Give, Save, Spend

As we near the end of 2023, Dave and Ryan offer up some practical tips for finishing your financial year strong. And because they can't help themselves, they shamelessly solicit bribes from local restaurants and discuss the merits of Costco's $1.50 hot dog deal.

Tax and/or legal advice is not offered by Family Financial Partners. Keep in mind, tax rules are constantly changing and there is no guarantee that the current tax landscape will remain the same or that the current tax rules set to expire will not be extended in years ahead.  For specific assistance about Roth conversions and before implementing any strategy, the services of an appropriate financial and tax professional should be sought.  Examples are for illustrative purposes only.

David Smyth and Ryan Petrunyak talk about family, finances and fun. Learn more about Family Financial Partners at familyfinancialpartners.com.

Securities offered through The O.N. Equity Sales Company, Member FINRA/SIPC, One Financial Way Cincinnati, Ohio 45242 (513) 794-6794. David Smyth is an Investment Advisor Representative offering Investment Advisory services through O.N. Investment Management Company. Estate planning services provided in conjunction with your licensed legal advisor.

Transcript

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Hey everyone, welcome back to another episode of In My Day with Ryan and Dave. It's our final one of the year. You ready to talk about some of our end of the year money tips? I am ready, willing, and able. Where do you want to start? Talking about end of the year tips, we came up with three words that just wrap the entire conversation up in a nice bow. Because this is the season for tying bows on, putting them on presents, right? There you go. The three words are give, save, spend. Okay. The idea being that just to give you the overview this is the time of year where everyone's thinking about giving their money away, right? Or money being given to them. This is also the time of year where, people always say, I wish I had saved more money. For this emergency known as Christmas and or I'd love to, I wish I had saved more money in 2023. And then thirdly, spend, the reality is in 2024, there's gonna be a number of things that are repeatable expenses. Even if it's not a good expense, you know it's coming. You know it's coming. You know it's coming. So one of the things we can do this month, maybe in some of that downtime. As you may have a few days off from work or what not, and you're sitting around with family and this and that. But there'll be times with, you have a hour or two of extra excess time and you might be able to think about just overall, where am I gonna be spending my money? And is there any value in anything I can do in the short term to save money in 2024? Yeah, so let's start with the giving side. Let's start there. What is one of the most common questions you get As a financial planner, or financial counselor what is one of the most common questions you get as far as giving money, whether it be to kids, charity, church, whatever it might be? The number one question I get is, do I have enough money to give, fill in the blank, X? And... 100 percent of the time. Let's just assume... The answer is yes, because everyone's situation is different, so we're not going to dive into the nitty gritty details of that. But let's assume the answer to that question is yes. What's the follow up question? Then the question is, what's the best way to give the money to them? Okay. And that answer, that's where the answer starts to differ. Because there's people that we have our overachieving families we work with. That have emergency savings and that actively even save to their emergency savings. So oftentimes their emergency savings account Has excess funds that they don't even need so they may just give some of those excess funds from that. Yep And then we have our you know Everyday people that have an emergency fund but other than that spend what they make, you know They save for retirement. They have an emergency fund. They spend what they make that's 80 percent of the population out there, right? And so when they ask about giving money, they're trying to figure out, do I... sometimes they can write it out of their checkbook, right? And other times it's taking it out of an account they may have with us. Yeah. The other thing that goes into that giving too, because we spend a lot of time talking on this show and in just day to day life about ways to save on taxes when you're saving. And we talk about that a lot. But when the money's actually going out, we don't talk about that quite as much, I don't think, which but it is a reality that we help a lot of people with. You want to go into a little bit of how we can go about that in certain situations? Yeah. Since we're, in certain situations with clients where they have appreciated stock, right? Or appreciated cryptocurrency, right? There is that out there, too. Let's, we're not supposed to talk about individual stocks, so we won't, but I think we can talk about cryptocurrency because it's... It's really not regulated. And it's imaginary. But, let's just take our imaginary case. That you bought some cryptocurrency that Elon Musk said is going to the moon. Okay? And it went to the moon. And it went to the moon. And your, I don't know, two cents turned into 20, 000. And you're like, that was pretty good. Why don't you give me advice like that, Dave? I'm like, I'm sorry. I just... I don't deal in fake