Dollars and Diagrams

2020 Financial Advent Calendar


To end the year on a high note, we decided to create a 2020 Financial Advent Calendar filled with 25 Financial Planning gifts over the next 25 days. Check out what we think are the top 25 things to think about when it comes to financial planning.

To end the year on a high note, we decided to create a 2020 Financial Advent Calendar filled with 25 Financial Planning gifts over the next 25 days. Check out what we think are the top 25 things to think about when it comes to financial planning.


Day 1: Build A G.RE.A.T. Portfolio

Do you know how to build a G.R.E.A.T portfolio? Use our acronym as a framework to get started.

???? Growth Opportunities – does the portfolio have a realistic expectation to grow at a rate higher and hopefully substantially higher than inflation.

???? Real Names – do you know what you own and why you own it? I believe that truly understanding how you are investing is far superior than some sort of black box investment that lacks transparency.

???? Expenses – expenses most be fair & reasonable for the nature of the investment that you are choosing.

???? Access – how easy is it to access your money WHEN you need it. Some investments are nearly impossible to actually access your money.

???? Tax Efficiency – are your investments located in the right place? Can you access your money in a tax efficient manner? Remember, it is not how much you make, but how much you keep!


Day 2: Keep Your Income Greater Than Expenses

The bedrock of financial planning is ensuring that your income is greater than your expenses.


Day 3: Build An Emergency Fund Equal To 6 Months Of Living Expenses

Build an emergency fund equal to 6 months of living expenses. For example, if you spend $8,000 per month. Your goal would be to have an emergency fund of $48,000. Your emergency fund should be in a cash equivalent (cash, savings, or money market). These are not funds that should be “invested.”


Day 4: Plan For 3 Years Of Major Purchases

In addition to setting aside cash for emergency funds, make sure that you set aside cash for any major purchases that you have planned in the next three years. While you might lose purchasing power to inflation. Historically, this can be less risky than taking risk in fixed income or equity markets.


Day 5: Asset Location Is More Important Than Asset Allocation

While both Asset Location and Asset Allocation are both important, Asset Location is greatly overlooked in the financial planning process. This is important when you have money in multiple buckets (taxable, tax deferred, and tax free). It might be prudent to have your high growth potential investments in your tax-free bucket. Income producing investments might be best suited for tax deferred or tax free. .


Day 6: Save At Least 10% of Pre-Tax Earnings

No matter where you are at on your financial planning journey, make sure to save at least 10% of your pre-tax earnings.  Annually, try to raise your contribution rate until you are financially independent.


Day 7: Embrace All Things Roth

There are 5 ways to Roth. Understand which ones apply to you and your family.

????Roth 401k

????  After Tax 401k – then direct rollover to a Roth IRA

???? Roth IRA

???? Roth Conversions – convert Traditional IRA’s to Roth IRA’s

???? Backdoor Roth – contributing to a non-deductible IRA and then converting to a Roth IRA

*Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion.


Day 8: Utilize An HSA

The HSA is arguably the most tax efficient investment option that exists.

???? Funds are contributed pre-tax.

???? Any earnings are tax deferred.

???? Funds can be distributed tax free.

NOTE: Make sure you have your funds invested, shred the debit card, and use these funds for health care expenses in retirement.


Day 9: Save Inside Of A Taxable Account

Do not forget to save inside of a taxable account. Spread your money into all 3 major savings “buckets.”

A taxable account helps give you access to money. Make sure you watch out for income producing assets and actively managed funds.

While a taxable account can help give you access to money, you don’t want to leak too much of your return to your 1099 income taxation.


Day 10: Don’t Forget The Line Of Credit

Lines of credit are wonderful because they give you access to money. We often think of having a line of credit on our home. However, do not forget about having a line of credit on your taxable brokerage/ managed account. You can potentially collateralize your taxable account. In many cases, it is more advantageous to borrow money as opposed to sell an investment and trigger a tax bill.

Risks to consider: Margin calls and/or liquidation of securities, Amplified losses if the securities in your account decline in value, Losses greater than the original investment are possible, Interest rates may rise, increasing the cost of your loan.


