morelli, and their road to reaching you know what.

Chevreau says that when you’re financially independent, you work because you want to, not because you have to. “Findependence is necessary for retirement,” he says. “You can be findependent and not retired, but you can’t be retired without being findependent.”

Chevreau targeted April 6, 2013 – his 60th birthday – as his Findependence Day and reached that goal, but he still edits Canada’s MoneySense magazine. “I have a job I like, so why would I quit?” he asks.

5 Rules to Declare Your Findependence

Chevreau’s five rules for achieving findependence:

1. Pay off your home in full. “That’s really the foundation,” he says.

2. Find multiple sources of income for retirement. These can include interest and dividends from your investment portfolio; rental real estate; freelance or consulting work; Social Security; an annuity; and perhaps a guaranteed pension.

3. Develop “guerrilla frugality” habits. Chevreau calls this “becoming a Frooger.” Keeping expenses low while working full-time will make it easy to live that way in retirement and reduce the amount of savings you’ll need for a comfortable retirement.

“If you spend like a millionaire, you’ll end up a pauper,” says his book’s protagonist, Jamie. “Spend like a pauper and you have a shot of becoming a millionaire.”

4. Save 20% of your gross income. This will be impossible for many people, but not for others. If you can’t save 20%, try for 15 or 10%.

5. Invest with a “Lazy ETF” portfolio. That means selecting, say, three exchange traded funds– a U.S. stock fund, an international stock fund and a U.S. bond fund – and holding onto them.

Review their performance once a year. Then rebalance your portfolio if the markets shift and you discover you have a higher percentage in one of these asset classes than you want. (Use index funds instead of ETFs, if you prefer.)

Women, Men and Money

At the risk of overgeneralizing, I think many women gravitate toward the concept of financial independence, while men often prefer focusing on “the number.”

In the initial episode of the two-part Consuelo Mack WealthTrack public television series on Women, Investing and Retirement that premiered June 28, Jewelle Bickford, senior strategist for GenSpring Family Offices, said the first question her male clients ask in their monthly or quarterly meeting is “how has their portfolio done, whereas the women tend to think: ‘Will I have enough?’”

(This ends part 1 of this article.  Part 2 will follow in our next post). FFN Editors

Let us know your thoughts iregarding this nformation in the Reply Section below.  Also, please click “Like” and “Share” this artilcle with others who may be interested in achieving financial freedom.

(Disclaimer:  The views in the above article are strictly those of the author.  They do no necessarily represent those of FFN. Please use due diligence prior to applying the concepts, recommendations and/or in purchasing any products or services offered by the author).  FFN Editors 

Get Your Retirement Plan Back on Track

Does your goal of retiring seem farther away than ever.  Well, you aren’t alone. The reality for many is that normal retirement at age 65 is being postponed to some later date.  As a result of the financial crisis of 2007/2008 and the widespread lack of retirement preparation, many have to work longer to reach the  financial level necessary to retire. 

Putting a retirement plan into effect is a critical step in making retirement a reality.  Trent Hamm writing in The Simple Dollar outlines several  steps that can get your plan underway. And, perhaps close to where it should be if it has been side-tracked.

Let us know your thoughts about this information in the Comments section at the end of this page.  Also, please “Like” and “Share” this information with others you may be interested in achieving financial freedom. FFN Editors

How to Approach Retirement Catch-Up
By Trent Hamm for The Simple Dollar

December 10, 2013

It’s well established that if you start saving about 10 percent of your income for retirement starting at age 25, you’re going to be in excellent shape for retirement when you hit age 65. This fact should be emblazoned on every single college and trade school diploma issued in the United States today: start saving for retirement now, not later.

Unfortunately, that fact doesn’t represent reality. Quite a few of us didn’t save at all during our 20s, and some of us didn’t save during our 30s, either. All the time, I hear from readers in their late 30s or early 40s (or even later) who are just now realizing that they need to start saving for retirement or they’re going to work forever.

