The clock is really ticking now on 2020.
But before you celebrate, please — for the love of Pete — make SURE that you are getting whatever needs doing done NOW that might affect this year’s taxes. I’ve been banging this drum the last couple weeks, but I know how thick-headed I can sometimes be, so I’m just assuming you’re like me and that you like reminders.
Here’s the quick list of moves to consider, one more time …
- Project your 2021 income (if you can) and adjust accordingly.
- Check your withholding. By now, probably just one more paycheck to get right.
- Spend down your FSA (if you have one).
- Give to charity — EVERYBODY (and I mean everybody) should give at least $300 — because even if you take the standard deduction, you can ALSO deduct up to $300 in charitable giving. Giving matters.
- Max out personal gifts — if you have means, you can give up to $15K tax free to a family member or friend. But that ends 12/31…
- … as does your opportunity to max out workplace retirement accounts (if you have one).
There are plenty more “little” things, or items that might only apply to certain situations, but these are the biggies. So, if you need to have a quick conversation about this, this is where you reach us:
Making these kinds of moves while they’re available (i.e. not “missing the boats” when they come your way) is just another marker of the San Antonio individual who is moving towards building a financial fortress. Those who build real worth in their lives are pausing at the right moments to do what’s needed.
Which is hard in our frenetic culture.
But when you start building the habits of the wealthy into your life, they really do pay off.
Five Key Habits of the Wealthy San Antonio Clients We Serve
“May your choices reflect your hopes, not your fears.” -Nelson Mandela
I recently wrote about climbing out of debt and other financial holes.
But what do you do once you’ve done so?
It might seem outlandish, this year of all years, to consider the things I’m about to have you consider … but what I’ve seen in working with Texas Hill Country clients all across the financial spectrum is that these habits begin small.
As I’ve watched clients go from one end of the income scale to another, over the years, here are five habits of the wealthy I’ve seen carried by all of them who moved *up* that scale (and those who started there — without these habits — well … they went the other direction).
1. A future orientation
The wealthy usually carry a willingness to live beneath their means for as long as it takes to reach their financial goals. While their peers are showing a tendency toward embracing the good life at the first sign of prosperity, the would-be wealthy take a pass on all of that.
While others are saving 6-10% of their annual incomes — usually for retirement — people who want to be wealthy often save 20, 30, 40 or even 50% or more of their incomes.
Imagine how much money you’d have saved in 10 years if you saved half of your income during that time? The fact that no one ever sees this happen is one of the reasons that people believe that the wealthy somehow “come into money.”
2. Careful spending
The self-made wealthy learn early in life that you never pay full price. The combination of this habit with delayed gratification is a powerful force when it comes to growing wealth. Not only do you spend as little money as possible, but you buy at a discount when you do.
While most San Antoniopeople are buying the most expensive house they can afford, the rich-in-progress buy beneath their means, and buy the cheapest house in the neighborhood to boot. They first ask themselves, “How much house can we truly afford right now?” The same is true of buying cars: If one wants to be rich someday, he buys a conservative car — and buys it used.
3. Avoiding debt whenever possible
Debt represents a reduction of future cash flow and the wealthy will avoid it. By paying cash on the barrel, there are no strings attached to what you buy that might compromise your ability to continue saving money at a high rate.
Notice how the drive to save large amounts of money causes frugal spending habits, which then enable the ability to make purchases without using debt; the three habits combine to form a pattern that brings the aspiring rich to the point of great wealth earlier than an outsider might expect.
4. Low risks and high yields
If you want to be rich, the first rule of investing is to not lose money! If you have a small amount of money to invest you might be tempted to put it all into high-risk growth stocks in the hope that a big run-up in value will make you rich. But if you have — or hope to have — a large portfolio to invest, you might not take that kind of risk. Your investments will be in assets that are unlikely to collapse in price, reasonably likely to grow in value over time, and able to provide a steady cash flow while you wait for them to grow.
For those who are starting out, a perfect investment asset might be an undervalued (and therefore very likely to grow) blue chip stock (not likely to collapse) with a history of above-average dividend yields (steady cash flow). Or a good index fund. You don’t need your investments to make you rich — you’re already on your way there, and just want to further grow your wealth, steadily and predictably. (Of course, the specific strategy will vary from person to person, and at different stages of life, so this isn’t necessarily intended to be personalized investment advice for you.)
5. Ruthless ability to say “no”
My wealthiest Texas Hill Countryclients have the ability to center on the most profitable ventures and to let go of nearly everything else. They often do this by delegating non-profitable activities to others, if not making those activities somehow go away altogether.
This is easier to do when you have money to pay others to handle them for you, or when your finances are relatively uncomplicated. If, for example, the rich person has a business, he might pay someone to handle specific aspects of the operation that are necessary but produce little or no revenue. That frees him to concentrate all of his efforts on generating more income for his business. As a result, his business and his income grow much more quickly, making him wealthier still.
One thing I’ve seen in my clients with means: Becoming wealthy is really a lifestyle as much as anything else. Once you adopt it — by living beneath your means, staying out of debt, and saving large amounts of money constantly, you have capital to invest (conservatively) and to pay others with, in order to free you up to make even more money. It’s not so hard to see why the wealth of the self-made rich seems to spring out one day as if there’s a winning lottery ticket in the mix.
But that’s simply not the case, and my self-made wealthy clients know this.
Give YOURSELF the gift of light at the end of your tunnel, and remember … we’re here to help:
To your family’s lasting financial and emotional peace…
“CRISIS Action Plan” for my San Antonio tax clients and friends — which is still relevant today:
1) Don’t marinate in other people’s panic. Be mindful of your social media consumption.
2) Continue to stay financially and logistically prepared for worsening situations.
3) Make sure you have some ready, liquid assets, if you are able. (I.e., cash in the bank, and in hand.)
4) Set aside plans for any big spending until the dust settles — but especially look out for your small business owner friends and vendors.