InSight

Financial Planning Dentist
Investment With

InSight

Menu

Your Money, Your Freedom: The 4-Point Fun Guide to Decoding Your Employment Dependency!

Financial Planning Dentist

Ever wondered how chained you are to your 9-to-5? Or dreamt of making your money work for you while you sip cocktails on a beach, climb mountains with friends, or just hang out with children and grandchildren?

Welcome to the guide to adding content to InSight’s – Employment Dependency metric—your secret weapon in the quest for financial freedom!

1. Your Money’s Scorecard

Imagine for a moment that your investments are akin to a bunch of lazy couch potatoes. Yes, those starchy loungers sprawled across your financial living room, eyes glued to the TV, completely oblivious to the world of productivity. Now, ask yourself, how many of these lethargic spuds would it take to keep your life’s engine running—your fridge bursting with food, your Netflix subscription ticking over for those all-important binge sessions, and even ensuring there’s enough in the kitty for those spontaneous adventures or cozy dinners out? This quirky analogy is precisely what delving into your investment asset performance feels like. It’s an exercise in evaluating whether your hard-earned money is actively working towards your dreams and lifestyle needs or if it’s just taking up space on the sofa, idly passing time. It’s high time those potatoes were given a meaningful job!

If your employment dependency is on the higher side, meaning a significant chunk of your lifestyle relies on your job income, the pressure on these couch potatoes—your investments and savings—is somewhat alleviated. They can afford to be a bit more relaxed because your job is doing the heavy lifting. However, if that dependency figure is alarmingly low, indicating that you’re leaning heavily on your investments to fund your day-to-day life, then it’s a wake-up call for your sedentary spuds. This scenario demands that your investments shed their couch potato persona and shift into high gear. Transforming these idle assets into diligent workers is essential to securing not just your current lifestyle but also your future comfort and financial independence. It’s about making your money work for you, pushing those investments to sweat so you can eventually kick back and enjoy the fruits of their labor.

2. Lifestyle Limbo: How Low Can You Go?

How long can you keep sailing smoothly if your paycheck suddenly turns into a ghost, leaving you in a financial limbo? It’s a scenario that many might find daunting, yet it’s crucial in understanding how equipped you are to live not just a life, but your best life, sans the regular income stream. This goes beyond the mere basics of survival; it’s about thriving, indulging in your passions, and maintaining your lifestyle without compromise. The Employment Dependency metric serves as your financial limbo stick in this high-stakes game. How low can you dip without hitting the floor? The beauty of this metric is that the lower your dependency on your employment income, the more freedom you have to enjoy life’s pleasures without the ominous cloud of the next payday looming over you. It’s about achieving that delicate balance where your financial stability is not rocked by the absence of a paycheck, allowing you to lead a life filled with joy, security, and prosperity.

Moreover, the concept of employment dependency doesn’t just offer a snapshot of your current financial resilience; it’s also a crystal ball into your future, especially your retirement years. By putting your lifestyle through a “stress test” using the Employment Dependency metric, you gain invaluable insights into how your days of leisure and retirement could look. Will you be sipping margaritas on a beach, or will you be pinching pennies? This metric illuminates the path to ensuring your retirement paycheck—funded by pensions, savings, and investments—can support your dream lifestyle. It’s about preparing today for the tomorrow you desire, making sure that when work becomes an option rather than a necessity, your lifestyle continues unabated. This dual focus on present joy and future security is what makes understanding and optimizing your employment dependency so crucial.

3. What If… The Game

Life, with its unpredictable twists and turns, often throws us into scenarios we never saw coming. Imagine one day you’re on top of the world, with a hefty bonus check in hand, ready to splurge or invest. The next day, the tide turns, and those freelance projects that were your bread and butter suddenly dry up. Here’s where playing the “What If” game with your Employment Dependency metric becomes your secret superpower, allowing you to navigate through life’s uncertainties with grace and poise. Think of it as your personal financial forecasting tool, crafting an umbrella sturdy enough to shield you from any storm that life decides to brew. This approach not only tests your financial resilience in times of stress but also empowers you to remain comfortable and secure, no matter the financial weather outside. It’s about preparing for the worst while hoping for the best, ensuring that whatever life tosses your way, you’re ready to catch it with a smile.