If this describes you, the obvious answer is to start saving immediately. Right now. If you’re reading this article and you’re a professional adult without any retirement plan in place, you need to start a retirement plan.

If your employer offers a 401(k) program with matching contributions, run (don’t walk) to the HR office and sign up for that plan. Contribute enough to get every dime of that matching money because it’s essentially free retirement savings for you. If your employer doesn’t offer matching in their 401(k) program, look into opening an individual retirement account. I recommend contributing 10 percent of your income to that IRA, for starters.

So, you’re saving. Now what? The first thing to think about is time. If you’re only contributing 10 percent of your income per year to a typical retirement fund, it’s going to take about 40 years of saving before you can safely retire. Like it or not, that’s the reality of it.

If you’re 30 when you start, that means you’re looking at retiring when you’re 70. If you’re 40 when you start, that means you’re looking at retiring when you’re 80.

Another problem is that simply doubling the contribution doesn’t mean that you can halve the time. You can’t expect to contribute 20 percent for 20 years and match what you would get out of 10 percent over 40 years. That would only work if you were getting no return on your money – in other words, if your retirement plan involves stuffing cash into a mattress.

Saving for retirement once you’re behind the curve looks quite scary. Thankfully, there are a few things you can do to help improve your situation.

1. Get a Social Security estimate. The average American earns 40 percent of his or her retirement income from Social Security benefits, so knowing what you have coming to you can go a long way toward soothing retirement fears. The Social Security Administration offers a calculator to help you figure out how much you’re going to receive in benefits. It’s a good idea to wait until you’re as old as possible to start collecting benefits so you can maximize the income.

2. Look for ways to boost your income. Many mid-career folks find opportunities for freelance work and side businesses that can supplement their current income. Instead of simply spending that money, however, channel all of it into retirement savings (or into a mix of retirement savings and debt repayment). If you’re unsure where to start, visit your local library for information on side businesses and freelance opportunities related to your career path.

3. Hike up your savings. If you wish to retire earlier than 40 years from now, you’re going to have to save more. That means stowing away a higher percentage of your income. A good quick rule to use is that for every 10 years you want to shave off your goal, you need to double how much you’re saving. If you want to make it in 30 years, shoot for 20 percent per year. Twenty years? You should be saving 40 percent of your income per year. You need that boost to make up for the time you lost.

4. Cut out unnecessary expenses. Finally – and this is the tough part – you may have to consider some cutbacks. If you’re living a lifestyle that makes saving for retirement inconceivable, then you’re simply living beyond your means. You can’t assume that your ship will come in someday and everything will be OK. Everyone has expenses that they can cut from their life.

The road to retirement is a challenging road – but it’s not an impossible one.

Trent Hamm is the founder of the personal finance website TheSimpleDollar.com, which provides consumers with resources and tools to make informed financial decisions

(Disclaimer:  The views expressed in the above article are strictly those of the author.  They do not necessarily represent those of FFN.  Please use due diligence prior to applying the concepts, recommendations and/or in purchasing any products or services offered by the author)  FFN Editors

How to Control Debt

A key component in achieving financial freedom is reducing and controlling debt.  Some financial freedom seekers have been able to shrink debt to an absolute minimum…even to zero.  Most of us, however, will have debt in our lives.  Managing that debt becomes critical in our ability to realize financial independence. 

Our featured article by the GreenPath organization addresses this issue.  GreenPath Debt Solutions, a nationwide, non-profit credit counseling and education organization, has come up with a list of ways to work your way out of debt in the New Year.

Let us know your thoughts about this article. Also, please “Like” and “Share” this information with others who may be interested.  FFN Editors

Quick Tips On Getting Debt Under Control In 2014

SOURCE: GreenPath Debt Solutions. (GreenPath Debt Solutions shares ways to tame credit card bills and other debts).

