Easy Wins in Personal Finance (Part 1)

It’s important to eventually get a comprehensive financial plan for yourself, but sometimes even just a few minor adjustments in your portfolio can make a big difference. Let’s discuss a few easy places to start...

 

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Transcript: 

Marc Killian  00:00

It's important to eventually get a comprehensive financial plan for yourself. But sometimes just a few minor adjustments in the portfolio can go a long way. This week on the podcast easy wins in personal finance with Tony Morrow. Look up in the sky. It's a bird.

 

Announcer 2  00:15

It's a plane. No, it's the tax man. He may not be a superhero. But Tony Morrow has saved many retirement plans with his extreme knowledge of tax planning strategies. It's time for a plan with the tax man.

 

Marc Killian  00:30

Hey, everybody, welcome in to plan but the tax man with Tony Morrow and myself here to talk easy wins in personal finance. With Tony we're gonna get into it. We're gonna make this a two parter for the month of December, as we're wrapping up the year here. So we're gonna go through a few pieces this week on the podcast. And then we'll do the rest of them about a week or so before Christmas. So we will share a few nuggets of information with you guys. As we're winding down the year, Tony, my friend, what's going on? How are you this week,

 

Tony Mauro  00:57

I'm doing wonderful, you know, getting ready for winter and getting ready for Christmas.

 

Marc Killian  01:02

Now doing pretty good and pretty much the same thing. It'll be it'll be here in a hot flash, we you know, it's got about three weeks to go at the time we're dropping this podcast, but you know, that'll that'll go by in the blink of an eye. So make sure you get all your stuff done and ready because it'll I'm sure it's gonna be goofy out there to people running around crazy. So keep your head on a swivel. That's for sure. I get this week I got some, like I said, I guess some easy wins for us, Tony, I want to go through a couple of things here. Just give some people some places to think about things where they can make little tweaks. Sometimes, folks think, Oh, I gotta go see a financial professional or I got to talk to a financial person. That's gonna be this major pain is hefty overhaul? You know, sometimes it's just little things, right? So let's talk about the little things like cash. Let's start with cash. Cash, is King cash King this time of the year, right? We tend to spend a little bit more cash, maybe we've been piling it up. And so yeah, maybe it's dwindling down for the holiday season. But if you do have some piling up, you know, just be careful where you got it. Right. Don't Don't let it sit there and be too lazy, especially with the considering the fact that the times that we're in right now, it's only when maybe a money market for a smaller amount for short term, or even a CD could be a good option versus what it has been versus just leaving it in the savings account. It's

 

Tony Mauro  02:13

because the savings accounts are still doing pitiful, right? Things counts and checking accounts. Yeah, really awful. Nothing, right. But so these are like a like a 12 or an 18 month might be okay. I just saw it, you know, and for years, you know, from our end of it, you know, for people that are looking for fixed income, you know that FDIC insurance, you know, we've had to say, hey, look, it's terrible, you know, you're not going to be able to live now all of a sudden, I mean, I just saw one in the paper on Sunday, 5.35, for 1718 months, something like that. But the point there, though, is, this happens more with my retiree clients, my dad being one of them, he'll stockpile a lot of cash in his checking account. Next thing, you know, he's got $100,000 in his checking account, you know, and it's paying zero. So we have to try to convince those types, that, hey, you know, we're not saying take it all out and invest it, we're just saying, let's put it to work for you. Maybe you know, 60 70,000 In his case, and still remain very safe and whatnot. So even if you're working, you know, I never advocate having tons and tons of money just sitting in the checking. Now a lot of people will say, Well, I'm saving that for a rainy day, well, then that should be in a rainy day fund, that should not be in your operating account. You know, you're just like we do with businesses. We call it the OP X, you know, don't don't just let that money sit there and make it work for you a little bit, even if it's money market rates, you know, yeah, they're not

 

Marc Killian  03:36

bad start to add up over time. Yeah, yeah. Yeah, for sure. And we'll kind of keep this in a different context. Because all my list also is an emergency fund. So we'll talk about this cash, the cash amount, maybe from the retirement standpoint, because you're not really, you know, the emergency fund conversations a little bit different when you're retired, is it's all coming in, right. But if you're still working, or you're retired only, again, you know, sometimes it just makes you feel good to have $100,000 in cash sitting in the savings account. But is it really the best thing for your portfolio for your plan? When it's just not doing it? It's not it's lazy. It's not doing a whole lot. We don't want lazy money. So

 

Tony Mauro  04:12

we don't want that. No, and you gotta get clients over the fact that we still have the money. It's just a different account now. Yeah. And it's a lot easier for them if they can see it, because a lot

 

Marc Killian  04:23

of money markets liquid, right, versus like a CD where you're maybe tied up for 12 months or something a little different. There will differ,

 

Tony Mauro  04:29

you know, money markets, very liquid, you know, CDs, even if I mean, they're not as liquid, but you're not going to get really hurt too much. If you have to get out early. But yeah, there's a little bit difference in liquidity there. All right.

