Welcome. My name is T.J. van Gerven, CFP®, and host of the Do More With Your Money podcast.
In this podcast, I discuss the latest in financial planning and wealth management solutions.
Many of the strategies discussed I regularly use with clients of my independent financial planning firm, Modern Wealth Builders, LLC (MWB).
All content on this podcast is for information purposes only.
Opinions expressed herein are solely those of MWB, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to other parties’ informational accuracy or completeness.
All information or ideas provided should be discussed in detail with an advisor, accountant, or legal counsel prior to implementation.
To learn more, head to modernwealthbuilders.com
Four Tax Planning Tips For 2021
Tax rates will likely be going up in 2022.
In this podcast episode, I share four tax planning tips to consider for 2021 in anticipation of increasing rates.
Disclaimer: This podcast is not intended to be tax advice, and you should consult with your tax professional regarding your particular situation before considering any of the tips discussed.
The Number ONE Element In Making Work Optional
Today I'm going to share with you the number one element in making work optional.
The path to both building and maintaining financial independence is built on this crucial concept.
The earlier you can master it and build it into your financial habits, the sooner you can build towards a work optional lifestyle.
Should You Be Worried About An 'Epic' Stock Market Bubble?
On this Do More With Your Money podcast episode, I discuss if you should be worried that the stock market is in an 'epic' bubble.
Whenever someone claims a stock market bubble or bottom, it's crucial that you take it with a grain of salt and always defer to your personal financial plan.
Remember always to consider the incentives of the person making strong claims about where the market is headed. We live in a world of clickbait and soundbites used to gain our attention to push us towards products and services.
When you understand your personal financial situation and what's in your control, you should invest with confidence regardless of outside noise.
Always maintain the perspective of the big picture. Major stock market corrections and bear markets allow you to accumulate wealth during your prime earning years.
As always, the key is that you’re able to maintain discipline within your financial plan in any market or economic environment.
How I Manage My Money As A Solopreneur
Let’s get it out of the way and start with the disclaimer that personal finance is always personal and that this isn’t advice.
In this post, I’ll explain how I think about and manage my personal finances based on where I’m currently at in life.
While some principles can be applied to any life stage, I’m sure how I think about money for my personal situation will change over time. And I’m sure yours will as well.
Everyone’s personal finances start with understanding cash flow. You need to understand how much you’re spending and be able to review whenever you need to.
I use Mint and Right Capital for tracking my personal spending. I use QuickBooks Self-Employed for tracking the cash flow of my financial planning firm, Modern Wealth Builders.
It’s not necessary whatsoever, but I review my cash flow daily . Re-categorizing any transactions within Mint, Right Capital, and QuickBooks that don’t have pre-determined rules or are miscategorized.
Being on top of reviewing transactions helps with:
Immediately identifying fraudulent purchases. Maintaining consciousness of spending decisions. Incentivizing yourself to spend with intention. I regularly audit my spending decisions to ask myself, “do I value this purchase”.
I use my credit cards for all purchases (that can be charged via credit card) for the following reasons:
It keeps all transactions electronic and trackable. It adds a layer of security as opposed to a debit card. It allows me to maximize cashback rewards. I don’t get caught up in maximizing specific cashback rewards (it doesn’t really move the needle), but I do think it’s important to get at least the standard 1% back on all purchases.
Part of the reason I am so on top of tracking cash flow is that I get paid primarily quarterly. As you might imagine, I want to budget properly for expenses, taxes, and *ideally* investment contributions.
Understanding cash flow helps to determine how much cash to keep on reserve. Because I’m self-employed and somewhat risk-averse, I tend to keep more cash on hand than I probably need.
I prefer to have twelve months of living + business expenses in cash at all times.
While this may not be the “smartest” mathematical decision from a financial planning perspective, it does give me the following:
Peace of mind Flexibility in drastic economic environments Leverage to quote my value as a solopreneur A strong cash reserve gives me a “hidden return” by enabling me to be aggressive in other aspects of my financial life.
Additionally, it allows me to maintain my investment allocation across my various retirement accounts. Let’s talk about my personal investment philosophy.
The vast majority of my investments are held in a combination of six ETFs. My primary concern always starts with asset allocation and asset location, as I believe most returns (net of fees and taxes) can be attributed to these factors.
The six ETFs cover the following:
US Equity International Equity (developed and emerging) Domestic and International Fixed Income I keep it as simple as possible and allocate based on market cap, while being mindful of asset location. For example, keeping the asset classes with higher expected returns (long term) in Roth accounts, and keeping less tax-efficient investments (fixed income) in pre-tax accounts.
Rebalancing occurs automatically based on pre-determined rules for drift.
Each tax year, I take full advantage of the tax-preferential accounts at my disposal. This currently includes a SEP IRA, Roth IRA, and Health Savings Account (HSA). I anticipate I’ll be changing from a SEP IRA to a Solo 401(k) and taking advantage of backdoor Roth IRA contributions soon.
At this point, I’m not currently investing in any taxable accounts as I need the cash reinvest in MWB.
The way I look at it, once you’ve maxed y
Am I sitting on too much cash?
"I have money going to my savings account each paycheck that I don't know what I should be doing with; what should I be doing with it?"
Let's start with the ever-important caveat that personal finance is personal, and as always, "it depends."
With that out of the way, let's talk about some ideas, habits, and strategies you should be thinking about if you feel like you're sitting on too much cash.
It may seem trivial at this point but having a sizable cash reserve is crucial for many reasons, some of which provide a "hidden return" like having the flexibility to search for better job opportunities or be more selective with investment opportunities.