Day 11: Evaluate Permanent Insurance

Permanent insurance can be extremely controversial. Some areas to consider using permanent life insurance:

???? Leaving a legacy – a 2nd to die life insurance policy can be an amazing way to leave a federally and state tax free death benefit to loved ones. Not designed to build cash value, but to leave the maximum amount of death benefit for premium paid.

???? Funding Future Health Care Costs – hybrid life insurance policies with long-term care or chronic illness riders have some benefits than purchasing a traditional long-term care policy. With hybrid policies, they can be established with a level premium and non-reducing benefits. The downside to traditional long-term care can be rising premiums or reduced benefits over time.

???? Cash Value Accumulation – funded and designed correctly, this can be a way to build cash value with returns non-correlated to the rest of your portfolio. Funds can potentially be borrowed without triggering any tax obligations. This can be a great way to access cash in case of a bear market. After all, you never want to sell your stocks into weakness.

Riders are additional guarantee options that are available to an annuity or life insurance contract holder. While some riders are part of an existing contract, many others may carry additional fees, charges and restrictions, and the policy holder should review their contract carefully before purchasing. Insurance guarantees are based on the claims paying ability of the issuing insurance company. Loans from a life insurance policy may be subject to penalties and fees and, along with any accrued loan interest, will reduce the policy’s account value and death benefit. A policy loan could result in tax consequences if the policy lapses or is surrendered while a loan is outstanding


Day 12: Keep Pre-Tax Investments Under $630,000

Pre-tax investment dollars are a wonderful part of a diversified portfolio. I encourage you to try to keep your balances under $630,000. Try to convert dollars about $630,000 to Roth IRA’s for tax diversification or beginning putting additional dollars into other “buckets.”

Why $630,000? A 4% distribution from $630,000 is $25,200. The standard deduction for 2021 just happens to be $25,200.

The distribution of $25,200 could be offset by the standard deduction. It’s not what you make, but what you keep.

Roth IRA conversion considerations primarily include income tax consequences on the converted amount in the year of conversion.


Day 13: Calculate Life Insurance Needs

Step 1:  Add up outstanding debts

Step 2:  Add up outstanding unfunded liabilities (ex: college)

Step 3:  Add Steps 1 and 2 together

Step 4:  Calculate how much money you need to maintain your lifestyle if you were debt free per month.

Step 5:  Calculate the Step 4 number x 12

Step 6:  Divide the answer in Step 5 by .04

Step 7:  Add Step 3 answer + Step 6 answer = total assets needed if I died today

Step 8:  Step 7 – liquid net worth (i.e. what you have already saved) = insurable need

For example:

Step 1:  $550k mortgage

Step 2:  $250k lump sum need for college for 3 kids

Step 3: $800,000

Step 4:  $9k/month

Step 5:   $108,000/year

Step 6: $2,700,000

Step 7:   $3,500,000

Step 8:   $3,500,000 – $500,000 savings = $3,000,000 insurable need


Day 14: Disability Insurance: Protect Your Paycheck

For most people, their largest asset is not their house or their IRA, but their ability to earn a paycheck. What happens if you are sick or injured and cannot earn your paycheck? This is where disability insurance is incredibly important to you and your family. You do not have to be in a major car accident to go on a disability claim. Two of the leading causes for claims are muscular skeletal (back pain) and cancer.

Make sure you protect your paycheck.


Day 15: Evaluate How You’ll Pay For Long-Term Care

If you had to go into a long-term care facility today, how would you pay for it? Maybe you do not like paying premiums. I get it. Who does? However, better solutions exist today than in the past. Long-term care is no longer a “user it or lose it” endeavor. In addition, there can be great leverage on transferring the risk to an insurance company as compared to simply paying for long-term care out of pocket.

You owe it to yourself and your family to revisit the long-term care conversation.


Day 16: Get Estate Planning Documents In Order

A great way to show your family that you love them is by having your estate planning documents in order. This can hopefully keep Holidays peaceful years after you are gone!

Key Estate Planning Documents:

???? Will

???? Trust

???? Power of Attorney

???? Medical Directives


Day 17: Save Money In Different Buckets

You have probably heard don’t put all your eggs in one basket before, right? It’s great advice! Make sure to have at least three different “buckets” of money.