 

Marc Killian  04:41

All right. Good to know. All right, number two, cleaning up old life insurance policies. So again, this is, you know, this is an easy win, right? So if you got got an old life insurance policy sitting there that you've had for 20 years, it might be worth taking a look to see if you can get better coverage at a cheaper rate.

 

Tony Mauro  04:55

Yeah, even though you know, you're much older maybe you know, Because the rates have changed a lot in this area over the last 2025 years. Now, I think it's a good idea to review your policies like we were talking on the last episode as part of your year end plan, but you should clean some of these up. Because one, you may have bought a an older policy that you don't need any more. Or like you were saying, you may be able to get more coverage or the same amount of coverage for a lot less, and extend out that term. If you're, you know, if you've got term insurance, but even the whole lifers in the universal policies have changed, you might be able to roll that into it, you know, whatever cash value, you may have, roll that into a newer policy with better benefits. And so yeah, I wouldn't overlook that, for sure. It's pretty easy.

 

Marc Killian  05:41

Now think about TVs nowadays, right? You know, TVs are, they're so throwaway, right? You know, the prices are so far down, that if something happens to one, you know, you just go and replace it. And they're not that expensive, versus like our old ones from the 70s 80s or 90s. Right? Where it's like a piece of furniture. Yeah, these furniture had weighed 500 pounds. Yeah, and you'd have to probably service it before you'd replace it right? Well, nowadays, replace it. So before you throw it out, you know, double check those old life insurance policies and stuff like that, clean those up. Liban speaking of cleaning up, number three, cleaning up and consolidating old 401 Ks, you know, if you've got one or two of those, from an old job, it's gonna not only make your life a little happier, but also your financial professional, clean that stuff up, put

 

Tony Mauro  06:22

them together. Yeah, clean it up, it's easy to do it's paperwork, it takes a little time, I've seen people, as many as like five or six of these, you know, bouncing around, they get statements from different, you know, the, the person is bouncing around over the years, you know, and then next thing, you know, they've got all of these different 401, K's with small balances, you can easily consolidate those either in possibly your new company's 401k. Or if nothing else, a rollover IRA and get it all in one spot. Yeah, make it a little easier to monitor and have more choices. Really?

 

Marc Killian  06:53

Yeah, tons. And again, it's worth talking to your financial pro about what you know, like, what's the best strategy for doing that and everything and getting it put together. But it is pretty easy to do. And it will give you just a lot more options. So consider doing that as well. Number four reconsider that that managed account you may have may not have a lot of management going on. So if right, for example, Tony, if you're working with someone who's got you into mutual funds, for example, and it's just been that way for 10 years, well, there's not a lot of management happening there, they just kind of let it be right. And maybe there's some better options.

 

Tony Mauro  07:26

Yeah, and I think they're the key is, is you've got to have a good relationship with your advisor, and they have to be doing something for the management fee, even if they're not changing investments, which, you know, sometimes we're in, you know, a basket of mutual funds, that we tend to rebalance. And so we're at least rebalancing, number one. And number two is we're meeting with the clients four times a year, and then that last meeting, you know, making revisions to the plan, because that's really what you're paying for is trying to keep that advisor or coach, if you will keep a new on track, right. If you're not getting that whether it's, you know, it's sometimes you're right, you need goals have changed, risks have changed, we need to reposition a little bit. But if you're not getting any of that, well, then you're really ended up paying for something for you. No, no, no real value added. Exactly.

 

Marc Killian  08:19

is speaking to the mutual funds. Tony, my fifth one on here, that will do five for this week, and the likes that we'll do the remaining for the next podcast. But it is Ricans, it's considering replacing those high expense mutual funds, because that is typically the conversation piece. I just saw something a couple of weeks ago, I think it was from New York Times, but I'm not 100% talking about the death of the mutual fund. And so while they don't think they're gonna go away anytime soon, because there's so much money in there from a you know, especially I mean, the institutional thing, but ETFs really have just, you know, clearly taken over in this space over the last 20 years. And just about every advisor, I know really talks more to their clients about ETFs versus mutual funds for a myriad of reasons. Can you kind of break that down a little bit for us?

