Financial Planning Help with Mullooly Asset Management

Charitable contributions can be a great thing for everyone involved. In 2017 alone, Americans gave $410.02 billion in charitable donations – accounting for 2.1% of the GDP. Making charitable donations can help fulfill your family’s moral values, but it can also play a significant part in lowering your taxable income.

If you donated to a charity in 2020, charitable contributions can count even more toward lowering tax bills for some. Thanks to the CARES Act, which passed in late March 2020 amidst the coronavirus pandemic, your giving could stretch even further this tax season.

How Is This Year’s Charitable Contributions Exemption Different?

Thanks to the CARES Act, filers will be allowed to take a $300 above-the-line charitable giving deduction. This means you do not need to itemize your taxes this year to use this deduction.  This is significant because following the tax law changes of 2017, most people took the standard deduction.

As a reminder, the standard deduction for 2020 is $12,400 for single and married filing separately, $24,800 for married filing jointly and $18,650 for head of households. 

It’s important to note that the $300 limit is per filing unit, whether your filing single or jointly.

Who Does This Change Benefit?

This CARES Act exemption is not available for those who itemize their deductions, it’s only for those who are using the standard deduction on their 2020 tax returns.

This is significant because, historically, anyone taking a standard deduction has not been able to reduce their adjusted gross income (AGI) by claiming charitable contributions. 

Nearly nine in 10 taxpayers now take the standard deduction and could potentially qualify for this new tax deduction. In tax-year 2018, the most recent year for which complete figures are available, more than 134 million taxpayers claimed the standard deduction, just over 87% of all filers, according to the IRS. 

What Donations Count Toward the CARES Act Deduction?

Just as any other charitable contribution deducted from your taxes, eligible donations must have been made to qualified 501(c)(3) organizations or any other qualified organization as outlined in section 170(c) of the Internal Revenue Code.

What About Regular Charitable Contributions?

In the past, those who itemize their deductions were able to deduct up to 60 percent of their AGI in charitable contributions. Those who are extremely philanthropic may be interested to know that this limit has been raised to 100 percent.

If you were so inclined to do so, you could donate all of your income and deduct 100 percent of it – leaving you with a $0 tax bill.

While this deduction is just $300, it’s another form of tax relief for taxpayers in 2020.  After a year as chaotic as 2020, any little bit of relief helps, no matter how subtle.  You can still take the standard deduction and get a nice above-the-line deduction to your AGI.  If you have questions about your tax situation for 2020, now would be a great time to reach out to your financial planner or tax preparer.  If you don’t have professional assistance, we would be happy to speak with you!  Click here to schedule an initial call with our team today.  There is no cost or obligation!

2020 is a year most of us would prefer to forget. When the year started, nobody expected the COVID-19 pandemic or the tough financial times for many that followed.

Having said that, 2020 is now behind us!  We are into the first few days of 2021, and it’s time to look forward.  We have outlined a few financial suggestions to take with you from the lessons learned in 2020 into 2021.

Establish an Emergency Fund

If 2020 taught us anything, it’s the importance of preparing for the unexpected. Establishing an emergency fund is crucial when it comes to being financially ready for medical emergencies, house repairs, car maintenance, etc. Living at the Jersey Shore, here in Monmouth County, isn’t cheap.  It’s important to have money readily available.

Money tucked away in an emergency fund is meant to help cover the costs that are not part of your normal monthly expenses. Without an emergency fund, any unexpected event, even a small one, could set you back significantly. While you may not be able to put the same amount away every month, every little bit helps, and it’s important to put aside what you can.

If you were forced to dip into your emergency fund due to the tough times in 2020, that’s okay.  That’s what it was there for.  But don’t forget to refill that emergency fund in 2021. 

Save More Money

You’ve heard the phrase, “Every little bit counts,” all your life – but it couldn’t be more true. If you enjoy grabbing a Rook coffee before work, maybe consider brewing some at home a few days a week.  We’re not suggesting simply making coffee at home will make ALL of your financial problems disappear, but small lifestyle adjustments can make an impact on your monthly cash flow.