FARMINGTON HILLS, Mich., Dec. 18, 2013 /PRNewswire-USNewswire/ —

The New Year is only a few weeks away, and after the holiday gifts and decorations are packed away, mailboxes will soon be packed with credit card bills.

“In early January, we really see a surge in calls from people worried about their holiday bills,” said David Flores, GreenPath personal finance counselor. “Once the excitement of the holidays has passed, they realize they need to get serious about paying off their debt in the New Year.”

Plan Your Finances – This is an important first step to take in the New Year. An active financial plan is a tool that helps reduce spending and increase savings.

“You shouldn’t simply be content with having money left over in your checking account, at the end of each month,” said Flores. Developing a plan will allow more financial freedom and enable you to get through financial emergencies.

Create a Budget – A budget forces you to get your spending under control, and to “live below your means,” which is exactly what you’ll need to do to start eliminating your debt. Making little adjustments to your lifestyle can add up to big savings. “Be sure to give yourself a bit of breathing room in your budget for unexpected expenses,” said Flores.

Prioritize Your Debts – “Debts that take first priority are the ones directly related to your ability to survive, such as mortgages or auto loans,” said Flores. “If you don’t pay these loans, you can face foreclosure or repossession.” Flores recommends prioritizing payments into three categories: high priority (housing, child support, utilities, car loans); medium priority (personal secured loans, student loans, home improvement loans); and low priority (loans for household goods, credit cards, doctor’s bills).

Estimate Available Income – Income can be a weekly paycheck, pensions, public assistance and investments. After you subtract taxes and other deductions from your total income, you will have your available income that you can work with each month.

Check Your Spending – Identify your past spending patterns by reviewing cancelled checks, receipts, and charge statements, for the past two to three months. Place expenses in “fixed” or “flexible” categories. Fixed expenses occur at specific times and rarely change (car note or mortgage). Flexible expenses fluctuate from month to month, and may possibly be altered to balance the plan (credit card bills, electric bill).

Use Cash for New Purchases – Unless you pay off the entire balance every month, you are probably paying interest on new purchases from the date of the purchase. If you stop using your credit cards all together, you will be able to reduce your debt more quickly. Because of compounded daily interest, it is far better to use cash for the things you need and adjust your budget to accommodate those expenses, rather than to use credit cards and then struggle to send large payments.

Review Your Plan – You should review your plan about every two to three months. Do not be surprised if, in the beginning, actual expenses are quite different from what you initially listed. Your plan will become more realistic as you continue the process.

Planning ahead early in the New Year can set you on a path to being debt-free in 2014.

Contact Information:

For more information on GreenPath, or to receive a free counseling session and budget plan, log on to http://www.greenpath.org or call (866) 648-8122.

Keep up with GreenPath Debt Solutions on social media at http://www.facebook.com/greenpathdebt and http://www.twitter.com/greenpathdebt.

Resources Information:

GreenPath Debt Solutions is a nationwide, non-profit financial organization that assists consumers with credit card debt, housing debt and bankruptcy concerns. Our customized services and attainable solutions have been helping people achieve their financial goals since 1961. Headquartered in Farmington Hills, Michigan, GreenPath operates 50 full-time branch offices in 11 states.

They also deliver licensed services throughout the United States over the Internet and telephone. GreenPath is a member of the National Foundation for Credit Counseling (NFCC). Our professional counselors are certified by the NFCC, and we are accredited by the Council on Accreditation (COA). For more information, visit us at http://www.greenpath.org.

©2012 PR Newswire. All Rights Reserved.

Information contained on this page is provided by an independent third-party content provider. WorldNow and this Station make no warranties or representations in connection therewith. If you have any questions or comments about this page please contact pressreleases@worldnow.com.

(Disclaimer:  The views in the above article are strictly those of the author.  They do not necessarily represent those of FFN.  Please us due diligence in applying any of the concepts, recommendations and/or in the purchase of products or services offered by the author).  FNN Editors 

Smart Financial Steps To Take Before Year’s End

Here are a dozen money actions to consider taking before closing out 2013.  Deborah Jacobs of Forbes magazine offers an insightful collections of financial steps to both protect your current wealth and set a course for increasing it.

