Organizing Your Finances – Episode 170

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[00:01] Welcome to the Prosperity Podcast, fresh alternative personal finance talk for independent thinkers who prosper outside of Wall Street. Here’s your host, bestselling author, Kim D.H. Butler and No BS Money Guy, Todd Strobel. Hey everybody, welcome back to the Prosperity Podcast. This is No BS Money Guy, Todd Strobel. Again, we have bestselling financial author and our co-host, Kim Butler with us today. And we’re going to be talking about something that is probably painful for me because I am just not into organization, but fortunately for all of us, Kim Butler is, so welcome Kim and let’s talk about organization. Well, thank you, Todd. You know, it’s funny that as we’re recording this today in the middle of the day,

[00:53] my husband Todd and I chose to spend this morning, it’s President’s Day, so the office is closed and we chose to spend this morning, I would call it sharpening the saw. So everybody’s familiar with or if not, will help you be familiar with Stephen Covey’s Seven Habits of Highly Effective People. And I think this actually originated from Abraham Lincoln, where he says if I had something like five hours to chop down a tree, I’d spend the first four sharpening my axe or something like that. And so Stephen Covey’s reworded that to sharpening the saw. And it essentially means that you prepare before you do. And I’ll admit, I’m not a great preparer. I’m a great like, let’s jump in and see how well this goes.

[01:40] But I will readily admit that when you can take time, whether it’s four hours or an entire day or a week or five minutes, whatever it is, but when you can block out time to get organized around a particular area, it makes that area so much easier to deal with. So by way of example, this morning, Todd and I had set aside to clean up what we call our mudroom, which is a long kind of hallway in the entry part of our house, not the front door, but the back door. And as the term mudroom implies, you know, when you come in from the farm, being outside in the garden, whatever, there’s muddy boots and everything else. But this is also an area where my husband has a lot of the smart home aspects of our house.

[02:31] Big electronic racks full of all kinds of pieces and parts and black things with cords and little silver knobbies, et cetera, et cetera on them. You can tell I’m not the smart house guru. He is. But what happens is whenever he gets in there to upgrade or update or move anything around, what the countertop, which is a fairly long countertop in this little hallway area, ends up getting absolutely littered with are all of these pieces and parts and cut apart wire and cords that mean something to him don’t mean anything to me and little screws and tools. And it just becomes a disaster zone. And that’s fine. I always put up with it for a while, but every now and then I just have to say, OK, let’s stop.

[03:19] Let’s get to a good stopping place in this project and then take the three or four hours that it takes to clean this mess up. And this is something important in finances as well. And it’s interesting because I find that my finances are actually fairly easy to keep organized. And so I want to share with our listeners the way that we do that. And maybe that will benefit somebody. So as many people are well aware, we believe that the best place to store money is our life insurance. So we have a lot of cash value of life insurance policies, and we keep track of them on an Excel spreadsheet. And if anybody wants that, I’d be happy to share it. It’s kind of funny in today’s world. We have so many cool online spots, but most of those spots do not

[04:10] enable good life insurance information because they’re just not set up for it like Mint.com is an example. Great system, but you can’t really store your life insurance information there. So by keeping track of all of our life insurance policies and the building cash value and the obligation to pay premium, which helps us do our forced savings, we have a very efficient environment as it relates to cash, our liquid emergency slash opportunity money. It’s very important, both emergency and opportunity. Nobody wants to get stuck talking about emergency money all the time. But that opportunity account that is the cash value of life insurance that we’re adding to all the time, as a matter of fact, Todd at 53 just bought

[04:54] a whole brand new life insurance policy to continue to store cash in. And that’s a good way for us to stay really organized around the cash arena. The other area that I see clients disorganized in is around their IRAs and their 401ks. We meet so many people that have three or four different IRAs and they have an old 401k or two or three still at their old employer. And as a general rule of thumb, I encourage people to consolidate those. Now, obviously, you can’t mix the Roth IRA in and you can’t mix any after-tax type 401k or IRA that you’ve done in. Those must stay separate. And spouses cannot mix. I find that’s an area that people are not aware of. If you have an IRA and your spouse has an IRA, those two IRAs have to stay separate.

[05:48] But other than that, 401ks, regular deductible 401ks and regular IRAs can all be rolled over and put together. There is one caveat. Many people on the advisor side would say that you don’t want to move a 401k because a 401k is a little more protected than IRAs are. But I find in today’s world that that’s not typically enough of a reason for me to leave a 401k at a former employer. That’s a discussion point and could certainly be argued both sides of the table. But I believe that IRAs, when they’re of the same type, should be consolidated and it’s so much easier to deal with them. And then you also would potentially have enough money to meet the minimums of the really good investments. Most good investments are $50,000 to $100,000 minimum.

[06:40] And if you can combine two or three IRAs and get yourself above that balance, then you have an opportunity for better monies. So those are just two recommendations that I would give is using the cash value of life insurance as your emergency opportunity fund that actually helps you be more organized and then consolidating IRAs together as well. Todd, do you have anything in that area that you like to do? You kind of admitted to not liking organization, but I bet you’ve got a tip or two. I think your tips are great. I have a question, I guess, more than anything is that we are recording this at the time when taxes are on everyone’s mind. Any tax tips that you’d like to share with our listeners?