money, so but they've got this 20, 000 and they're like I would like to give this to My children right then all you're doing in that sense. The first thing you're gonna do with that is you're gonna liquidate it You're gonna figure out what your capital gains are on it with hope you know save those taxes that you're gonna need to pay in April when the taxes are due and just Give the kids the money right or you could transfer, you know that asset And I say asset with big, giant fingers in the air. He's doing the air quote thing right now. Big air quotes. You could transfer the assets to the kids. Okay? bUt let's say for example it's not your children, it's maybe a church or a charity, right? In this case you may be able to actually donate that asset to, directly to, an account held Buy, like a 501c3 as an example, they then in their gift account can take that money. You don't have to pay tax on it because you gifted the entire amount to them, or you don't have to pay tax on whatever amount you gifted to them. When they receive it, because they're exempt, they don't have to pay any tax on it either, and they can use 100 percent of your gift. For whatever purpose they're designed to fulfill. And there's a lot of people that do have appreciated assets in years where the markets have gone up. And as in this year, it could be a time to, if we're your financial advisor, talk to us. If you have another financial advisor, talk to them. And ask them, what are my charitable gifting options For X amount, is there anything in my portfolio that I could give directly to the charity so that I could not only get the deduction, but I also don't have to pay taxes on it. I think that's a big, something you hit on there is something that a lot of people don't realize that when you gift the stock. That the charity isn't paying. A lot of people think that makes the charity pay the tax on the stock. Yeah. And that makes sense, right? Logically it makes total sense. They're like, oh, uncle Sam always has to get his dollar usually. That's right. That's right. But this is one of those loopholes that if you directly gift that, then not only are you not paying it, but in reality you're just giving more money to that charity. I think that's a big misconception out there that we miss sometimes. Yeah, absolutely. What about on the saving standpoint. Let's go to the saving area. One thing that I know that comes with the saving, is, you mentioned taxes. And nobody likes to pay more in taxes than they have to, right? Yeah. It's the American way. Okay? Most people don't even like paying what they have to. So when you take out money whether it's an investment account, but let's just leave the investment accounts out. If you have an account, or like your paycheck there's ordinary income taken out of that paycheck. And if you defer money into a retirement account, like an IRA, and then pull that money out for income, that also is treated as ordinary income. So a lot of people, this time of year, it's a really good idea, if you haven't done this, if you know what your tax bracket is, and there's all sorts of I'm looking at one we've got here. There's all sorts of just what they call the 2023 tax rate schedule that people can reference. And if anybody would like that tax free, that tax rate schedule, feel free to email us at team@familyfinancialpartners.com and we'll make sure we send you that complimentary so you can have that. But that tax rate schedule, you can actually look at it and depending on your filing status single, married. Joint, you name it. You can determine what amount of tax you're going to pay overall at your, on every dollar that you're taking in. And for some people, if they know what their tax bracket is, and they're like I maybe am not at the top of that tax bracket. Whereas I like to think of it as like a bucket. We always want to fill the bucket up. We want to fill the bucket up. So if you're looking at like a for example a, 20 percent tax or 22 percent tax bracket for married filing jointly, you're looking at that tax bracket is going to be around 190, 000. If you're a retiree out there and you're like I've taken my income, right? And I've got 150, 000 overall in income this year. I've got another 40, 000 or so that I could fill that bucket up with, right? I could, and anything I can fill that up with, I could either get a job and make another 40, 000 and pay 22, 000 or if I have an IRA, I could do what's called a Roth IRA conversion. And do you want to talk about how that works? Yeah. So for those folks out there that save money in their traditional 401k or IRA for years and years and are now retired, or not even necessarily retired, but just Later on, and like you said, trying to fill up that tax bracket you can take a portion or all, if you wanted to, of that IRA and simply convert it over to a Roth IRA. So we've talked before about the differences between Roths and traditional IRAs. So why is that beneficial? Because long term, that Roth money will now be able to grow tax free for when you eventually want to take it out. The idea being if we're currently close to the top of a tax bracket, but we're not quite there and you're gonna get there over the next couple years, we'd rather pay the tax. Now at, like for your example, I believe it was the 22% tax bracket. I'd rather pay it now at 22%, allow that to grow tax free for the next couple years as opposed to seeing the assets continue to grow more in the deferred account and then end up paying a higher bracket later