Let us know your thoughts about this article and “Like” and “Share” with others who would wish to take advantage of this information.

“12 Smart Money Moves To Make Before The End Of 2013”

Deborah L. Jacobs, Senior Editor, Forbes Magazine, 12/02/2013

Many people, rushing to make holiday plans, would like to take a vacation from thinking about money. Not so fast. In the process you could whiz by some crucial financial deadlines on Dec. 31. Miss them and you might get hit with substantial penalties or lose the opportunity to take advantage of some smart money-saving moves. Here are strategies to consider in the countdown to 2014.

1. Fund employer-sponsored retirement plans.

For 2013, you can contribute up to $17,500 to a 401(k) plan, or $23,000 if you’re 50 or older. These dollars can be put in a pretax 401(k), cutting your current tax bill. Or if your employer offers the option and you believe tax rates will rise, put some of those dollars in a Roth 401(k). The money goes into a Roth after taxes, saving you nothing now. But the Roth grows tax-free. You can withdraw from it tax-free when you retire or before that if you leave the company, have had the account for at least five years and are 59 ½ or older.

Think it’s too late to top up your 2013 contributions? Maybe not. Ask your employer to withhold extra dollars from your last couple of paychecks.

Self-employed? Set up a one-person 401(k). So long as you create it by Dec. 31 you can make contributions for 2013 until the due date of your 1040 with extensions – as late as Oct. 15, 2014.

2. Buy business equipment.

Here’s another tax goodie if you’re a business owner or moonlighter. Instead of recovering the cost of new equipment by depreciating it over a period of years, you’re allowed to deduct the entire cost of most new business property in the year you acquire it. Currently, the limit is a generous $500,000, which comes in handy if you’re in the market for computer equipment, furniture, or a car, for example, but it’s scheduled to drop to $25,000 Jan. 1. For the current rules on this Section 179 Deduction, check IRS Publication 946, which downloads here as a PDF.

3. Accelerate income tax deductions.

The most obvious examples are property taxes and state and local income tax. That’s assuming, however, you’re not paying (or in danger of paying) the fiendishly complicated alternative minimum tax, which can turn that traditional advice on its head. For example, since state and local taxes aren’t deductible in AMT, you might delay the payment of your fourth-quarter state taxes until 2014 – if you’re stuck in AMT this year but likely won’t be for 2014.

4. Take required distributions from your own IRA.

You are considered the owner of an IRA that you set up and funded – either through annual contributions or the rollover of a 401(k). Unless the account is a Roth, you must take yearly minimum distributions starting at age 70 ½. You have until April 1 of the year after you turn 70 ½ to take the first one. After that, you must take distributions by Dec. 31 of each year.

The payout is based on the account balance on Dec. 31 of the previous year divided by your expectancy, as listed in one of three different IRS tables (really) contained in Appendix C of IRS Publication 590, “Individual Retirement Arrangements (IRAs),” downloadable as a PDF here. After doing the calculation the mandatory withdrawal is expressed as a dollar value. You are required to pay income tax on this amount.

5. Take required distributions from an inherited IRA.

Generally, non-spousal IRA heirs must withdraw a minimum amount each year, starting by Dec. 31 of the year after the IRA owner died. Note: This is true whether it’s a traditional IRA or a Roth (a common misconception).

To calculate this distribution, you take the balance on Dec. 31 of the previous year and divide it by the individual’s life expectancy, as listed in the IRS’ “Single Life Expectancy” table (see p. 88 of IRS Publication 590. Unless the account is a Roth, there is income tax on this required payout.

Don’t make the mistake, as some people do, of using the number from the table to figure a percentage. In subsequent years, you simply take the number you used in the first year and reduce it by one before doing the division.

