10 Best Personal Finance Practices

Smart investors use all the tools at their disposal to make informed financial decisions. Key considerations include tax-smart planning and investing, individual financial planning and coaching, personal portfolio allocation, investment selection and rebalancing. Working with a specialist on your financial picture, Russell Investments has set up to +4.83% of our annual investor portfolio result. As the new year begins, here are 10 strategies to consider for long-term financial success.

during the distribution years

1. Postponement and conversion in early retirement. A coordinated retirement plan creates an opportunity to minimize taxes over a lifetime, increase steady cash flow, and maximize growth and tax-free income. When the portfolio is organized tax-appropriately during working years, retirees before starting a risk management program (required minimum distribution) can defer taking Social Security while converting pre-tax money to Roth and spending taxable money.

2. Donate Wisely – Most donations are not tax deductible. Tax reform has reduced the number of households itemizing for deductions, prompting taxpayers to find innovative new strategies. The use of retirement plans to fund charitable contributions quickly emerged, with many taxpayers adopting strategies of pooling and/or qualified charitable deductions (QCD).

3. Look for a generational tax reduction, even during retirement. Lifetime tax minimization often requires choosing to pay taxes during lower-income years as a form of tax arbitrage by accelerating income that may have been deferred to a later date. You can strengthen this strategy further by allocating equity assets (risk) into tax-exempt Roth accounts.

Intentional and personal investment management

4. Don’t settle for a one-size-fits-all investment management approach. Investment management decisions should always result from the outcome of your plan and complement your balance sheet, personal goals, liquidity needs, and tax scenario.

5. Understand the role of fixed income and why it fits in your portfolio. Having the right mix of bonds accomplishes important goals: liquidity, income production, liability matching, and diversification. Bond consolidation is crucial for many investors, especially those who need income from their portfolios soon.

6. Eliminate uncompensated risk from your portfolio. Portfolio diversification across uncorrelated asset classes reduces volatility. Professional portfolio construction reduces unnecessary risk without sacrificing return by limiting exposure to catastrophic failures or failures of a single company or sector.

over the years of accumulation

7. Evaluate investments and business opportunities wisely. Maximize your organization’s lifetime value when making staffing and capital decisions. Find a professional to help understand the differences between a W2 position versus an independent contractor, the benefits, and the time value of money to understand.

8. Use Debt Right – Not all debt is the same. We do not favor debt over the declining assets that facilitate overspending. However, business, real estate, and education debts can increase wealth when properly organized with payoff in mind.

9. Organizing the family’s finances to take advantage of the variable income. Using behavioral finance principles to design an automated cash flow process creates the discipline to save while enabling spending. Established processes can be created to smooth out the variance surrounding expenses, savings, and tax deductions.

10. Accumulate investments in multiple tax brackets, not just pre-tax. Many investors mostly save in pre-tax retirement accounts. Not considering the Roth tax treatment is shortsighted and may increase the tax paid over your lifetime, limit flexibility and increase the risk of reduced purchasing power imposed by tax increases.

Bonus! Plan your legacy. Significant advantages can be created by planning the beneficiary tax scenario and properly structuring account types over the lifetime of the original owner and beneficiary.

Ballast Inc. It is an investment advisory firm registered with the Securities and Exchange Commission. Registration with the Securities and Exchange Commission does not indicate that an advisor has achieved a certain level of skill or ability, nor is it endorsement by the SEC. All investment strategies have the potential for profit and loss. Ballast Inc. does not operate in the practice of law or accounting. Always consult with an attorney or tax professional regarding your specific legal or tax situation. For more information visit ballastplan.com.

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