At a minimum, you should have at least three months worth of living expenses in cash at all times. This should range as far as eighteen months of cash reserve depending on a variety of factors such as if you're self-employed, how economically sensitive your job is, or how many income sources you have in your household.
Personally, I strive to have twelve months' worth of living expenses in cash as it provides me the peace of mind to run my business and invest (in personal investment accounts) long term with confidence.
If you're still working towards building towards your ideal cash reserve, don't feel bad about not investing additional cash flow. The opportunity cost of building a sizable cash reserve is well worth the peace of mind.
When you're determining your ideal cash reserve, you can base it on your baseline spending needs or what you're currently spending. The lower your baseline spending needs, the lower your cash reserve can be, and in turn, the more cash flow you can use to grow your net worth on an ongoing basis.
If you've determined you're "sitting on too much cash" relative to your cash reserve requirements, here are some things to consider:
Are there any major short-term expenses or purchases you anticipate to have in the next 6-18 months? Generally speaking, you want to avoid investing in the stock market for any money that will be needed within the next three years (ideally five years +). However, if you have a sizable cash reserve, stable income, and a high tolerance for risk, there is some flexibility.
If you don't anticipate having any major short-term purchases and are looking to maximize the value of your hard-earned money to grow your net worth, here are some ideas:
Are you maxing out your 401(k) at work? You can contribute up to $19,500 (under age 50) in employee contributions for 2020 and 2021. Why would you want to contribute more to your 401(k) than is necessary to receive your employer match? Because contributions to a Traditional 401(k) reduce your taxable income and can be invested to grow tax-deferred until you need to pull them out after age 59 1/2. If your employer offers Roth 401(k) contributions, you should strongly consider taking advantage of these "after-tax" contributions (no income tax deduction) to increase your tax-free investment assets.
In addition to maxing out your 401(k) at work, you should also be taking advantage of an individual retirement account (IRA). You can contribute up to $6,000 (under age 50) for 2020 and 2021 and receive the same tax-deferred benefits as investing in your 401(k). However, if your income (MAGI) exceeds ~$124,000 (2020), you'll want to consider a backdoor Roth IRA.
Does your employer offer a Health Savings Account? You'll need to have chosen the "high deductible" plan to take advantage of the account. HSA contributions are a no-brainer as they provide a potential "triple tax-free" benefit. Contributions to the account reduce your taxable income, can be invested with tax-deferred growth, and if used for a qualified medical expense, can be distributed tax-free Additionally, if the money can be drawn penalty-free after age 65 for any reason. An extremely tax flexible account t
Four Financial Tips For Newly Married Couples
One of the biggest (if not the biggest) investments you can make is choosing a lifelong partner. You and your partner must be aware of each other's values, goals, and desires as it relates to your money. There is no perfect strategy when it comes to managing finances as a combined unit. However, you both must have at least a general understanding of each other's finances and long-term financial goals.
That way, you can avoid any unneeded stress or disagreement because you weren't on the same page. We can all benefit from having a professional, objective third-party who has our best interests at heart to bounce off ideas and provide us with guidance.
Here are four financial tips for newly married couples:
1) Your income is now taxed as a joint singular entity, so make sure to maximize it.
Before you're married, you pay taxes separately. Depending on your respective income level, filing jointly may benefit you or cause you to pay additional taxes.
If one person in the household is the primary earner, then filing jointly will most likely provide you a tax benefit due to the larger bands in the marginal tax bracket.
Regardless, it would be best if you worked together to maximize the efficiency of your combined income. If you view your income as combined, you should work together to make sure both of you max out your retirement accounts or additional tax preferential accounts.
If one spouse's income is substantially lower, it may not be easy to maximize a tax-deferred account like a 401(k) without the higher-earning spouse supplementing their spending needs. These strategies depend on your specific needs and how much cash flow you have to dedicate to discretionary investment contributions.
However, if done correctly, you can substantially increase the efficiency of your after-tax joint income.
2) Have a joint checking account and joint credit card for joint expenses.
There's no "correct" way to approach spending as a couple. The most important thing is that it works for you, and no one is resentful about how expenses are paid. A strategy I've seen work for various couples is maintaining a "his and hers" spending approach with a joint checking and credit card for joint expenses. In certain cases, it may make sense to consider a "pro-rata" approach where the higher-earning spouse pays a higher proportion of the fixed expenses.
Again, the most important thing is that you and your partner agree on the approach you'd like to take. As long as both spouses are comfortable with the level of ongoing saving (preferably investing), no one should be concerned with the other partners spending.
3) Discuss your individual and joint financial goals.
You may be surprised to learn how different your partner's individual financial goals are. How important is achieving financial independence to you vs. your partner? Do you want to fund your child's education savings fully, or do you want them to have "skin in the game"? Our personal experiences with money have a massive impact on how we view the world. Your partner may have had a substantially different experience with money growing up, which will influence their individual goals and preferences.
Again, communication (ideally with an objective, third-party professional) is essential for getting on the same page about what financial and lifestyle goals you'd like to work towards together.
4) Have a combined investment strategy that factors in each other's tolerance for risk.
Like your income, your investments should be viewed as one unit for all intents and purposes. It's important that you both have a general understanding of your investments, what you own, and why you own it. Your long term financial plan should influence how your investments are structured. Ideally, you'll factor in your combined tolerance to accept the risk needed to achieve your financial goal
Customer ReviewsSee All
TJ shares great insights into how millennials can improve their finances. Highly recommend!
Great podcast for your millennials! Keep doing your thing T!