The beginning of a new year is a perfect time to review your spending habits from the past year.  This year, it will be important to see how you spent your money in 2020 considering how different a year it was.  With things not fully back to normal yet in 2021, it could be smart to factor in some of the new spending habits you may have established last year.

Review Your Tax Situation

With tax season approaching, there are a couple of things you could consider doing now to maximize the financial impact of your tax refund. For example, you may find it more beneficial to have your refund split between paychecks throughout the year. To do this, you would need to adjust your tax withholdings with your employer. Now’s an ideal time to speak with your financial advisor, CPA or other financial professional to discuss what changes you should be making now to get the most out of your tax situation for the coming year.

Set Goals

The goal for many people in 2020 was just to make it through.  Which, given the circumstances, was a fair goal to have.  A new year gives you a new chance to reset some goals that may have been pushed off in 2020. Ask yourself what you want to accomplish in the months to come. Is there a certain amount you’d like to have tucked away in your savings? Or maybe you’re focused on paying down debt? Whatever it may be, set a specific goal that you can focus on working towards in 2021. Specific is the key word here.  Without specificity, our goals become less tangible and easier to forget.

In a world where we’re all recovering from economic and environmental hurdles, progress is worth celebrating – and worth pursuing.

Start Automating 

It’s 2021.  There is safe, efficient, secure technology at your fingertips.  Automation is an incredibly effective tool when it comes to working toward and achieving your financial goals.

Some things to consider automating include:

• Bill paying
• Investments
• Paychecks
• Loans (Your mortgage, student loans, car payments, etc.)
• Savings

Automating as much of your financial life as you can takes the human connection and decision-making out of the picture. It cuts down on late payments, and it can make contributing to your savings account hassle-free. When it comes to your finances, the less emotion the better.

Remember Your Retirement Savings

2020 was a year of survival in the present day for a lot of folks.  Retirement was potentially one of the last things on your mind. For others, 2020 was an opportunity to sock more away than usual, since big expenses like vacations, concerts, weekend trips, etc. were canceled.

With enough stashed away in your emergency fund, 2021 may be the year to focus on padding your savings for retirement. If you have a 401(k), 403(b) or IRA, ask your financial advisor if you’re adding enough to it or if you should be upping your contributions each month. If you haven’t reached your contribution limits by the end of the year, consider making additional contributions – maybe from an end-of-year bonus or other additional income.

You don’t HAVE to wait until January 1^st to make big, sweeping changes in your life.  But since we’re here already, there’s no better time!  Whether the changes are big or small, any step in the right direction is a positive development towards a healthier financial life.  If you have any questions about how to set goals, attack those goals, or figure out your financial life – give us a call!  We would be happy to speak with you.  Click this link to schedule an initial call with our team!  There is no cost or obligation.

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What are you doing on January 1st?

As a society, we talk about goals a lot. We talk about “start the New Year off right!”

“Turning the page” and “setting new goals” seem to be national pastimes. And more than ever, it seems everyone wants to “start a new chapter in the New Year.”

We are a nation of goal setters. We talk about goals frequently.
But we begin each new year the same way – by taking the day OFF.

And for many, because the way the calendar falls in 2021, the first “work” day this year is not January 1st, it’s January 4th!

For the last few years, I have worked on January 1st. And I’ll continue to work on New Year’s Day. I’m not a workaholic or anti-social, I just want to start the coming year on the right foot. The stock market is closed on New Year’s Day, so there are no phone calls. It’s a great opportunity to start the year on the right track.

So what do I actually DO on January 1st? I count my blessings.
Let me explain.

One small part of our annual filing requirements with the SEC is reporting an official count of our assets under management. This number needs to be reported once per year, every year. The number needs to be exact, it needs to be accurate. As I discovered, through an SEC examination years back, the SEC wants to see your work and prove your work. You cannot “estimate” or “fudge the numbers.”

So on New Years Day, January 1st, I count our firm’s assets under management. Said another way, I count our blessings. I consider this to be a blessing because YOU have trusted US to manage your assets. And on behalf of all of us, I can say we take that obligation very seriously.