 

Tony Mauro  09:04

Well, we do two, we're in that that camp, I mean, most of you know, the funds that we use, you know, our ETFs are a variation of them. You know, Vanguard is a big family, the real thing there is, and I love mutual funds from an advisor standpoint, don't get me wrong. But if you can take different ETFs and get the same diversification, you know, you're basically mirroring the returns and or losses of those particular indexes. And most of the time, the studies have shown that the best minds can't outperform the market consistently year in year out and they lag a little bit. And then their manager fees tend to drag down the returns a little bit. You're talking about the expense ratios and the fee for management. Right, right. And the next thing you know, you're you're a little bit less, and then you've got an advisor maybe in their way to half or 1%. And so, you know it does it drags down the return heard. So we try to, you know, use them. Because basically, if they're paying us a half to 1%, for, like we just talked about, you know, for management and help, we want to keep those other fees as low as possible. And you could do that with ETFs. Now, I could see mutual funds. You're right. I

 

Marc Killian  10:18

mean, they've got so much money in them that they're not going to go away. But I think more and more advisors at least, and even people doing it on their own right are starting to understand, hey, this is a real option. Yeah, it seems like it's more in the institutional space for a lot of folks. Because ETS, I mean, they trade like a stock, right? I mean, so you're not waiting. We're not waiting till the end of the day before, you know, the total information. And it changes like a mutual fund. The fees are certainly the conversation piece for many people, that typically tend to be a significantly lower when working with an ETF. And it's just technology change, right? I mean, mutual funds were created in the 1920s, you know, and it took till the 1990s, before two ETFs came along, and it could it really took that technology boom, it to create the ETF. So I mean, mutual funds have been great for a very long time. But if there's a better option out there, again, to the point of this conversation, easy wins, it may be worth it to take, you know, to rethink those high expense mutual funds, right? And is that something that you guys do like when you you're doing a review, somebody's coming in new for the first time and you're going through their portfolio portfolio, one of the things you're looking at is fees and stuff and like how to, you know, evaluate and get the best value there? We do

 

Tony Mauro  11:27

when somebody is coming in new we that's what we look at, we don't really focus on, on returns. And that sounds kind of counterintuitive. But we're like everybody else, you know, we're not doing this, right. Yeah, we're not chasing that. We're we want to get the best return for the client based on their risk portfolio, or risk tolerance and their tax, you know, preference.

 

Marc Killian  11:50

Yeah. Does that mean tax efficiency, that's going to be next on our list. But that was, I would say to that point, right? fees, and taxes are usually where you guys make, you know, that's where you guys really earn your keep along with, I think the behavioral management of it, because that's where somebody will tend to lose our money.

 

Tony Mauro  12:06

It does, you know, and it's, I remember back when, when mutual funds you to buy a mutual fund, you know, you paid an 8% to load, as they call it, you know, to go into them. I remember those days. Yeah. And that if we can keep fees, you know, as much as possibly as low as possible. I think, you know, again, at the end of the day, just only going to help your portfolio. And that's, that's what you're paying us to do, right? Yes. Is that's part of it. Yeah,

 

Marc Killian  12:33

for sure. All right. Well, there you go. So there's the first five of our easy wins in personal finance, some things to certainly ponder there. And as I mentioned it, stop the tax. And we'll talk about that on the next half when we come back a little later in December and pick up the final pieces of this conversation to wind down the year. So don't forget to subscribe to us on whatever podcasting app you like using Apple or Spotify, or now Google, I think, is merged everything. So it's all under the YouTube banner. But either way, you know, you've got all that stuff typically pre installed on your phone. So whichever one you like to use, just type in plan with the tax man in the search box, and add to your podcasting or streaming list of things to check out. And of course, Tony is a CPA and a CFP. And an EA was 20. Well, actually close to 30 years now. Right, Tony? That cost? Yeah, I've experienced doing that, sir. There you go. So if you need some help, they are certainly here to help at tax Dr. Inc. You can find them online at your planning proz.com. That is your planning proz.com where you can also find the links for the podcast of as well. So a lot of good tools, tips and resources there, go check them out and see if they can help you with your situation. You're planning proz.com All right, my friend. Thanks for hanging out. Thanks for running through these first five with me. And I'll talk to you again in a couple of weeks just before Christmas, and we'll do the other half. All right. Well, sounds good. And

 

Tony Mauro  13:51

we'll look forward to talking to you then.

 

Marc Killian  13:52

All right, we'll see you next time. We'll hang out with Tony Morrow right here on plan with the tax man with Tony Morrow from tax doctoring.

 

Walter Storholt  14:05

Securities offered through a van tax investment services SM Member FINRA SIPC investment advisory services offered through a VAT tax advisory services insurance services offered through an event tax affiliated Insurance Agency. Investment strategies discussed in this episode may not be suitable for all investors. Please consult with a financial professional.