Split your mixed retirement plan to traditional and Roth = OK.
Do a backdoor Roth conversion with no other IRAs = OK.
Do a backdoor Roth conversion when you have other IRAs = Warning!
Do a backdoor Roth conversion when you have a SIMPLE or SEP = Warning!
Move money to your 401(k) and the rest to a Roth = potential opportunity!
If you’re a sole proprietor, in a partnership, or LLC, would you like another deduction so you can pay less tax? Let’s figure out this new Qualified Business Income Deduction together.
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There is constant flak associated with the Millennial generation because, as should’ve been expected, they do things and think just a little different from their predecessors. I don’t actually care about all that. What I do care about is that we’re not yet the target market for most financial service professionals, and what’s worse, is that we impose our own limitations on ourselves. Often times we’ll turn to Google before we turn to a professional for help. This isn’t everyone, but it is common enough.
WHY GET A PROFESSIONAL
The things I hear the most from my peers are: “I have to concentrate on paying off my debt before I can focus on growing my wealth”; or “I don’t have any wealth to invest, yet;” and “oh, I’ll work with someone once I get everything figured out first.” To me, those statements seem counterintuitive (and not because I’ve started a new practice and want people to work with me!). The way my head works is that math is math and if I can optimize anything, I will probably reach my goal sooner. I believe that being emotional and empathetic are some of our most powerful qualities, but they also significantly work against us. They get in our way of seeking help, they inhibit our success in the market, and just imagine the momentum we could have if someone could help us direct our emotions to be in alignment with our goals. For example, I can easily do a quick web search on best ways to pay off my student loans: I can use the “avalanche” to pay off highest interest first; the “snow ball” to get a series of victories by attacking balances first; I can just as easily adopt PAYE and REPAYE plans and/or work for debt forgiveness on certain federal loans. It’s not as simple for everyone as just deferring to the math to define which is best for them, and that’s where a professional comes in. And I’ll let you in on a little secret, the most math efficient technique in any area of planning is NOT always the best. A fun example is in the design of submarines. An engineer can figure out mathematically the best way to decrease friction, reduce heat loss, maximize output, and how to cram as much stuff into a small space as possible, but if they aren’t careful, they’re going to put some critical valve or component upside down in some horrid location that a technician can’t get to let alone perform maintenance! It’s the same with dieting; I know I can lose ten pounds by axing carbs. At the same time, I’ll quit that diet if I can’t drink my beer when I want. The same goes for budgeting and every other concept, you have to take the person into consideration. It’s not an easy task, even for the most self-aware individuals.
Working with someone can help you fit the best strategy to you thus increasing the probability of success. Professionals should be able to address the behaviors and feelings that only an objective perspective can. I like to think that as I move through life transitions, even without “wealth” to invest, that my life would be more fulfilling if I had a sounding board, a coach, an advisor and advocate that could keep me on track, make me aware, or teach me the things that I know I don’t yet know. If can start the process earlier and make small tweaks here and there as I go, two things will happen; (1) I won’t have to make a huge correction later on because I started later, and (2) I’ll be on my desired path sooner, which will feel much better. Plus, the more time we have left to our own devices (regardless of how great a DIYer you are), the more time we have to make mistakes.
WHAT CAN YOU DO BEFORE PAYING SOMEONE
Especially for the younger generations, on a personal level cash flow always seems tight. So, before we rush to hand our money over to, what seems like, every professional we meet, let’s figure out what we can do first to make the most out of that time. I approach this the same way I approach planning, I ask a few questions. “What would I want if there weren’t any obstacles?” “What have I learned from the past decisions I’ve made?” And lastly, “what’s going right that I’d like to see more of?” These questions set the groundwork to answer personal value questions, they help you set goals and objectives if you don’t have any yet, not given it thought, or need to clarify existing ones. A little self-reflecting can help us identify our own habits, biases, passions, and strengths which facilitate making behavioral changes, adapting, and evolving our dreams to even bigger possibilities.
From here, take a snap shot of where you’re at and the ideas you’ve tried and are trying. Typically, in the finance world that may look like a balance sheet and a cash flow statement. Naturally, you can see the logic in that if cash flow is a concern. You simply can’t stop the bleeding if you don’t know where the money is going. And that’s a big part of getting to work, is getting organized and being aware of where you are. Once you know this you can take steps to optimize the course you’re heading or completely change directions. That power is up to you now. For money especially, the anxiety of not knowing and feeling overwhelmed by these burdens is very real. The more financial stress we have the more we tend to make missteps, too. So, take a little bit of time and figure out where you are and one small thing you can do again or do differently, and I’ll bet you see a dramatic change in the long run and in how you feel.
Now that you know roughly where you’re at and one thing you’d like to adjust or replicate, the next step is what kind of person can help me make this make sense and work better. Find professionals that specialize in your objectives and interview them. How they get paid, not necessarily just how much. What is their personality like and what’s their approach? This person is going to learn a lot about you, hopefully you like them, and at the same time we don’t want them to just be a “yes” man or woman. Share with them what you are good at and areas that lack your interest so they can best help you. If you’re super analytical ask them for the math or the statutes so you can understand and internalize the advice. If you’re more visual, explain that certain graphs make you more comfortable or to slow down with the math. The point is to find and articulate the style that works best for you so that the advice you receive is more actionable for you and takes less time to arrive at. Therefore, you have better value and bang-for-your-buck.