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Friday Q and A: Resources for the Executor of an Estate, Specialization vs. Generalization, Advice for Transitioning to a Single-Income Family RPF0123 Dec 20, 2014

Show notes

On Fridays, I answer your questions! I decided I didn't want to handle any of the in-depth, math-related questions today so I chose these three questions to handle.

1:41 - What can I do to prepare for being the executor of someone's estate?
16:49 - How can I reconcile the idea of being a specialist in my field with the advantages of being a generalist?
48:09 - What can I do to ensure a smoothe transition to a single-income household?

I hope you enjoy the show!

Joshua

Links:

NOLO: The Executor's Guide for Settling a Loved One's Estate or Trust

Geo-Arbitrage and Expatriation for a Better Life: Interview with James Wesley, Rawles of Survival Blog RPF0122 Dec 18, 2014

Show notes

Today, we welcome Jim Rawles, Founder and Editor of SurvivalBlog.com back on the show to discuss improving your lifestyle and personal resilience by moving.

We talk about optimizing your lifestyle within the United States by carefully selecting your location as well as the pros and cons of international expatriation.

Topics include:

Ideas for playing the "State Line Jumping Game" (living in a no-income-tax state and shopping next door in no-sales-tax state).
Brief mention of the "Five Flags Theory." In essence, the idea is that you can arrange your affairs over five different countries:
- Flag 1: Business Base-These are places where you make your money. They must be different from your personal fiscal domicile, the place where you legally reside.
- Flag 2: Passport & Citizenship-These should be from a country unconcerned about offshore citizens and what they do outside its borders.
- Flag 3: Domicile-This should be a tax haven with good communications. A place where wealthy, productive people can be creative, live, relax, prosper and enjoy themselves. Such a place should not be threatened by war or revolution and preferably should enjoy good levels of banking secrecy.
- Flag 4: Asset Repository-This should be a place from which assets, securities and business affairs can be managed anonymously by proxy.
- Flag 5: Playgrounds-These are places where you would actually physically spend your time.
Jim's idea for "The American Redoubt"
The Free State Project and Free State Wyoming
Estimate your own tax savings with SaveTaxesByMoving.com
Considerations for international expatriation:
- taxation, language skills, friendly to foreigners, strength of the economy, crime rate, climate and lifestyle, gun laws, homeschooling laws. etc/
Discussion of Finland, the Philippines, Swizerland, New Zealand, Belize, Costa Rica, Panama, Chile, Argentina, Paraguay, Uraguay
For more information check out the Sovereign Society and International Living
For a Second Passport opportunity, consider St. Kitts and Nevitts
Check out Jim's novel: Expatriates

Enjoy!

Joshua

Last-Minute Tax Planning Ideas To Save You Money RPF0121 Dec 17, 2014

Show notes

Today on the show, I've got some last-minute tax planning ideas for you. These are all ideas and tactics that you can use in the last two weeks of 2014 to lower your income tax bill.

I hope you don't defer your tax planning to the end of December. The end of the year is far too late to start talking about the really good stuff. Good tax planning should begin before January 1.

But, these types of ideas can still be useful for you. It's possible that you've simply been too busy to do effective planning.

It's also possible you had an unexpected windfall and you need to wipe out some tax liability.

I'm here to help! :)

Let's start with the easy ones and move to the harder ones:

Last-minute retirement account contributions.
- 401(k)s and 403(b)s are tough becausec you have to have made your contributions as you go. Consider talking to HR about diverting a bonus check into the account if you can.
- IRAs are simple. You can contribute any time until you file your return. You can contribute up to $5,500 in 2014. Don't forget about the $1,000 catch up if you're older than 50.
- Almost everyone I've ever worked with is confused by the contribution limits. Read them for Roth IRAs and Traditional IRAs.
- Little tricks for IRAs: You can make a separate payment for custodian fees, brokerage commissions, etc. in excess of the contribution limit. That will allow you to get the maximum value from the account.
- Consider establishing a an HR10/Keogh Plan or a SEP IRA.
  - Keogh plans were very popular for self-employed people prior to 2001. There was a tax law change in 2001 and now they're largely replaced by SEP IRAs.
  - They have the same contribution limits but the SEP paperwork is much simpler.
  - A Keogh plan has to be established by the end of the year but it can be funded prior to filing your return.
  - A SEP IRA can be established after the end of the year and funded after the end of the year.
  - The maximum contribution is the lesser of 20 percent of earned income, less your deduction for half your self-employed payroll tax, before the deduction, or $52,000. (This winds up being 25% of net earned income after the deduction.)
  - Remember that you can have one of these plans in addition to a 401(k) and an IRA.
- Don't forget about the HSA. If you're covered by a HDHP, you can make your HSA contributions any time up till you file your return. Your contribution limits are $3,300 for an individual and $6,550 for a family. Remember also that there's a $1,000 catch-up contribution for 55+. This won't save you on your employment taxes but it will save you on your income taxes.
- One final little trick on IRAs. Look to see if you'll be eligible for a saver's credit. If you're at a low income level, this might help you...even if you can't afford to save for retirement. If you need to and you want to be aggressive, you can contribute to your Roth in December, take the savers credit on your return, and then take the distribution in January. (You'll owe tax on any gain but not on the contributions/basis.)
Consider deferring your income in other ways.
- You can enter into a binding agreement until January to defer the grant of a bonus that you would otherwise receive in December. You need to enter into the agreement before the bonus is "constructively received."
- The easy way to defer your income is if you are in business for yourself is to simply delay billing your clients until late December. You won't receive payment until the following year. Thus, no taxes in this year.
- Remember that this only works if you are a cash basis tax payer. If you are an accrual basis taxpayer in your business, you have to report the income when it is earned, not when it is received.
- If you have income from the sale of property, consider using an installment sale to defer income to a different tax year.
- Consider accelerating your expenses to lower your net income.
- In business, you can think through any end-of-year transactions you need to pay: accounts payable, conference fees, insurance premiums, marketing and advertising expenses, etc.
- Remember that you have to follow the 12-month rule.
- Consider buying equipment. In general, equipment will primarily be depreciated rather than expensed. But remember that you can make a Section 179 elect to expense up to $500,000 and then take your depreciation after that.
- Consider bunching certain expenses such as medical expenses. If you've had a lot of medical expenses this year, consider going ahead and getting your dental expenses and eye expenses taken care of and pay forward the annual premium on your LTC insurance. That may result in enough deductions to take advantage of the medical expense deduction.
- Consider accelerating your tax payments: real estate taxes, personal property taxes, and state and local income taxes. Pay them now to take the deduction. (Be careful of AMT.)
- Consider making your charitable contributions and make sure to bunch them in years that you can fully use them.
- If you're making charitable contributions, be smart about how you do it, especially with regard to your taxes. Don't only think in terms of cash.
  - If you have appreciated property that you've held over 12 months, contribute it to the charity and take a deduction for the FMV. (Avoids the tax on the gain.)
  - If you have loss property, sell it, take the tax loss and give the cash.
- You can take deductions for items paid by check in the current year even if you mail the check on New Year's Eve, as long as there is no reason why the check can't be cashed in January.
- Credit card charges can be taken this year even if you don't pay the bill until next year.
Think through the tax ramifications of your relationships.
- If you're planning an end of the year or New Year's day wedding, calculate your taxes and see when you should actually schedule the marriage. Doesn't have to be the same day necessarily as the wedding itself.
- In general, marriage will only cut your taxes if one spouse works or earns almost all the income. Marriage will actually boost your taxes if both spouses work and earn good income.
- Dependents: Most people think purely about kids. There might be a planning scenario involving them. For example, if you're having a planned C-section and the safe zone covers new years, have it on 12/31. Or, if you're adopting, try to get it finalized before the end of the year.
- But, the major benefit for some of you might be if you're caring for parents. There are a bunch of detailed rules. The one I want you to focus on is if you're providing more than half of a dependent's support. Doesn't mean income...it means support. Might be worth it to bunch some of your support here at the end of the year so that you can claim them as a dependent.
Make sure you harvest your tax losses but also that you harvest some gains. Ratcheting up your basis in your investment portfolio over time can really save money in the long run.

Getting a Designer Education on the Cheap: Interview with Scott Young, Inventor of the MIT Challenge RPF0120 Dec 17, 2014

Show notes

Is education something that we buy or something that we work for? Ever thought about that?

My guest today is Scott Young. I first heard of Scott when I watched his TEDx talk on "How to Get an MIT education for $2,000."

This interview is filled with tidbits that will be useful to you whether you're designing your own education or whether you're helping someone else with their educational plan.

Enjoy!

Joshua

Links:

ScottHYoung.com

Building Wealth One House at a Time: Interview with John Schaub RPF0119 Dec 16, 2014

Show notes

I love real estate investing. I think it's one of the most accessible, realistic ways for people to grow their long-term wealth at an excellent rate of return.