Talking about the future is a waste of time. Doing something about your future is concrete and a positive step in the right direction. For many, 2020 was a year completely thrown off track.

Start the New Year off right. Begin on January 1st doing something positive for yourself. That may be counting your blessings, or working out, or taking one small step to put you closer to a goal. Take that action.

Do it today, January 1st.

Graduating from college is no small feat.  This momentous occasion should be celebrated by anyone and everyone who receives their degree!  However, after the celebrations have died down – the financial reality starts to set in.  Student debt is a scary problem for a lot of folks in our country today.  For a lot of people, it seems insurmountable to tackle by yourself.  Even if you’re overwhelmed with your loans, don’t neglect them!  Here are a few things to start doing right now that can help you as you work towards financial independence in 2021.

Tip #1: Build Good Credit

Paying back federal student loans might be your first attempt at establishing a credit score.  Making sure you build good credit is crucial to your financial success.  If you want to eventually buy a home in the Monmouth County area here in New Jersey, or buy a new car, you’ll need good credit. In fact, only 57% of undergraduates reported having a credit card. 

If you have gone without a credit score of your own thus far, paying back your student loan debt on time and in full is critical. Federal student loan lenders report to the three major credit bureaus – Equifax, TransUnion and Experian.

If you don’t have a credit card yet, consider applying for one and using it to help further your credit score. Paying your credit card bill monthly can help boost it. We say this with the understanding that you will use your credit card WISELY.  Abusing a new credit card will make your newly established credit score worse, and we don’t want that.  If you’re unsure about how to properly use a new credit card, get in contact with a financial planner.

Tip #2: Always Pay Student Debt On Time

Paying your bills late (including student loan repayments) can not only have a negative impact on your credit score, but it can cause you to incur late fees or penalties. Even if all you can pay is the bare minimum, paying that on time is much better than not paying anything or paying late.

As we move into 2021, the likelihood of you being able to set up automatic, monthly payments online is pretty good.  If for some reason you cannot set up automatic payments, set a reminder on the same day each month to make your payment. This would eliminate the possibility of forgetting or missing a payment. Making consistent, on-time payments will help your credit score.

Tip #3: Consider Reprioritizing Your Debt

There are a handful of effective ways to tackle debt, but all of them include having a plan. By reprioritizing your debts, you can focus your dollars to have the most impact as you tackle debt one at a time.  This may sound counterintuitive, but maintaining your student loan debt and focusing on other debt types could be beneficial in the long run.

This doesn’t mean completely neglect all other types of debt and focus on one at a time.  Continue to make the minimum payments, while focusing any extra dollars towards the most important debts (highest balance/highest interest rate/etc.).

High-interest debt can get out of hand quickly because outstanding amounts earn interest at a much higher rate than low-interest debts like student loans, auto loans and mortgages. Paying off your credit card amount each month will help you avoid paying unnecessary interest and help avoid hikes in interest rates.

Paying off your student loans isn’t likely going to be an overnight affair.  Unfortunately, it will take most people years to fully get rid of their debt.  However, there are ways to effectively manage your debt while not letting it get out of control.  If making a plan for your debt is one of your financial goals for 2021, we’d be happy to help you out!  Click this link here if you’d like to schedule an initial appointment with one of our team members. Student loan debt is not fun, but together we can help make it manageable!

Developing good money habits in your early adult years can help you position yourself for financial stability and better grow your wealth over time. The sad truth is that many Millennials in their 20’s are unaware of how to best manage their money. They may regret the financial decisions they made in their 20’s well into their 30’s and 40’s.

Living here at the Jersey Shore, in Monmouth County, is not cheap.  Setting up your financial life early on is the best way to be financially successful in this area.

For Millennials looking to get into good money habits early, below are four things you should know:

1. Money and Material Goods Don’t Buy Happiness

It seems cliché and obvious, but it was true decades ago, and it’s still true today.

When you are young, you may think that if you save and accumulate enough money and wealth, that you will not have any problems, which is hardly the case. Even though money is an important part of life, if you measure your life by it, you are likely to find yourself unhappy. This can also be true of material possessions.