???? Tax Free – Example: Roth IRA, HSA, Cash Value Life Insurance

???? Tax Deferred – IRA, 401k

???? Taxable – Brokerage/Managed accounts


Day 18: Have 5 Years of Portfolio Income Needs In “Fixed Income” When Entering Retirement

Before retiring, figure out how much money you need from your portfolio to supplement any guaranteed income sources you might have (Social Security, Pension, or Annuity).

For example, let us say that you need $8k per month in retirement and you will receive $5k per month from “guaranteed” sources. This leaves a gap of $3k per month. Set aside 5 years’ worth of income needs in “fixed income.” In our example, this would be $180,000 ($3k x 60 months).

Do not forget to invest the rest for “long-term growth and appreciation potential.”


Day 19: Leave A Life Insurance Legacy

If you want to leave a legacy to your children or other beneficiaries, leave life insurance. Life insurance is the most efficient way to pass money from one person to the next.

Spend down your qualified investment dollars. The new SECURE Act states that non-spouse beneficiaries must liquidate IRA/401k dollars within 10 years. These funds can no longer be stretched for the lifetime of beneficiaries.

Go ahead and don’t feel bad about spending those IRA dollars!


Day 20: Embrace the Debt Snowball

I encourage everything to have a game plan to get debt free or at least have no debt outside of your mortgage. I believe Dave Ramsey’s famous Debt Snowball approach is the best way to do it.

Step 1:  Make a list of all your debts from smallest outstanding amount to the largest outstanding amount.

Step 2:  Make minimum payments to all lenders except for your smallest obligation. Put the most money you can on the smallest obligation until it is paid off.

Step 3:  Repeat Step 2 until debt free.


Day 21: Limit Company Stock To 10% Of Liquid Networth

High earners can easily become overconcentrated to their employer’s stock without much effort. You might receive Restricted Stock Units or participate in the Employee Stock Purchase Plan.

Make sure that you do not have more than 10% of your liquid net worth allocated to your employer’s stock. After all, you already have 100% of your income dependent on your employer.


Day 22: Invest In Your Health

I believe to truly thrive you need to invest in your health. This is an area to splurge. Eat healthy food. Get the personal trainer. Make time to get your daily exercise in. We only get one body. Make the most of it. This will greatly lead to a higher quality of life to be able to do more with the time that we have.


Day 23: Invest In Your Earning Potential

One of the greatest investments you can make is in yourself. Do not be afraid to re-invest in your business. Take the leap of faith and bet on yourself if you have a great business idea. Continue to be a lifelong learner.


Day 24: Invest In Saving Time

This one hits close to home for me. Calculate what your time is worth. Take your total compensation divided by hours worked. For example, if you make $400,000 per year and you work 50 weeks per year, your time is worth $200,000 per hour.

Stop spending your “free” time doing activities/chores that could be outsourced may not be optimal. For example, I have always mowed my own yard. I could easily outsource these two hours per week for $40 per hour. If I took that two hours, I could work for 24 minutes and produce $80 worth of value. That would free up 96 minutes to invest in faith, family, and relationships.

Outsourcing does not mean that you could not perform the task well, it just means that there are better uses of the most valuable resource…time.

Think of the value you could unlock if you put a valuation to your time?


Day 25: Invest In Time With Family

There is no investment greater than spending time with family and the ones you love. Christmas is my favorite day of the year. I am so thankful for the wonderful memories that I had growing up. Now I am so thankful for the time I get to spend as a parent and a husband.

I miss the people that that have passed from this life but carry incredible memories of my grandparents and other loved ones.

I hope that my children have such fond memories of their childhood.

Wishing you a wonderful Holiday season!

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is also not intended to be a substitute for individualized legal or advice All investing involves risk including loss of principal. No strategy assures success or protects against loss. Roth IRA Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax.


College Planning

Disability Insurance

Estate Planning



Life Insurance

Retirement Funding

Roth IRA


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In this paper we discuss 10 actions you should take to develop and deploy a successful long-term wealth plan. It will help you make decisions about your financial journey today and well into your retirement chapter.

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