But let’s push the envelope further. What if your Employment Dependency metric could do more than just safeguard your current lifestyle? What if it could open the door to possibilities you’ve only dreamed of? Imagine living on a cruise ship, traveling the world without a care, or dedicating your days to volunteering for causes close to your heart. By understanding and adjusting your employment dependency, you start to sketch the blueprint of your life’s next chapter. It’s not just about surviving; it’s about thriving in ways you’ve only imagined. This foresight enables you to allocate your finances not just for survival or comfort, but for the fulfillment of your deepest desires and dreams. Asking “What might it require today to get there?” transforms your financial planning from a mere exercise in numbers to a strategic map leading to your ideal future. It’s about realizing that with the right planning and insight, your financial decisions today are the seeds of the lifestyle you aspire to live tomorrow.

4. Your Financial Safety Net

Finding yourself high on the employment dependency scale can feel akin to performing a precarious tightrope walk, where the safety net of financial independence seems conspicuously absent. This unsettling scenario is not just about the fear of falling; it’s about recognizing the vulnerability that comes with being overly reliant on a single income source. Understanding where you stand on this scale is the first step toward crafting your own safety measures. It’s about taking proactive steps to mitigate this risk, whether that’s by bolstering your emergency fund, diversifying your income streams through hobbies turned side hustles, or reassessing your spending habits. Building this financial safety net is a deliberate, strand-by-strand endeavor, ensuring that should you ever find yourself faltering, you have the resilience and resources to recover gracefully, maintaining your lifestyle and confidence intact.

This realization also beckons a strategic reassessment of your investment approach. Are you in pursuit of maximizing returns because the clock is ticking, or is it time to adopt a more conservative stance to protect your financial well-being? For those who find their employment income sufficiently robust to support their envisioned lifestyle, it might be wise to consider “taking some chips off the table,” so to speak. Lowering investment risk doesn’t necessarily mean settling for less; rather, it’s about aligning your financial strategy with your current and future lifestyle goals. It’s a balance between seizing opportunities for growth and ensuring you’re not overly exposed to market volatility, especially if your income already affords you the life you dream of. This nuanced approach to investing—weighing the thrill of potential gains against the peace of mind that comes with security—reflects a mature understanding of what it truly means to live well, both now and in the future.

So there you have it, your whimsical walkthrough to mastering the InSight “Employment Dependency” metric. It’s not just about numbers; it’s about unlocking the doors to your financial independence with a smile. Start your journey, keep it fun, and remember, in the game of money, you’re aiming to be the boss. Cheers to making money moves with a giggle and a wink!

More related articles:

Boulder Financial Planners and Real Estate Experts
Articles
Kevin Taylor

Real Estate Risk Management: Commingling and Conversion

Commingling and conversion in real estate are two important concepts to understand. Commingling involves mixing funds together, while conversion occurs when funds are used for a different purpose than originally intended. For instance, if you’re a landlord and you deposit security deposit funds into the same bank account where you receive your rental income, you are commingling funds. If you then use those funds to repair the property’s roof, it’s considered conversion. Commingling is generally not advisable and may even be illegal in some cases. To rectify this situation, you should move the security deposit funds into a fiduciary account. However, if you proceed to use these funds for personal purposes, it constitutes theft, which is a serious offense. To avoid commingling in real estate, seeking guidance from a real estate attorney is the best course of action. Additionally, always maintain a strict separation between investment and personal finances to prevent accidental misuse of funds. Here are some strategies to help you steer clear of commingling: 1. Establish a separate Limited Liability Company (LLC) for each investment property to keep personal and business assets distinct. 2. Open dedicated bank accounts and credit cards for each rental property, using them exclusively for property-related expenses. 3. Create a separate trust account specifically for holding security deposits, ensuring they are separate from personal and business accounts. 4. Never use business funds for personal expenses, maintaining a clear boundary between the two. 5. Keep meticulous records of all business transactions and maintain a well-documented paper trail for each one. 6. Regularly review your property’s income, cash flow, and expenses to catch and rectify any errors promptly. In summary, commingling real estate funds can lead to legal complications. To protect yourself, always keep personal and business expenses separate, especially when dealing with rental properties. Avoid mixing funds intended for different purposes, such as security deposits and rent payments. If you have any doubts or questions, consult local tenant-landlord laws and consider seeking legal advice from an attorney.