Getting that first job out of school, it can be easy to wildly spend this newfound money.  That new car or new pair of shoes may seemingly bring you happiness, but it is fleeting. The need to keep up with peers and acquire high-level material items that are outside of your budget is, unfortunately, a quick way to get into debt that can be hard to get out from under. 

2. Borrowing Money Responsibly is Crucial

Most people rarely make it through life without ever having to borrow money.  It is unfortunately a necessary thing in your adult financial life. While it is easy to tell you to simply not borrow any money in your 20’s, the truth is borrowing, and repaying the money is an important part of establishing a strong credit history. Since borrowing is an essential part of adult life, it is important to exercise caution when borrowing money. Saddling yourself with a mountain of debt is a quick way to turn your financial life upside down. 

Unfortunately, many young adults are already saddled with a large debt figure before they even begin their career due to student loans. The problem is, borrowing these large sums of money can have a major effect on your ability to borrow in the future as well as meet your financial needs. When trying to come up with tuition money, first look for available grant and scholarship money and when you have to borrow, only borrow what you will need to cover your most basic costs.

3. Make a Financial Plan Early

Make sure that your money has a place and that all of your expenses are accounted for in a budget. It may seem daunting at first to have a strict budget, but it is a great tool to help prevent you from overspending.  Knowing where all of your money is going will put you ahead of many of your peers. In your budget, you will need to include your housing, utilities, and any debt you might have. You will also want to set a monthly amount for clothing and groceries as these costs can add to a budget quickly and are often unaccounted for. Once you have spread your money out over all the necessities you can think of, you should create a budget for what you will contributing to your savings and emergency fund each month. 

4. Know the Importance of Having Cash on Hand

Your first instinct when you get an influx of money is to either pay off debt or maybe even invest it. While it is vital to put money away for retirement early and also keep your debt under control, it is always important to have cash on hand. Emergency situations can arise such as major car or house repairs or even losing a job. There are many bills that still do not allow credit cards for payments such as rent and mortgage, so not having cash on hand when life throws you a curve ball can have devastating consequences. Your goal for your emergency fund should be about three months of living expenses. The important thing to remember is always to replenish the money you take out when you are able. Especially early in life, there are plenty of big purchases coming.  It’s important to make sure you’re preparing for them wisely and not tying money up in restricted retirement accounts.

Prepare yourself for your future and help increase your chances of being financially secure by taking money matters seriously in your 20’s. By following the tips above, you will be taking the first steps to taking control of your money for the rest of your adult life. 

If you are a young Millennial that needs help getting things organized financially, we would be happy to speak with you.  Click here to schedule an initial call with one of our team members!

Be sure to follow along with our weekly video series, ‘The Mullooly Asset Show’, on our YouTube channel!

Planning for the next twenty-five years, no matter what your age, will take a few key ingredients to succeed.
We have outlined the four steps we believe you will need.

What we aim to do is show four of the steps most will need to succeed over the coming twenty-five years.

But we intend to show you these steps, through messages we have shared with our clients.  You’ll find links to different posts on our site: some are written articles, some are videos, some are podcast episodes.

All geared to help you be prepared for the next twenty-five years.

STEP ONE: Know Your Numbers

We meet plenty of individuals that simply do not have a handle on their monthly expenses. Before you can get to the point where you are certain your revenues exceed your expenses, you have got to know your numbers.

Where does all that money go each month? 42% of credit card debtors say they have trouble making ends meet on a monthly basis.

While we mention this point “know your numbers” in many of our blog posts, videos and podcasts, the best representation we have found comes from a video, aptly titled, “Four Ways to Stay Out of Bankruptcy Court.”

You can watch the short video here.

Knowing your numbers is so crucial. We begin the planning process with ALL new clients the same way – getting to know your numbers. We lead with planning.

Beginning with building a cash flow report and projection, we can see where you stand currently, and where you are headed. We also build a personal balance sheet for all new clients as well. The balance sheet and cash flow reports give us an indication of the amount of income the individual may need over the next twenty-five years.