Today, I'm thrilled to bring you an interview with John Schaub. John is widely renowned as one of the good guys.

John has been investing in real estate for decades. He's also been teaching the subject for decades.

He has a wealth of ideas and knowledge to share with us today.

Enjoy!

Joshua

Links:

JohnSchaub.com
John's Seminars
John's recommended authors: Bill Nickerson, Jay Decima, Zuckerman (?), Al Lowry, Donald Trump, Robert Allen, Robert Bruss

Friday Q and A: Cash Houses vs Mortgages, Speculative BioTech Stocks in an ESA, Physician Private Practice vs Hospital Job, Accounting for Business Deductions, Multi-Family Living, 529 Plan Qualified Expenses, Inflation Rates, Gifting Money to Kids RPF018 Dec 13, 2014

Show notes

Today, we have a really fun Q&A for you! I hope you enjoy!

Here are the questions I answer:

2:25 If I have the cash, should I pay cash for a house or invest it?
17:13 Should I use my Coverdell ESA to speculate on early-stage biotech stocks?
28:05 Should a physician try to continue a private practice with a partial ownership interest or take a full-time hospital job?
40:38 How can I account for the business deductions in my side business?
49:40 Is multi-family, multi-generational living a good idea?
1:03:40 What do I need to know about disability income insurance?
1:26:03 Which college expenses can I pay for out of my 529 account?
1:33:27 Why do I use different inflation rates on calculations?
1:39:26 What kind of account can I use to gift money to my nephew?

Enjoy!

Joshua

Links:

Lower Your Taxes Big Time! by Sandy Botkin

Transitioning From Personal Finance Blogger and Writer to Financial Advisor from a Canadian Perspective: Interview With Dan Bortolotti, the Canadian Couch Potato RPF0117 Dec 11, 2014

Show notes

Today, I have a really great interview on finance from a Canadian Perspective. But make sure to listen whether you're Canadian or not.

My guest is Dan Bortolotti, founder of the Canadian Couch Potato website. He has a really great story where he began as a personal finance writer and blogger and later moved into the space of being a professional financial advisor.

We chat about:

The value of a paying fees to a financial advisor
The fit between PF writer and advisor
Canadian tax law and retirement accounts
Indexing from a Canadian perspective and similarities to the US market
Home country bias
And more!

Enjoy!

Joshua

Links:

How to Set and Achieve Your Financial Goals in 2015 and Beyond RPF0116 Dec 10, 2014

Show notes

The new year is fast upon us. Even though we're in the midst of the busy holiday season, this is a convenient time to consider the success and failures of this year and look forward to plans for next year.

Even though the articles you're now seeing in your feeds on "10 End-Of-The-Year Planning Ideas" can be useful, they just don't get it done because they're not focused on the core need.

The fundamental key of financial planning is to understand the process. Building wealth is a process. Achieving goals is a process. It's simple and can be readily replicated if you understand it.

It starts with a clear desired outcome. A.K.A. a goal. Or objective.

Then, it's a matter of laying out a strategy that is likely to work. And that strategy is connected with specific action steps.

And then you simply repeat the cycle over and over and over again.

Enjoy the show. I hope that it's useful for you!

Joshua

p.s., this might be a great show to share with others. Let me know if it's helpful.

Potential Journaling Prompts:

Simple Goals: What are 10 goals you'd like to accomplish during 2015? What I Want list Make a list of 30 things you want to do, 30 things you want to have, and 30 things you want to be before you die. Ideal DayThink through what a perfect day would look like for you. Describe it (in writing) with as much detail as possible. Where are you, what does it look like, who are you with, what do you do, etc. Strategic Coach Questions 1. If we were meeting three years from today, what has to have happened during that three-year period for you to feel happy about your progress? (Personally, Professionally, Financially and any other category you want to think about.) 2. What are the biggest dangers you'll have to face and deal with in order to achieve that progress? 3. What are the biggest opportunities that you have that you would need to focus on and capture to achieve those things? 4. What strengths will you need to reinforce and maximize, and what skills and resources will you need to develop that you don't currently have in order to capture those opportunities? Visioning Exercise (excerpted from Jack Canfield's "Success Principles" book This is an exercise that is designed to help you clarify your vision. Although you could do this as a strictly mental exercise by just thinking about the answers and writing them down, I want to encourage you to go deeper than that. If you do, you'll get deeper answers that serve you better. Start by putting on some relaxing music and sitting quietly in a comfortable environment where you won't be disturbed. Then, close our eyes and ask your subconscious mind to give you images of what your ideal life would look like if you could have it exactly the way you want it, in each of the following categories. 1. First, focus on the financial area of your life. What is your annual income? What does your cash flow look like? How much money do you have in savings and investments? What is your total net worth? Next...what does your home look like? Where is it located? Does it have a view? What kind of yard and landscaping does it have? Is there a pool or a stable for horses? What color are the walls? What does the furniture look like? Are there paintings hanging in the rooms? What do they look like? Walk through your perfect house, filling in all of the details. At this point, don't worry about how you'll get that house. Don't sabotage yourself by saying, "I can't live in Malibu because I don't make enough money." Once you give your mind’s eye the picture, your mind will solve the “not enough money” challenge. Next visualize what kind of car you are driving and any other important possessions your finances have provided. 2. Next, visualize your ideal job or career. Where are you working? What are you doing? With whom are you working? What kind of clients or customers do you have? What is your compensation like? Is it your own business? 3. Then, focus on your free time, your recreation time. What are you doing with your family and friends in the free time you’ve created for yourself? What hobbies are you pursuing? What kinds of vacations do you take? What do you do for fun? 4. Next, what is your ideal vision of your body and your physical health? Are you free of all disease? How long do you live to? Are you open, relaxed, in an ecstatic state of bliss all day long? Are you full of vitality? Are you flexible as well as strong? Do you exercise, eat good food, and drink lots of water? 5. Then move on to your ideal vision of your relationships with your friends and family. What is your relationship with your family like? Who are your friends? What is the quality of your relationships with your friends? What do those friendships feel like? Are they loving, supportive, empowering? What kinds of things do you do together? 6. What about the personal arena of your life? Do you see yourself going back to school, getting training, attending workshops, seeking therapy for a past hurt, or growing spiritually? Do you meditate or go on spiritual retreats with your church? Do you want to learn to play and instrument or write your autobiography? Do you want to run a marathon or take an art class? Do you want to travel to other countries? 7. Finally, focus on the community you live in, the community you’ve chosen. What does it look like when it is operating perfectly? What kinds of community activities take place there? What about your charitable work? What do you do to help others and make a difference? How often do you participate in these activities? Who are you helping? You can write down your answers as you go, or you can do the whole exercise first and then open your eyes and write them down. In either case, make sure you capture everything in writing as soon as you complete the exercise.

Helping Your Kids Develop Talent (So You Don't Have To Support Them Forever): Interview with Jonathan Harris from 10kToTalent RPF0115 Dec 09, 2014

Show notes

Financial Planning is--and should be--fully integrated with every aspect of life. Often, there are non-financial ways of hitting financial goals that are more efficient than just simply "buying the solution."

Helping your children develop their talent is one such area of focus. If you can launch a young man or woman with real, useful skills that have an economic value in the marketplace and which are aligned with their individual personality and interests, they will be far ahead of many of their peers.

This early start can launch the magical cycle of compounding earlier which can have a lifetime impact.

Consider the impact of an early start:

If a 16-year-old can learn to earn and invest $100 per month through developing and marketing their talent, they could accumulate a nest egg at 66 of $1,746,876.07. (50 years of investing, $100/mo each month, 10% interest compounded monthly, starting with $0.)
If a 22-year-old begins when they graduate college, they will wind up with $955,649.56 at age 66. (44 years of investing, $100/mo each month, 10% interest compounded monthly, starting with $0)

My guest is Jonathan Harris and he writes at the website www.10kToTalent.com. He is the father of 8 children and is a both a learner and an expert at developing talent in children.

Enjoy the interview!

Joshua

Links:

Little Known History of the ER Movement: Interview with Doug "Nords" Nordman RPF0114 Dec 08, 2014

Show notes

Doug Nordman is a really neat guy who has made an incredible contribution to the Early Retirement (ER) community. Known affectionately in various forums as "Nords," he contributes a rational, learned perspective on financial topics.

He and his wife both retired from the US Navy. Doug was 41 and has somehow managed to stay retired for the last decade. ;)

Join us today for a really neat discussion of the history of the early retirement movement and some of the contributions from its early leaders.

(It's not all fun and games...we do get into some technical details on early retirement as well!)

Joshua

Links:

Doug's website: The Military Guide
Cashing In On The American Dream by Paul Terhorst
Early-Retirement.org
RetireEarlyHomepage.com
Yahoo article on Anton Ivanov (who lied about financial independence plan)
"The Millionaire Liar" - Article from the original PF blogger who publicized his story
The Hapless Y2K Retiree

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