They say all you need to survive is food, shelter, and love.
I think they forgot tax planning.
It doesn’t have the kind of marketing that love gets, but it’s the most unbelievably useful financial practice you might never have heard of.
Picture this: over the past 40 years you have been stockpiling savings into your employer retirement plan. But on your retirement date, it’s worth less than what the statement says. Sound alarming? Well, this would be the case if you haven’t given any thought about tax planning for those 40 years, especially around your retirement.
The IRS is not-so-patiently waiting to take anywhere from 0% to 47% of your pre-tax retirement account. Our goal as tax planner is to reduce your total lifetime tax to get you closer to the 0% than the 47%.
When I first mention tax planning, I often find that people have some pretty profound mistaken beliefs about it. Here are five myths I hear the most:
#1 – Tax planning has to be complex.
Surprised? Don’t be, even though an alarming number of tax planning “experts” insist that the only way to lower your total lifetime tax bill is to implement some ultra-obscure tax strategy. While yes, these strategies may work for a select few, the “experts” often gloss over the “boring” and easy to implement strategies.
For example, implementing annual Roth conversions, HSA strategies, or selecting between pre-tax or Roth contributions can potentially reduce your total lifetime tax by tens of thousands of dollars.
There’s an old adage that’s a great frame of mind for your tax planning strategy:
“Small hinges swing big doors.”
Little choices now can make a big difference later.
#2 – The goal of tax planning is to pay zero tax every year.
A year where you pay zero tax is a lost opportunity in the realm of tax planning. When we look at successful tax planning, we want to see a reduction in your total lifetime tax paid.
This means potentially paying more tax one year and less the next. Years with lower income can provide a great opportunity to implement a number of tax strategies (capital gain recognition, Roth conversions, etc.)
The professional doing your tax planning should be computing tax projections each year to determine what strategies are best to implement. As we like to say at Note, “pay the IRS every dollar you owe, but don’t leave them a tip.”
If your wallet’s feeling too heavy or you’re just feeling extra patriotic, the U.S. government happily takes donations against the national debt.
#3 – Your accountant does tax planning for you.
I’m sure there are some accountants who do real tax planning, but speaking from experience, the vast majority do not. While having a rockstar accountant in your corner helps, they tend to make better historians than planners.
Your accountant is more like a rearview mirror. They’re useful, but unless you plan on driving in reverse, you’re going to need someone looking down the road with you. Your tax planner is more like a windshield. It’s crucial to look through the windshield and have someone planning out your future tax strategies.
Know what’s even better? If your financial planner and accountant can work together closely to ensure the tax strategies get reported and implemented correctly.
#4 – The benefits of tax planning can be seen quickly.
Tax planning (when done right) is more like well-aged bourbon than lemonade. If you have a short-term frame of mind, you might still come out with a good outcome. But if you keep your sights on the long-term and give it years to mature, you can have an amazing product to enjoy.
There are almost always strategies to implement now to see a pay off in the short term, like safe harbor payments to avoid an underpayment penalty. But most strategies need time to mature.
For example, if we decide to do a six-figure Roth conversion, it might take decades to benefit from that strategy. But the models suggest that a conversion like that could generate seven figures worth of tax savings.
Patience can pay off.
#5 – Tax planning is only for the “rich”
Ever read a book on tax planning? Probably not! But if you had, it would probably sound like you need to own a yacht or a villa before tax planning is relevant. It’s not true!
Every person who is paying taxes can and should implement some sort of tax planning strategy.
There are strategies to utilize no matter your income or net worth. It all comes down to being intentional with your personal finances. As we’ve seen with our clients, what you give your attention to makes all the difference.
Whether that’s making the intentional choice to save in pre-tax dollars, or after-tax dollars, or both. Knowing how different retirement accounts work is tax planning. Deciding which ones are best for you and your goals is tax planning!
If you want to be intentional with your tax planning and/or your personal finances and don’t know where to start, I’d urge you to seek the help of a tax planning professional.
It’s never “one and done”.
Tax planning is not just a one-time thing. You should have eyes on your tax return and tax planning strategies each and every year.
Here’s three easy steps to get you started:
Review your prior year tax return. It’s important to understand your income and how it affects your total tax. Take note of your total income, taxable income, total tax paid, and marginal tax rate.
Understand your eligibility to contribute to pretax, Roth, and After-tax retirement accounts. Be intentional with how you will fund each.
If all of this seems overwhelming, I urge you to reach out to your financial advisor.
If tax planning isn’t in your advisor’s arsenal, you and I should talk! Schedule a call with me here:
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No portion of this commentary is to be construed as the provision of personalized investment, tax or legal advice. Please consult with the appropriate professionals for advice that is specific to your situation. Note Advisors, LLC can assist in determining a suitable investment approach for a given individual, which may or may not closely resemble the strategies outlined herein.