on. The idea is basically just let's maximize each tax bracket now, so we don't end up moving into the higher tax bracket later. And not to scare anyone listening, but this country, as far as historically, we are in one of the lower kind of periods of tax across the board that we've ever been in. When you hear the news articles out there that say, we have budget deficits, right? And we have runaway inflation and we have all these issues and you think how in the world is the government going to get more money? They're going to raise taxes. They're going to raise taxes! It doesn't take a rocket scientist, right? Like... Money out, money in. Yeah, it's real simple. It's we are all going to have to pay the price of this overspending, right? Regardless of what it was spent on, it was, it's money out. They've got to get money in. I don't know when, I don't know what amount. Or for who it gets raised a little more or a little less. That's right. That's all up in the air. But I do believe... If that longer term our tax rates and our system will be adjusted, even if it just goes back to what it was a few years ago which so we've already had higher taxes just a few years ago, then even if it just reverts back we're going to be paying a little more tax. So anything that was converted to a Roth right now would be exempt from that and it's going to lower your overall tax rate down the road. Absolutely. Keeping on the savings theme, let's talk about going into next year. What are some ideas for people out there that are thinking, I didn't save quite as much as I hope to this year, and it wasn't that I did a bad job financially, it just happened. What are some ideas for folks out there? It's simple. You just gotta automate your savings. Just make it that simple. Automate it and forget about it. Yeah and if you already are automating your savings and you're like, Okay, my goal for last year was to get, everyone's different, right? On what they need in an emergency fund, right? Just depends on, I always say, Are you a stock or a bond? Is your job a stock or a bond? If you work for example, the government, or for the local schools system, right? Or you have some kind of job that is... Very stable, right? As long as you show up and go to work, then your job is a bond. So you don't need to have as much in your emergency fund because your paycheck is very likely to come versus someone who's self employed or sells something for a living, right? Or maybe is has a seasonal type business like a lawn mowing business where maybe in the wintertime They shovel snow, but if it doesn't snow They're not gonna make as much money So so the idea that person needs to have more in their savings for those rainy or non snowy days So the thought is if you are automating for an emergency fund and you've hit your number That's great start to automate and save for some other goal in your life If you haven't hit that number save for the emergency fund Now the natural thing that people say is what are the other goals? So let's say people have a 401k, right? Most employers now are automatically enrolling per government requirements, right? New employees in the 401k. So they're receiving a match for a minimal contribution. If you were someone that in the last year or two took a new job, you most likely didn't really look at your 401k plan to see if you were maximizing what you're putting in. So one thought going into 2024 could be right now in the month of December take a look at your What you were contributing for 2023 and maybe just bump it a percentage or two Right not enough that it's gonna like really screw your you know up your pay take home pay But enough that it's gonna start that snowball of money accruing just a little bit faster. You might just not even Notice. That's right. And if you got a raise or something then whatever the raise was, if you're like it was only a 40 a week raise, we'll just put the 40 in the 401k plan. I have a client who's a retiree who, that was her strategy her whole life. Basically, she took whatever her first, I think like the third year she was working in her corporate job, every year she got a bump. She would just increase her savings into the 401k until eventually she was maxing it and then she would do something else with it. And comfortably re comfort comfortably retired in her fifties. So that's a good trick that I think easy, sometimes easy way, easy thing to do. So I as we've discussed, emergency savings, 4 0 1 k, the other option, if, let's say you're maximizing your 4 0 1 k, maybe it's time to start looking at if you have children, a 5, 2, 9 plan for college or education expenses., now the reason we don't typically start with that plan. before someone's significantly contributing to their 4 0 1 k is, it's the old idea if you get on an airplane, right? What does the stewardess say? She says, buckle your seatbelt. And then in the case of an emergency, put your mask on first before the kit. That's right.'cause at the end of the day if you're drowning, then the kid's gonna drown too. That's right. And so if you haven't saved enough for your retirement. Your child's not going to be able to necessarily loan you money for retirement. But, they can get loans for their education if you need to actually save your hard earned money for your retirement. Yeah. They're going to be okay. Yeah. I would look at 529s, and I also look at if you're not contributing to your own individual Roth IRA, and you're allowed to due to your income then make, start an IRA