[07:28] Well, I will readily share what we do. And that is we have a bookkeeper that helps us get prepared for our taxes. And there are also now so many online capabilities and apps that can help people get organized. And so, like you said, here we are almost beginning of March. And for last year, I hope that you were organized, because as we all know, it’s difficult to do it after the fact. If you weren’t, now is still a great time to start getting organized for 2017. And there’s a couple specific things that I would share. There are driving apps now available where it’s on your smartphone. It kind of runs in the background. Every time you get in your car, it alerts you, hey, is this a business trip or a personal trip?

[08:19] We’ve talked about them before on the podcast. And then, of course, there are also receipt apps where you take a picture of your receipt and you, and I don’t know how the app works, because I’ll admit I just give all my receipts to my bookkeeper. But you, and I think she scans them in and probably does what the app does with anyway. But you put the pictures of the receipts in some form so that things are more organized and beneficial. And that makes it so much easier for you to be prepared for tax time because getting those deductions is super, super important. And while we’re on that note, it’s so imperative, I believe, for every single family to have a home-based business. Find some network marketing product that you love

[09:05] and create that into a home-based business if nothing else or create some other home-based business. Because then so many things that would not normally be deductible can be deducted, even office supplies and things like that. I mean, it has to be a legitimate business. You have to truly be trying to make a profit with it. But even if you can just generate a little bit of income, it enables you to have the ability to deduct things that you would be legitimately buying for a business. And I think that’s a fabulous strategy. And all families need to be thinking entrepreneurially and looking towards having some type of business in their future. And so that is, I guess, my biggest tax tip and the easiest way to reduce your taxes

[09:50] is to have legitimate deductions. I also want to bring up that at this time of year, you always run into people, at least I do anyway, that are so excited about the big refunds that they are getting on their taxes. Now, most people would say that that person did a great job with their finances by getting that big refund. What’s your opinion? Absolutely not. I believe that a refund is just evidence that you did not do some good work on the early end of the year, like right now, in making sure that the government does not get more of your money than necessary. I think the reason people like refunds, it’s imposed self-discipline. And in other words, because you gave the government more tax money,

[10:46] you’re now going to get it back and you get to go do something with that. It’s so much more efficient to impose the self-discipline by buying a life insurance policy and making yourself pay premiums. If you use whole life insurance as a place to store cash and you put the extra money that was going to the government in an interest-free loan for the entire year, instead into your life insurance policy, you have the capability or the capacity to earn three or four percent on that money, not necessarily in the literal first year of the policy, but over time, you can get your money to earn two or three times the bank savings rates that you hear about. And so not only do you get the self-discipline

[11:35] that you are looking for, but you get a better use of your dollars instead of literally giving your money to the government interest-free and getting back your money, sometimes up to 14 to 18 months later, because the money that you gave them early in January is not going to come back to you until oftentimes March or April or maybe even May or June, depending on when you file your taxes and when they send you your check later. Not four months later, but 14, 16, 18 months later is not a good way to save money. It is not something that’s efficient, even though, yes, a lot of people do it and they get excited about it. They really could do so much better for themselves if they took the time to figure out what that difference was.

[12:25] In other words, you could just, if your income was consistent, just take your refund and divide by 12 and have your human resource department lower the amount that they are taking from you by that amount of money and then take that amount of money and buy a life insurance policy with the maximum pay to petition so you get an awesome emergency opportunity account that you’re building that’s in your control instead of in the government’s hands. I think so many times there’s our listeners out there are hesitant to reach out to a financial advisor because they feel like they have to give up something when many times our job is to make the dollars you already have more efficient without sacrificing lifestyle.

[13:14] Is that not correct? That is very true. You’re absolutely right. I think the biggest fear is that we’re going to have you only eat every other Thursday or something and that’s just not accurate at all. You can start saving, especially for the younger set, $200 or $300 a month and if you’re older, maybe it’s $500 or $600 a month but you can work with a prosperity economics advisor we have them all over the country. Of course, we’re willing to help as well and there are people that will help you get on track and get your dollars saved in the most efficient manner possible and get your dollars that are longer term invested in the most efficient manner possible so that you can be one of the Americans that says

[14:00] I’ve got my finances organized the best way for me rather than one of those Americans that is either just burying their head in the sand or stressed about not having their finances organized. Super and again, it’s been a little while since we’ve announced the gift that you have just for our listeners. Absolutely and this is a great time because people are thinking about their finances as it relates to tax preparation and etc. So the book is called Financial Planning Has Failed and there’s a bunch of beneficial items in the book to read and of course there’s an audio book available as well. Specifically, there’s the history of financial planning which is not that long and why it has failed us Americans

[14:49] and then there’s also some very specific ideas about what you can do with your money to put your family in a stronger financial position. So again, the book is called Financial Planning Has Failed. There’s an audio version available and it’s at partners4prosperity.com slash ebook. So that’s partners4prosperity.com slash ebook. Super and again, that is only available to our listeners. You can’t go on Amazon and buy it. That’s Kim Butler’s gift to you our valued listeners and again, I know that every time that we get on this subject there’s somebody out there who is getting a refund this year who can reposition that money next year and be amazed at how once they get it once they accept the fact that the money

[15:43] that’s coming back is theirs not a gift from the IRS or a gift from the government that I mean the whole world just changes. It does, yep. It rearranges your finances and consequently your confidence and that is worth a little bit of time. Awesome. Well again, this is No BS Money Guy Todd Strobel. Special thanks to Kim Butler. Special thanks to all of our listeners. We appreciate you. Again, we’d like to hear your feedback and we’re here for you and we’ll see you all again real soon. Thank you for listening to the Prosperity Podcast. To take control of your money and have it work for you visit us at partnersforprosperity.com. If you liked this episode make sure you subscribe and leave a review.