You probably have an instant picture of the word and what it means. The same could be true of “wealth coach.” Problem is, most people don’t know what a wealth coach is or does … and when they find out, they either want to dive right in, or run.
If you’re a runner or are sitting on the fence about having a conversation about wealth coaching, perhaps dispelling the myths surrounding this work will provide some clarity. At least enough to either get you off the fence or know what you’re running from.
Myth #1 – Wealth coaching is just financial planning or wealth management.
While it’s super flattering to hear someone immediately exclaim, “I need you!”, after they hear that I’m a wealth coach, we soon learn that their first impression of what a wealth coach does is wrong.
A wealth coach (at least this one) does not help you manage or invest your money. That’s the work of your financial advisor or planner.
A wealth coach will help you to manage your relationships with money … your instinctive, emotional, practical, and spiritual relationships with money. When these four relationships are healthy and operating in harmony with all facets of life, true wealth (well-being) is achieved.
Myth #2 – All wealth coaches (and money coaches) are the same.
It’s safe to say that most coaches have some type of certification or degree that qualifies them to do the work they do. But to assume that coaches who share the same title, for example “wealth coach,” “money coach,” or “life coach,” also share the same educational background is…shortsighted.
An example: I am an Ordained Metaphysical Minister, I have a degree in Metaphysical Science, and I am a Certified Money Coach CMC®.
Wealth Coach is a title I gave myself twelve years ago. I was intentional with my word choice just as I had been intentional with my degree and certification of choice. It all had to reflect what I stood for, the service I was providing, and be relatable.
The original definition of wealth is “your current state of well-being; or path to happiness.” The fact that we have four relationships with money makes money a powerful classroom for self-discovery, personal/professional growth, and life transformation.
So, as a wealth coach, I help people experience greater well-being (happiness), by transforming how they relate to money and life, changing how they choose to see themselves, and what they believe is possible.
Myth #3 – You’ll help me get rich.
A wealth coach won’t help you get rich. That’s not our job … that’s not our purpose.
It’s unfortunate that our happiness, right here and right now, is determined by how much we have and how much we make. Our identity, our sense of worthiness, what we believe about ourselves, and our capabilities are measured by and defined by our financial capital.
A wealth coach will ask, what value does being rich bring to your life? Is it about how others will perceive you? Do you have something to prove? Or do you believe that being rich will provide peace of mind?
A wealth coach will also tell you not to fight against what you currently believe. Examine it instead.
You may say to yourself, “I will be the happiest when I’m rich.” And if that’s what you believe, don’t change it. Just say, “Well, that’s what I believe right now and that’s ok. It doesn’t make me a bad person, it doesn’t make me evil, but it also won’t make me happy. And as long as I think being rich will make me happy, then I just have to wait until I realize it won’t make me happy.”
Being rich isn’t right or wrong. It’s the attitude that you bring to being rich that will ultimately determine your quality of life and well-being.
Myth #4 – You’re going to put me on a budget.
A wealth coach won’t ever tell you what to do. How you do money and finances is 100% up to you. But, if you resist looking at how you spend or you don’t have a conscious spending plan, then you may have an unhealthy relationship with money. And this goes for personal finances as well as business.
Other indications of an unhealthy relationship with money are:
Blaming others, the market, or the economy for your situation.
Impulsive spending, giving, or even investing.
You and your spouse/partner arguing over money, work, or business.
Tapping into your personal savings to meet employee expenses or payroll.
Money having authority in your life.
Being afraid of making the wrong decision.
… and many more!
Budgets aren’t bad and they’re not a form of punishment. They’re a really good tool for keeping you on track and aware of your spending.
But if you want to be successful at maintaining a conscious spending plan (budget), you need to become aware of and heal the belief patterns that are triggering your resistance, blaming, impulsiveness, etc. – which is the job of a wealth coach.
Myth #5 – You’re going to judge me.
For most folks, money makes us feel vulnerable. Talking about money is downright scary, uncomfortable, and simply too revealing.
I get it.
Two of my divorces left me financially crippled and one of them resulted in my filing for bankruptcy. And while I survived breast cancer, it was more than I could afford financially, even with health insurance and a grant.
And that’s why, as a wealth coach, one of the first questions I will ask someone is, “what is the one thing about you and money that you don’t want anyone to know?”
I don’t ask this to make you feel uncomfortable or ashamed. I ask so that you can find safety in being open and honest about money, about where you’re at, and about what’s going on in your head.
The first task of a wealth coach is to hold a safe space for open dialogue. And over a short period of time, what was once uncomfortable to talk about is now comfortable … because YOU are no longer judging yourself.
Myth #6 – You can’t help me with finding purpose and fulfillment.
If nearly every decision you make is influenced by money, then the quality of your relationships with money will determine how you experience life overall. In simple terms this means that the very nature of you and money will either leave you feeling “short” on purpose and fulfillment or feeling truly satisfied and in love with life.
I have witnessed time and time again that our most important relationship with money is our spiritual relationship. And it’s the one most often ignored.