contribution. And you can do that as little as, what, 50 bucks? Yeah, I have 50 a month. I have yeah. And just start allowing that money to accrue. While we say it's saving, a lot of times when it comes to saving, people think, Ah, then I'm not going to have as much money to do fun stuff with, right? And you're right, you're not. But by deferring gratification and saving every little bit, It all adds up and it counts, and then when you get to the point where you're like, either A, maybe it comes first, kids are in college, or B, comes first I need my emergency fund to buy new tires or something on my car or fix my car so I can get to my job, or lastly, I want to retire, I'm done working, We don't want the answer to be, no, you have to work five more years. We want to be able to say, well done, you can pick when you're going out. Yeah, absolutely. Absolutely. That's the save standpoint. And then the next topic of give save spend is obviously... It's fun time. It's the fun time, right? Let's talk about spending money. What we were talking about earlier off, off the show is that, everyone thinks that... Spending money is bad for as far as saving for your future, which is just not true because everybody spends money on certain things and a lot of people want to go on fun vacations. People travel for family and a lot of these expenses that we have and we know we're going to do in 2024 anyway, why don't we spend them in the most efficient way possible? So one of my first thoughts there is if you are planning a trip for or whatever it might be, summer break whatever your plan is for the next six months. It sounds fun. You're going to fly and it's going to be fun. Go ahead and book it earlier because the airline tickets only go up. So let's take advantage of their game. Let's play their game and win and try to take advantage of it and get the cheaper price. So maybe there'll be like a little lull right after the holidays as we after everybody's traveled a little bit, there's always that. lull. Yeah, hop on it in the second week on their diets and saving money from January kicks that they're on. And you're like, I'm doing all inclusive in Mexico or something. Yeah, Exactly. With or without the kids, either way. Yeah, whichever one you prefer. What would be another way? If you have a favorite restaurant that, so the local one in town that I think of, cause I know they do this. is the Malone's and Harry's and all those restaurants. They do a Christmas gift card where if you buy a 100 gift card you get, I don't remember, it's either a 10 or 20 free gift card that you can spend in the next three months. So if you know you're gonna go there anyway in January, February, March, go ahead and grab yourself, even if you're getting it for a friend, get yourself a gift card too that you know you're gonna spend and get the free 20 out of it, or free 10, I don't know the exact. But a lot of restaurants run deals like that and you reminded me when you mentioned the BHG group, right? We do spend a lot of money there as we're thinking about things for our podcast at lunches and happy hours and dinners. I'd be just as fine on next year's show talking about Tony's. Or even, rubies. I know there's a little contention there, but whoever wants to give us free gift cards, let us know. And we're gonna ship this to all three places, right? Dave's shifting the spending back to the giving. He wants his Christmas gift cards. 100%. I think it would be great. But no, the reason I bring that up is we do have an engineer client of ours, okay? And engineers, as everyone knows, we've said this before, they're very analytical and they spreadsheet everything, okay? This one client even spreadsheets the amount of time they're going to go out to dinner at their favorite restaurant a year. Okay. Okay, from the previous year, so they keep track. Can you say what the restaurant is? Or is that confidential? We'll call it confidential. Okay. We'll just use this as a story, right? Plus, we don't want to be looking like we're leaning towards, another... Oh, you don't want bias. Bias, right? They're all good. No, because they're not giving us gift cards, right? We can't endorse anyone until we get gift cards, right? You're on the sponsor hunt. Definitely. I think this is a great time, right? So the thought is... You're ridiculous. I know I am. I'm impossible. So They look at what restaurants they go to. And then they go buy gift cards from those restaurants when they're on sale. When it's 80 gets you 100 kind of thing. Or 100 gets you 120. They go buy the gift cards when they're on sale during December. And then the rest of the year, in 2024, when they go out, they know every time they go out, they got a 50 or 100 gift card that they can use when they're out and about. But it really feels like found money, even though they had to buy them. It's just nice, but they're automatically saving, for a lot of these it's 20 percent or so. That you're saving when you look at the menu and anything you order, you know it's 20% less. Yeah. Yeah. Absolutely. And that's just free money. Yeah. And a lot of Costco's big on that, right? They do a lot of gift cards at discounts like they do. I did one for Southwest last summer where it was paid 500 and it was only $450 for 500. Costco's a great place, whether you're getting the dollar 50 hotdog and the Coke. Yeah. Or a brand new TV to watch football games with. Yeah. I'm not sure which TV I'd recommend, but if Costco wanted to send us some TVs to look at, we could also put that in our next podcast. I would take the hot dog. Is it Coke or Pepsi? They have there, I feel like it's Pepsi. Pepsi products. There's someone listening and they know they're like, do not even suggest that Costco is going to switch to Coke. Yeah. They'd have a major problem. Did you, there was like a mutiny. What? No, there was a mutiny. Earlier this year, there was a rumor that Costco, because of inflation, was going to take the 1. 