Read More »
June 4, 2022 No Comments
Articles
Kevin Taylor

Financial Plan Principles For Dentists

Dentists have a unique professional path so they should have a unique financial plan. They can double as a full-time practitioner and a CEO of the practice at the same time. With this opportunity, they can have a rewarding career and secure their financial future. However, as a dentist, you can only have the financial future you desire with proper financial planning. This is not rocket science. Nothing special can be built without proper planning and management. By Kevin T. Taylor AIF® and Peter Locke CFP® Dental professionals have the responsibility to learn the key principles of financial planning and wealth accumulation for themselves, their family, practice, and staff. For these priorities, dentists should work side by side with a dental-centric financial advisor. A dental financial advisor can help you create a financial plan and provide you with a perfect place to start your journey of financial stability and prosperity. Whether you want to discuss investments, savings, spending, taxes, corporate retirement, or legacy planning, you will find help with InSight. Here are key financial principles to help dental professionals stay atop their finances. Quit the chase, have a real financial plan If you are in a chase with your colleagues or you have a certain amount of money you want to make, quit now. Who cares if your colleagues have the latest cars or tech.  Also, I promise you, when you reach that dollar amount, you’ll want more. Take time to think about what success looks like to you, who you want to do it with, and what it involves you doing or having.  Then build a plan to get there. Financial freedom means maintaining your current spending and not working. We will work for you and share our insight to guide you there. Protect your assets with financial planning You want to make sure you protect your gains over the years and your income. Make sure you have health and life insurance, car and home insurance, disability insurance, and business coverage. Have everything that protects your asset so that the wealth you’ve amassed over the years doesn’t erode. Let’s be clear, this is not a pitch to buy more insurance.  Having a well thought out risk management plan means knowing how much and what kind of insurance you need.  It means investing in yourself to protect your net worth and the others you support. Save, and keep saving Don’t stop saving! We coach clients to know exactly what their saving rate is, and it should be something you can quote. Not only do our clients know their savings rate, they know what their target rate is and why it’s important to their plan. Set up a savings plan that is automatic, goes into the right account, and immediately gets to work for you. There’s a reason why your 401(k) and home are typically your biggest assets.  You don’t look at them, tinker with them, or make emotional decisions with them. When’s the last time you sold your house because the value went down 2%? Never.  Treat your investments the same way. Our clients are coached to not only manage risk on their liabilities with insurance, they are managing the risk of cash flow disruption with savings and investments. One of the best advantages to having savings and investment accounts is that it can serve as an emergency source of funds for urgent situations personally or in your dental practice. That way, you don’t have to run around looking for loans or another way to accumulate more debt (unless it makes sense given your circumstance). If you aren’t saving yet, start now.  If you don’t know if you’re saving enough, schedule a consultation. Consider Tax Planning Tax planning is important and should be taken very seriously. Clients often spend too much time fretting over markets and returns, and not nearly enough time having a plan for taxes. For the amount of time spent, you are far more likely to impact your net worth by having a deliberate tax strategy year in and year out, and more so in retirement then you’re by picking the right stock and timing the market. For example, being able to take 1 million and outperform the S&P 500 for a decade would net you about $215,000, but to move from an effective tax rate of 39% to 37% could net you almost $300,000 in positive net worth. Tax planning and a comprehensive tax strategy is a far more predictable and efficient way to maximize the value of a financial plan.  Also, ensuring you’re paying the appropriate amount in estimated taxes means being a good bookkeeper. Whether you’re doing this yourself (we don’t recommend) or delegating it to a third party, understanding what’s happening on a monthly basis can mean a huge difference in your tax liability.  Understand your estimated tax number so you can utilize your cash in more effective ways than paying Uncle Sam early or being stuck with a huge tax burden at the end of the year.  Wouldn’t you rather pay yourself, practice, employees, or family? You must consider the total impact on your investment strategy to avoid eroding your returns. Tax planning helps you to learn what is worth investing in, and how best to impact the trajectory of your financial plan. Seek professional advice to polish your Financial Plan Dentists have lots of opportunities in their tax strategy and in investment options. Both determining what your tax strategy looks like in retirement and in the current tax year are important leading indicators of financial success. Being able to see the cash flow of your investments, and the long term impact they will have on retirement puts you in the driver’s seat. You need the right financial advice, guidance, and planning so you can ensure that you stay on top of your finances and business. InSight has developed the P.E.A.K Process®, a game changing way practices take control of their finances and digest the actionable information routinely. Our clients work