6. Split inherited IRAs that have more than one beneficiary.

Co-beneficiaries must take distributions over the life expectancy of the oldest beneficiary. It’s better to split it into separate inherited IRAs. That avoids investment squabbles and allows a longer payout period for the younger heirs. But you must take this step before Dec. 31 of the year following the year of the IRA owner’s death. If you don’t, the payout schedule will continue to be based on the life expectancy of the oldest beneficiary.

7. Make yearly tax-free gifts.

You can give anyone (and everyone) $14,000 annually without eating into your lifetime exemption from gift or estate tax. (That exemption is currently $5.25 million and goes up to $5.34 million in 2014.) Couples can combine this annual exclusion to jointly give $28,000. Just make sure 2013 gifts are complete (received and, in the case of a check, either deposited or cashed) by Dec. 31.

8. Fund 529 state college savings plans.

A popular use of the annual exclusion is to fund these plans. The main appeal of a 529 is income tax savings: You put money in one of these plans and you don’t have to pay federal or state income tax on the earnings, provided the cash is withdrawn to pay for college or graduate school tuition, fees, room and board, or books. In some cases you also get a state income tax deduction for your contribution. To take advantage of that tax break your contribution checks must be postmarked by Dec. 31; if you contribute by electronic bank transfer, your online request must be submitted before 11:59 p.m. on Dec. 31.

When it comes to 529s, there’s a special twist with annual exclusion gifts: You can make a lump-sum deposit of as much as $70,000 ($140,000 for a couple) and treat it as five years’ worth of annual $14,000 gifts. To do this you must file a gift tax return, and if you die before the five years is up a pro rata part of the gift goes back into your estate. Still, it’s a good way to get a large lump of college money into a 529, where it can grow tax-free.

9. Harvest capital gains and losses.

A popular way to reduce the tax on investment gains is to take capital losses to offset them. Should you go this route, beware of the “wash-sale” rule of the Internal Revenue Code. It prohibits deduction of losses if you either buy back the property you just sold or buy “substantially identical” securities 30 days before or after the trade. If you violate the rule, you can’t deduct the loss until you sell the new shares.

10. Pay estimated taxes.

This is relevant to people who are self-employed, have a business on the side, or have taxable investment income. To avoid underpayment penalties for the 2013 tax year, you must prepay on a quarterly basis 100% of what you owed in 2012 or 110% if your adjusted gross income in 2012 was more than $150,000.

11. Make charitable donations.

Publicly traded appreciated securities – assuming you have any – are by far the most tax-efficient asset to donate to charity. You can deduct their full fair market value at the time of your gift (offsetting up to 30% of your AGI), yet you don’t have to recognize the appreciation as income. If you want a 2013 deduction but don’t yet have a charitable recipient in mind, transfer those securities to a donor-advised fund. You can claim your deduction now, then recommend grants to your favorite causes later. (Fidelity, Vanguard and Schwab all have affiliated charitable funds.)

If you’re 70 ½ or older and still need to take a 2013 required minimum distribution from your IRA, consider transferring the payout (or part of it) directly to your favorite charity (it can’t be a donor advised fund). You won’t get a charitable deduction, but you also won’t have to recognize this “charitable rollover” as ­income, which has other benefits. For example, it might hold down the amount of extra income-based Medicare ­premiums you must pay in 2013.

Even if you’ve already taken your RMD, you can do a charitable rollover for up to $100,000 – before Dec. 31. This provision expires at the end of 2013. For details about how to do this, and pitfalls to avoid, see “The Dollars And Sense Of Giving IRA Assets To Charity.”

12. Schedule checkups and stock up on meds.

All the more so if you have met your deductible for 2013. In that case prescription refills that cost you nothing now may add up to considerably more starting Jan. 1 until you have met your deductible for 2014. Likewise, if you need surgery and have a choice about whether to schedule it this year or early next year, you might be better off financially having the operation this year.