Allowing money to be a classroom, a wealth coach will help you become aware of and bring forth the great unrealized potential that exists in your life right here and now.
You will be asked what you believe … about money … and time … what you believe about choice … and yes, even what you believe about God/Spirit. You will be gently and firmly challenged to question your understanding of who you think you are and what you believe is possible.
I want to know, and more importantly, I want you to know, all that you believe because it is the beliefs that you hold that will either move you towards or away from a life of purpose and fulfillment.
Myth #7 – I have a significant net worth, or I have enough money; therefore, I don’t need a wealth coach.
You may be right. You don’t need a wealth coach. But is knowing that you have a high (or ultra-high) net worth your final destination? Is having enough money your only measure of complete well-being and sustainable happiness?
If it is, fantastic!
However, I have found that those that consider themselves financially successful often suffer from chronic “not-enough-ness.” There’s usually something missing, and this becomes clear when …
They resist committing to a retirement date … They resist selling their business or turning it over to the family … They can’t (or won’t) envision a new life for themselves …
A wealth coach will ask …
What is it about setting that retirement date that scares you? What is it about letting go of controlling the business that bothers you? Tell me what matters most to you … what are you doing when you are most like yourself?
It’s that line of questioning that will get to the heart of one’s resistance, allowing them to begin to release their fears so they can begin to see what’s really been missing …
True wealth has nothing to do with money, it’s about what makes your heart sing.
Myths are Neutral
Like any thought, a myth is neutral until you decide to believe it.
If any of the myths I wrote about rang true to you, we should talk. Please reach out to me at christine@noteadvisor.com. Or schedule a call or meeting directly on my calendly.
Want to learn about what’s influencing the effectiveness of your financial decision-making? Take the Money Types Quiz now!
Watch my videos below to learn more about how wealth coaching can transform your decision-making:
Your Authentic Life
Feel like your life is narrated by someone else? Christine and friend of Note, Tamara, unpack how to live your authentic life instead.
Bring Those Beliefs to Light
How can you bring light to your financial anxiety? Christine and friend of Note, Tamara, have an idea. And it involves brunch.
Unlocking Business Growth and Financial Freedom
Christine goes on Connie Whitesell's business podcast to talk about how wealth coaching can help you achieve financial freedom.
It Was Something I Needed to Do
Friend of Note Alicia Kay shares what she discovered in her first wealth coaching session.
Alicia Kay is a current client of Note and was not compensated for providing this testimonial.
Money Isn't Out to Get Me
Friend and client of Note Chelsea Haines shares how Christine helped with anxiety surrounding money.
Chelsea Haines is a current client of Note and was not compensated for providing this testimonial.
She Couldn't Trust the Numbers
What happens when you reach your goal but you just can't trust the numbers?
Greg and Laura Beatty are current clients of Note and were not compensated for providing this testimonial.
Finding Yourself Stuck
Christine unpacks how to get un-stuck during or after a divorce.
You Can't Change What You Can't See
Christine gives her secret for seeing divorce as a classroom.
Start Wealth Coaching Early
Friend and client of Note Chelsea Haines shares how starting early with Christine was transformative. Chelsea Haines is a current client of Note and was not compensated for providing this testimonial.
What Greg and Laura Loved About Wealth Coaching
Wealth coaching helped Greg & Laura choose to see life differently.
Greg and Laura Beatty are current clients of Note and were not compensated for providing this testimonial.
Flourish & Flow
Flourish & Flow helps remove the fear and anxiety from planning your finances.
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You can't make wise decisions if your state of mind isn't healthy.
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Christine explains how our fear can take the wheel.
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Everyone knows numbers don't make you happy.
Judge Not
Christine has a fresh take on the topic of judging others and ourselves.
Everybody's Got It
Christine talks about alternatives to judging yourself harshly.
You're for Sale
Listen as Christine talks about “selling out.”
Lost in the Enormity of Life
Christine and Tamara McMillan explore what we chase after.
The Gift of Choice
Christine and Tamara McMillan unpack the power of choice.
Prostitutes and Coffee
Christine shares a...captivating coffee story.
Belief. Attitude. Behavior. Results.
Christine explains what’s really driving those precious results.
The Real Meaning of Wealth
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You've Sold, But Something Feels Wrong
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The CMC® designation combines sound coaching principles with practical financial coaching to assist individuals better understand their relationship with money and finances. Money Coaching complements financial professionals as an additional “field of expertise” to offer their existing client base. Certificate Candidates are required to complete Modules One, Two and Three; complete the “Core Process” and a Client Assessment on a minimum of two “practice clients”; complete all exercises in the Certified Money Coach workbook; submit their work and conduct a final review with and to the satisfaction of the Money Coaching Institute. Upon satisfactory completion of items above, candidates will be awarded the Certified Money Coach (CMC)® designation (along with the rights to use the service marks) and will be issued a Certificate of Completion.