Read More »
October 16, 2020 No Comments
Articles
Kevin Taylor

Using an Improvement Exchange

Imagine being able to sell your appreciated property with all of its gains intact, reinvesting in a new property, and having a budget for improvements, all while enjoying the capital growth of that new property immediately. Guess what? There is an exchange method for that! Here is the Issue Under the IRS rules, once you take ownership of a property, any additional expenditures used to make improvements to the property cannot count towards the value of the replacement property in the exchange. An example of this problem: say that you’re selling building A for $1m and buying building B for $800k. But Building B requires $200k in desired improvements. In a traditional exchange this is a nonstarter; because real estate exchanges have to involve disposing of and acquiring “like-kind” real estate. And unfortunately, the additional labor and materials are not considered “like-kind” for the purposes of the acquisition and cannot be part of the exchange. So the $200k in required improvements cannot be part of the transaction. However… If an InSight client prefers a situation where they need to relinquish property and desires to renovate the next property, there is a path to eliminating the tax loss of the investment AND getting your renovations done. Enter the Improvement Exchange An essential, but overlooked part of the IRS code, can help InSight clients keep their expectations of avoiding a tax loss while making desired improvements a reality. This accommodation can be used to develop the right exchange strategy for the transaction that the business or person requires. If you need to contract out for repairs or improvements, make strategic accommodations for a renter, or change the opportunity completely – this method creates the space to achieve those changes to the property. Under the IRS code in Revenue Procedure 2000-37, an independent third party may take title to the replacement property in the taxpayer’s stead and make the desired improvements on the taxpayer’s behalf. Using an Exchange Accommodation Titleholder (or EAT) In a traditional exchange, the exchange company acts as a qualified intermediary or QI. This means they act as a third-party agent that is both an arms reach from the taxpayer and they help to coordinate the timeline and reporting requirements to make the exchange IRS compliant. If the taxpayer requires improvements the conditions can change.  The exchange company can become an Exchange Accommodation Titleholder or EAT and modifications can be made before the Taxpayer takes ownership – making the desired improvements to the property before taking possession. The EAT takes title to the new property and parks, or holds, that title until the earliest of the following: 180 days from when the relinquished property is sold The improvements are completed 180 days from when the replacement property was parked by the EAT The InSight client can enter into a property improvement exchange with an EAT and direct the QI to send funds periodically to the EAT. Making the desired improvements based on the eventual owner’s instructions. Effectively making the building improvements now part of the acquired property after the close of property A and before taking possession of Property B. Seemingly limitless contractors, consultants, and designers can be paid out by the EAT during this phase, and the owner walks into Building B on day one of ownership with the work done, ready for business and with the changes they envision. In the End The client’s old properties cost basis is rolled into the new property, no taxes are paid on the sale of property A – and property B has received the required improvements to enable it to serve the investor better going forward.

Read More »
September 19, 2022 No Comments

Pin It on Pinterest