Finance tip – The best way to spend your money.

So the normal disclaimer, any financial advice you see on this blog are based on my opinions from decades in the finance industry. These may or may not work for you. Most finance professionals go on and on and on and on about saving, investing, your retirement they rarely spend time discussing with you how to spend your money. We all have to spend money to live. Food, Gas, gym memberships on and on. So what’s the best way to spend your money?

There are a couple of things here we to discuss before we answer that question directly. One of them is a personal theory, which is your consumption is your most powerful tool to affect the outcomes you want. Simply put, everyone wants your money. Companies, government, entertainers, you name it they work their butts off to obtain your money. If you agree with that theory then you realize when you chose to spend $100 on groceries, where you spend it is paramount. You see you are one of millions who are making that choice.

The game is how do you accumulate thousands (or millions) of people to spend their $100 at “Store X”. Places like Walmart spend millions of dollars every year in an attempt to convince you to spend your money there, and they are successful. You have to be aware of this, step away from it for a moment and then you can really see the best way to spend your money.

How much did you spend during the holidays?

What is that? The best way to spend your money is to spend it where it will have the greatest impact that you want. What does that really mean? Well do you want Walmart to make more money? Do you want them to import more products from other countries so you can get cheap products? If so then great you go do that. Do you want to support your local community and improve it directly? Take your $100 and go spend it at a locally owned store.

You’ll get less…. Don’t get me wrong here this isn’t a way to increase your purchasing power and obtain more for your money. There’s nothing wrong with that but if you want your spends to have the greatest impact you have to determine what is important to you and spend your money there, even if it means you get less. That is the best way to spend your money because your money then takes on an even higher value for you. You know that every penny you spend is spent further things that are important to you.

It’s okay to give your money to large companies, maybe they provide money to a charity you believe in and you want to support them, that’s cool. The point here is spend your money for the most impact and figure out what companies are in line with your personal believes. You may get less goods as a result but your return on your spending will be incredible. You’ll know the money you would have spent anyway is at least going to someone (or some company) whom you want to see prosper.

Thanks for coming by and supporting my blog I really appreciate it. Want to see another post like this one? Click here.

Advanced Finance Tip: Annual Gift Tax Exclusion

DISCLAIMER: Any financial advice I give on this blog is my opinion based on 30 years of working as a finance professional. Before making any financial decision do as much research as you can to make an informed decision.

So in the U.S. we have an extremely complicated tax code, its frankly ridiculous but that’s another blog post entirely. One of the issues the more fortunate of us face is how do we leave our money to our offspring without getting killed on taxes. This doesn’t apply exclusively to the rich either. Middle class Americans who have any amount of money face taxation on their net assets. The older you get the less you actually need your assets to survive. Specifically, there comes a point in your life where you have enough money that generates income that you will not have to compromise your principal.

Again, this isn’t for everyone… Many people live paycheck to paycheck but there are some of us who have a paid for house, a good chunk of change in our 401K’s and are debt free. We aren’t multi-millionaires but we do have money in excess of necessities. You may ask yourself “well Karac, why can’t I just spend it on all those things I wanted to do in retirement?” I would say to you “what things?”

There is this myth that once you retire there is glut of items or travel that you are going to purchase. You likely aren’t going to buy a new car, a 2nd house, travel 1st class. I mean you may, but average middle class people don’t do this regularly in retirement. Once in a while? Yes. So we are sitting on cash, when we die you aren’t going to care what your 401K balance is, your heir’s or the government WILL care because they benefit from it.

Decades later, they will pay taxes on their inheritance.

This is when all sorts of tax issues can happen and depending on the family dynamic horrible drama. There is an option and that is gifting money to your heirs now prior to your death. In 2021 the U.S. allows for a Gift Tax Exclusion of 15K per recipient. So if you had 150K you could gift 15K to 10 people and not have any tax implications. There is a life time limit to how much you can gift, its 11.7 mil which most of us are never going to hit.

So the tip: When you are starting your retirement planning, it may be prudent to calculate annual gifts to your heirs. It’s likely that the money now will help them more than money later as they can then take the gift and use it to supplement their current income. 15K is a lot of money. If you retire at 62 and live the average age (in the U.S.) of 82-84 (let’s say 83) that’s 21 years. 15K a year for 21 years = $315,000.00 that your heirs are not going to inherit and pay associated taxes on.

Again this is an advanced finance/retirement tip. You should be doing a lot of research and planning when you approach retirement. For a good article on Gift’s and Gift Taxes check out the article here.

Thanks so much for coming by and supporting my blog I really appreciate it. Want to see another post like this one? Click here.

Finance secret finance professionals won’t tell you (but I will)

It’s time for another finance piece on the blog. Before we get to far in remember that any advice you see here is my opinion based on 30 years of experience working in the finance industry. You should always obtain as much information as possible before making any financial decisions, and not take one bloggers advice as gospel.

The basis for wealth is income. Surviving in today’s world you need money and the more of it you have the more you can secure positive future outcomes. Simply put, income allows you to purchase things to make life better. TV’s, Food, Furniture, Housing on and on. The more income you have the more wealth you accumulate and that allows for the ability to make those purchases over longer periods of time.

“What’s the finance secret then Karac?”

It pertains to how you obtain income. Most of us exchange our time for money, you are getting an hourly wage. Even salaried people, you equate the hours worked to the money received. The problem with this method is there is a fixed number of hours you can potentially work. So your plateau for this income model can be reached quickly.

More governments will start regulating Bitcoin in the next 3 years.

Sure you can change jobs and get a raise or get a promotion but you pretty quickly cap at that level as well. A few years go by maybe you get raise but overall you are stagnant you are not growing your income profile and your wealth building slows. That isn’t to say you can’t have a great life and build wealth in this model, millions have. However, it always requires you to live with less now so you can have the same later on.

The secret is results based income. Essentially sales or production. Most people do not have an income based on results. Income based on results nullifies the weakness of time based income because results directly correlate to your skill. What may take me 3 hours may take you 1. Let’s say we are selling a graphic design for 5K. You worked 5 hours on it, I worked 10. Effectively you made double what I did, for the same result because it took you less time. Had we both been time for money based, I would have made more money for the same outcome.

Results based income is a fantastic way to maximize your earning potential and so little people do it. The finance industry wants you locked in to the time based job, making a fixed amount and saving a fixed amount. This enables them to project their earnings based on your investment strategy. A results based income earner is a finance professional’s nightmare. You could earn 50K in a week and then not have income for 2 months.

How can I forecast my fee’s off your investing with that kind of income model? This is why they don’t tell you about this income and wealth building model. Yes, it’s hard to pull off, but results based income is a great way to make a lot of money quickly. How do you do this? Look at all the people on EBay, they are essentially working on result based income models. They sell more they make more. So ya they have to hustle to get the product but that’s the return for them.

You? Go to work for 10 hours a day and make “X” every day, regardless of how hard you work. Even as a side hustle, selling the result = the greatest income potential for you. People will by anything, there is great demand. Teach someone a language, cut lawns, clean gutters, make walking sticks, resell used clothes on and on and on.

Thank you for coming by and supporting my blog I really appreciate it. Want to see another post like this one? Click here.