A similar strategy applies if you have incurred enough unreimbursed medical expenses this year for them to be deductible on your federal income tax return. Medical expenses are generally deductible if they exceed 10% of your adjusted gross income – 7.5% if you or your spouse is 65 or older.

Deborah L. Jacobs, a lawyer and journalist, is the author of Estate Planning Smarts: A Practical, User-Friendly, Action-Oriented Guide, now available in the third edition.

(Disclaimer:  The views expressed in the above article are strictly those of the author.  They are not necessarily those of FFN.  Please use due diligence in applying any of the concepts, recommendations and/or the purchase of products or services offered by the author) FFN

Build Wealth Like Millionaires Do

 

Would you like to build up a nice nest egg for the future?  Maybe you would like to really expand your wealth to something more significant.  Something approaching the millionaire status.  Well, our featured author, Liz Davidson, writing for Forbes Magazine, has a number of suggestions to help you get to your goal.

Please give us your thoughts in the comment section below.  And, indicate”Like” and “Share” this article with any one you think might be interested in the topic. FFN Editors

“Eight Ways To Build Wealth Like Millionaires Do – Make It A Game”

Liz Davidson, Contributor, Forbes Magazine 

The economic downturn has taken its toll on Americans – business owners and workers alike. Many of those who lost their jobs had to take substantial pay cuts in order to work. Overtime is a thing of the past and many who would like a second job find they are few and far between. Just because times have been challenging doesn’t mean it’s impossible to build wealth. In fact building wealth can actually be enjoyable, even fun.

There are opportunities out there for everyone whether it is in an emerging industry such as “micro jobs” or using a special talent you possess and enjoy turning into wealth building opportunities. Here are some ways to build wealth either in a small way to make ends meet or in a big way that could be life changing, either way any of these could be a positive move in the right direction:

Take a few micro jobs.

With the economic downturn and the technology/social media upturn, a new industry has emerged that helps people with small jobs or tasks such as running errands or something more interesting such hiring a micro jobber to “ask someone for forgiveness” for you (that would certainly get their attention.) On the other hand, some jobs could actually lead into something else such as reviewing resumes for job seekers, or recording video testimonials for websites. The micro job site takes a cut of course, but you net out a profit for a few minutes of your time. When you take the micro jobs, invest the funds to build wealth. You’d also have some great stories to tell.

Resource – Micro jobs

Invent something and sell the concept.

One of my favorite inventions is the pool sweep, not that I have a pool but I just think it is an amazing invention. Millions of pool owners agree since every swimming pool owner I have ever met has one of these devices that crawls along the bottom of the pool vacuuming up leaves and debris for them. A penniless engineer named Ferdinand Chauvier brought his family from the Belgian Congo to South Africa and eventually invented the first automatic pool vacuum in 1974 when he came up with the prototype for the “Kreepy Krauly” as he called it. Pool owners everywhere gladly pay for this amazing device. If you are constantly coming up with new ideas or ways to dramatically improve things, in your spare time, make a prototype or sell the concept to a company who buys ideas.

Resource – US Patent Office, United Inventors Association of America, Inventors Blog

Negotiate.

When you make negotiating a game to pay less for everything you purchase, you can not only save thousands of dollars on things you are purchasing anyways but you can make money by reselling. A friend of mine loves a deal and his idea of fun is calling his cable TV company to let them know he received an offer from a competitor to see what they will offer him to stay. I observed him getting a free month and a three-month premium package for his phone call. The key for him is making it a game which he uses for every single purchase he makes and he saves thousands of dollars as well as getting free services along the way. He took it to a new level with his baseball card collection and resells cards he got amazing deals on and now makes enough to make his house payment every month. You can do the same.

Start couponing.

It may not seem like a $1 off coupon makes much difference in your grocery budget but the bottom line is saving money on purchases increases wealth. People who use a coupon system report saving as much as 40% on a regular basis on their groceries and household items. It takes less than an hour a week to organize and can make you $50 an hour because of the savings on the regular household items you are buying anyways. Couponers see it as a challenge to get the absolute lowest price on their groceries and many make it a fun competition by texting each other after leaving the store to compare how they did. Whether it’s a small item or a big one if you can pay less, you are ahead.