50 hot dog and drink. They were going to raise the pizza too, right? They were going to raise it, and literally people were picketing the store. And the CEO came out and said we will never raise it no matter what we promise. Our loyal customers or something like that. That's a big deal, but I love running in there for something in the middle of the day and pick up, a prescription or pick up whatever I need for dinner that night. And then you're like, I'll take a hot dog. Yeah. That's perfect. Yeah. Greatest thing ever. Marketing genius. It's brilliant. And I like, it's always like a little grandmotherly woman there who's given me, the food that I ordered. And she's always so pleasant and wonderful. And you're like, God, it's only a dollar 50 hot dog, 400 later. You feel like you did a good thing. Absolutely. It just spreads joy and goodwill. So the tip here is if you go to Costco to buy your gift card for Southwest or whatever it might be. And you buy the 1. 50 hot dog, just be careful because it's a trap. I don't think anyone can walk into Costco without 300 in their pocket. Probably true. Just to be safe. Probably true. Because what if you like, you find like a giant trampoline or something that you always wanted as a kid that your parents never would buy you? And then you're like, it's only 2. 99. Did you do this? Is this based on true events? No, but I've seen things in Costco that I was not allowed to have as a child. And I've really thought is that a good use of my money and most the times I say no But it always brings back those things from my childhood Since we're going on the counseling route, you know that makes me actually think Gee, mom or dad, why didn't you get me that thing? And then I realized the reason they didn't is because if they had, I probably would have never left my house. Because I would have had everything. I would have been like today's generation and stayed home until I was 30 or 35, that's one way to do it. It'd be great. They made it so uncomfortable that I had to leave. I had to leave the nest, but so now I can, someday I'll have my own in ground trampoline. Well, fair enough. Maybe we'll make that on the list of goals for 2024. We could also do A medical show where we do it live as they reset my arm or something. The first show will be Dave's Costco Fund. We could do a live show from Costco where you buy a trampoline and a flare gun and fireworks and everything. Then a GoFundMe for July 4th and then our August show will be the GoFundMe to reset Dave's arm. Pay for all the bills, fix the burns. Yeah, we have our ideas for next year. All right, so so saving so so we said, airfare Credit card, or just for spending any kind of gift certificate kind of thing for restaurants and then any kind of I think the other thing is like speaking of Costco, right? They've got that annual membership, right? There's a lot of other places whether it be like gyms physical places that have annual or monthly memberships a lot of times they run deals Right as you go into from into the year or start of the year deals that if you do re up for the annual you might Be able to save a little bit on the monthly and we're not talking about just physical locations We're also talking about things like, if you're an Apple user, right? You know check out your subscriptions On your Apple account, right? Whether it's your, Spotify music or your Apple iTunes or storage. Any option where you can pay monthly or annual and potentially save money by just paying it annually is usually a good deal. Cause again, it's just, you're just literally, it's like the modern day way of clipping coupons. Yeah. Yeah. So that's a great way to, to be saving. So the end of the day we have give, right? If you need help or any kind of advice on how do I give some assets? To my children, church, charity, feel free to give us a call. The office 859 219 1006. If you're, looking at your budget and you're saying, I do want to save and I've maximized my emergency fund, maybe I've bumped up my 401k enough and now I have enough money to start some other additional type of saving fund, you can also reach us at that office number. Give us a call if you need some ideas. And and third, if you're, you're almost burnt out from your Christmas shopping, because I know I get there, and you're like, what other things can I spend money on? I've got a few shekels left, right? Believe it or not, Ryan and Dave are pretty good at that. Yeah, then we are very good. We are very good about that. Then think about, okay, I could spend some money forward. On things that I'm going to I already know are I have earmarked trips, right? I have restaurants. I'm gonna go to or there's experience. There's their monthly or annual Memberships that I could either reduce Right or just pay annually versus monthly and save some money on absolutely Thank you all for listening to us all year. It's been a fun one and we're looking forward to January 1 for 2024. Happy New Year. Happy New Year. We'll be back in January with our New Year's resolution, so I can't wait to see what Dave does this year.