That information then spills over into indicating how much risk an individual will need to take with their investments, to generate the income needed. So, knowing your numbers, really is always a critical factor.

STEP TWO: Make A Plan

We stress the importance of plans so much that we incorporate this line into many of our conversations, “we lead with planning.”

Even if a potential client simply wants to transfer their account from another investment advisor or investment firm over to us, we will still build a basic plan, as we begin. This helps the client, but also helps us gain a better understanding of how this account fits into their overall financial picture.

In “Alice in Wonderland,” Lewis Carroll wrote, “If you don’t know where you are going any road can take you there.”
As baseball fans, we know Yogi Berra improved on that by re-stating “If you don’t know where you are going, you might wind up someplace else.”

Both lines are technically correct.
The point is, without a plan, or without a guide, and without a destination or a goal, folks are letting the wind essentially take them where they may.

That works great on a sailboat, floating on the pond or a small lake.

But otherwise letting “circumstances” dictate your decisions will not get you far at all.

Two posts help drive “make a plan” home:
1. “Slow and Steady” Beats “Not At All”

Will saving fifty dollars, in the grand scheme of things, really move the needle? You need to lose this mindset, and start on a new plan. You don’t have to be “content” with saving fifty dollars. It may be what you’re capable of doing right now. You need to change direction and move forward.

2. “Four Surprises in Retirement”

Retirement can last longer than expected, you might continue to work in some capacity, things WILL cost more in the future. Without a plan in place, without some preparation, you may come up short. No one wants that.

STEP THREE: Get your Will and Power-of-Attorney in place

Do you know when you will die?
Do you know when you will be incapacitated?

Not many folks can say with certainty when these events could happen. From the “Seven Habits of Highly Effective People” comes the reminder to “begin with the end in mind.”

Interpreted in many ways, we like to focus on the fact we simply do not know when we will fall ill, become incapacitated or die. Leaving it all to chance leaves nothing behind but a mess for loved ones to clean up.

Is that what you really want family members to remember about you? We’ve all heard stories about the bickering, ongoing family squabbles and estate disasters left behind.

Make an appointment with an attorney. It won’t be free but should be considered a good investment in helping your loved ones in the future.

A good attorney well-versed in estate planning will know the questions and areas to focus on, which will make preparing for a future without you that much easier.

Likewise, having a medical directive, or medical power of attorney, gives the authority to a trusted contact of yours to express your desires to the doctors and medical professionals. This document allows this trusted person to legally speak on your behalf.

Additionally, having a financial power of attorney is another necessary tool in estate planning.  One of the worst phone calls we get is from a devoted spouse asking how to get access to money to pay necessary bills and be able to meet expenses. “My spouse handled all of this, but now he/she is in a coma. What do I do now?”

Getting these documents prepared properly and professionally will not be cheap or free, but will be money well spent.

For additional information, check out these posts:
3 Documents Everyone Over 18 Must Own

Estates Should Have One Executor

STEP FOUR: Don’t Interrupt The Compounding!

When Warren Buffett turned 65 years old, in 1995, he had a net worth of $8 billion dollars. In 2020, at age 90, his net worth is over $80 billion dollars.

Buffett has not made more investments in the past twenty-five years. In fact, he has probably made fewer. Much of the gains have come from one primary source: compounding.

Think about that: $8 billion at age 65, has grown to $80 billion today.

We’re surprised when folks tell us they “want to get out of the market at retirement.” We hear it more than we’d prefer.

Folks are telling us they want to stop the compounding train when they may have another twenty-five years of inflation to keep pace with.

The problem for most investors is much (nearly all) of the returns from compounding come much further down the road than people expect. The only way to get further down that compounding path is through patience.

Buffett’s business partner, Charlie Munger, has a very famous line. “The first rule of compounding: Never interrupt it unnecessarily.”

Yet day after day, we meet individual investors who had shot themselves in the foot by deciding they cannot tolerate the risk, or someone on TV suggested “taking profits.” Listening to the financial media can do more damage to your long-term returns than many other methods. Don’t interrupt the compounding!

Check out these posts here, over here and also here, where we discuss the power of compounding in more detail.