Resources: Southern Savers; Best Coupon Sites for 2012

Turn your hobby into a business.

You have a special interest or talent, why not use it to build wealth? I already mentioned my friend who turned his baseball card collection into a major money-maker and there are tons of other examples we hear about every day for someone who takes some initiative. An employee one of our financial planners recently met with at a work site financial planning session mentioned that he recently started an online book selling business. He loves to read and is adept at IT so he combined his interest with his talent and started selling used books on Amazon. He was already making a profit in the first three months and planned on using his profits to fund Roth IRAs for him and his wife. He also can get even more enjoyment from his love of reading since he can resell his books for a profit. The IRS is on his side too since he now has some additional write-offs.

Resource: Business deductions are critical for tax savings; Reporting Self Employment Income

Reduce your tax bill and invest the difference.

Educate yourself on smart tax reduction strategies such as what I just mentioned in turning your hobby into a business. Some tax strategies include harvesting losses against your gains, getting double tax breaks on medical expenses by funding a HSA with your employer, or “bunching” your expenses or even your year-end bonuses into the following year so you don’ t phase out of student loan interest deductions or taking losses on rental property.

Investing $3100 in a HSA in 2012 saves $775 on your federal income tax if you are in a 25% tax bracket because the funds are pre-tax and are withdrawn tax-free if used for medical expenses. By NOT getting phased out of student loan interest deduction of $2500 per year, you could save $625 on federal income taxes if you are in the 25% bracket and “harvesting losses” against investment gains could have unlimited potential. For example, a $10,000 gain on a security held a year and a day would incur a 15% capital gains tax (20% in 2013) so it would cost $1500 in taxes. If you took a loss of an equal amount in the same year, that gain becomes tax-free. Becoming versed in tax strategies can save you thousands of dollars each year that can go to your wealth building instead of to the IRS and your state tax department.

Solve a problem.

You can earn thousands per problem solved. For example, some students at Chicago University came up with an idea to install a “round up” button on cash registers so customers can automatically donate to charity by rounding up their transactions. These students won $10,000 to give to their favorite charity! Innovators Felipe Husser and Jeff Warren won $360,000 for Peepol.tv which created a streamlined platform for watching videos of breaking news events around the world which as you can imagine would be valuable to news organizations and even governments worldwide. There are also thousands of extremely smart problem solvers out there who are unknown and simply need a venue and a problem to solve for a fee and then invest the difference to build wealth.

Resource: Idea Connection

Throw parties and sell tickets.

House concerts and small local venues have increased in popularity to promote up and coming artists and musicians using social media. If you love to entertain and bring people together, why not get paid to promote your favorite musicians at a house concert or other venue? If you already are entertaining and absolutely love it, expand your horizons and your network and make some extra income doing it.

You don’t have to host it in your home if you don’t have the space or that doesn’t appeal to you, but you could host it at a community center or some other neutral space. A friend of mine in Scottsdale Arizona used to host networking events at local resorts who wanted to show off their venues and provided the room and the food for free. She picked up the drinks and charged the attendees. It worked out well as she developed a name for herself while making a profit.

Resource: House Concerts 101

There are opportunities out there in any market environment to build wealth and if you can pair up your skills and talents with what you love to do, you can actually build wealth by having fun. Isn’t that how it should be?

Liz Davidson is CEO of Financial Finesse, the leading provider of unbiased financial education for employers nationwide, delivered by on-staff Certified Financial Planner™ professionals. For additional financial tips and insights, follow Financial Finesse on Twitter and become a fan on Facebook.

(Disclaimer: The views in the above article are strictly those of the author.  They do not necessarily represent those of FFN. Please use due diligence in applying the concepts or recommendations and/or in purchasing products or services from the author.)  FNN Editors