InSight

Zending: The Art of Mindful Spending and Lasting Joy

Financial Planning Dentist

In the quest for financial stability and discipline, it’s common to be besieged by feelings of guilt and unease whenever we spend money on non-essentials. However, there exists a sweet spot where financial responsibility and pleasurable spending merge harmoniously. This sweet spot is known as “Zending,” a fusion of Zen (meaning complete and absolute peace) and spending. This article dives into the harmonious joy of Zending and how it can redefine our relationship with money.

Understanding Zending

Zending isn’t about spending extravagantly or living frugally. It’s about experiencing genuine happiness and peace in the spending choices you make, rooted in the confidence that you’re living within your means and aligning with your financial plan.

The Power of Guilt-free Spending

We’ve all been there: the thrill of purchasing followed by the sinking feeling of buyer’s remorse. But imagine a world where every penny you spend is accompanied by a feeling of satisfaction, a knowledge that you’re not compromising your future for immediate gratification.

Guilt-free spending isn’t about how much or how little you spend. It’s about ensuring every dollar aligns with your personal and financial goals.

The Zending Framework

  1. Mindfulness in Finance: Begin with a clear understanding of your current financial status. Be honest about your income, expenses, debts, and savings. This foundation is crucial for any financial plan.
  2. Budgeting with Purpose: Rather than a restrictive tool, view your budget as a reflection of your values and desires. Allocate funds for necessities, savings, investments, and personal pleasures.
  3. Plan and Prioritize: Establish clear financial goals. This might be a yearly vacation, monthly dinners at your favorite restaurant, or saving for early retirement. Knowing what you’re working towards will make spending and saving more purposeful.
  4. Savor Every Purchase: When you buy something within the framework of your budget and plan, relish it. You’ve earned this without compromising your future.
  5. Review and Adjust: Like any other strategy, it’s essential to periodically review your financial plan. As life changes, so do our needs and desires. Adjust your plan to stay aligned with your goals.

The Joy of Zending in Action

Imagine you’ve always dreamt of vacationing in the Maldives. With Zending, you would:

  1. Budget for it: Save a portion of your monthly income for this trip.
  2. Plan the Details: Research accommodations, flights, and activities, and allocate funds accordingly.
  3. Experience the Vacation with Complete Presence: Once you’re on the trip, every experience is enriched with the knowledge that you’ve planned for it. Every dinner, activity, and souvenir is devoid of financial guilt or stress. You get to be fully immersed in the joy you have designed without the concerns for costs, and the ramifications for enjoying your time on this vacation. 
  4. Return with Joy: Once back, instead of dreading credit card bills, you return to your regular life, content and ready for your next Zending adventure.

Conclusion

Zending offers a refreshing perspective on spending. By approaching our finances with mindfulness and intention, we can derive genuine, long-lasting joy from our expenditures. In a world where consumerism often leads to stress and remorse, Zending serves as a reminder that it’s entirely possible to find peace, pleasure, and purpose in the way we spend.

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Kevin Taylor

Real Estate Investing and More in your Retirement Accounts

Yes, you read that correctly, you can own real estate, land, private businesses, notes, precious metals, livestock, crypto currencies, equipment and more in your retirement accounts. We love telling clients of InSight that there is an investing world beyond what CNBC & Jim Cramer. Your retirement nest egg can be invested in more than stocks and bonds and you don’t have to be uber rich to do it. Anyone and everyone can. Our clients at InSight want to Invest in what they know, are passionate about, and understand, not just what the news or latest article or podcast tells them they should invest in. For many, yesterday, today, and tomorrow’s stock market can be intimidating, frustrating, and quite frankly annoying. By Peter Locke CFP® and Kevin T. Taylor AIF® Now, while doing this on your own is possible, there are a lot of ways to screw up and disqualify an investment opportunity by not knowing the rules so we recommend you use a third party professional before you do this. Let’s shed some light on what the clients at InSight are talking about and investing in. Over the past decade, I worked for a large brokerage firm. I wasn’t given the tools to help clients with self-directed IRAs. Unfortunately, I couldn’t even refer them to a third party that could. Advisors at these large firms like the one I used to work at aren’t given the opportunity or even allowed to refer clients to do something they want to do because it wasn’t in the best interest of the firm. What I mean by this is that if your expertise is in residential real estate and your financial advisor is only pitching you to sell your properties and invest in their diversified stock and bond portfolio then are they acting in your best interest? Sure, maybe all your net worth is in real estate and diversifying into non-correlated assets is a good idea. In that case, yes. However, this is not the case I am referring to. I am referring to the case where you know real estate and you want to use the funds you’ve saved in your retirement accounts to buy an investment property or a business that you heard about (key word here is investment not personal). Your advisor will most likely sell you on why you shouldn’t and that you should invest in stocks and bonds instead. Or they will tell you that you can’t depreciate an asset that’s in an IRA and therefore not great for tax incentives, or that it’s too expensive. And they’re right about depreciation but wrong about the tax incentives. If you buy a property in an IRA and the rent pays for your mortgage, the income just like a dividend isn’t taxable when it’s inside the IRA, and neither is the sale when you want to get into something else. When you turn 59.5 you can take that rental income which would be ordinary income inside an IRA or 401(k) but if you bought it in a Roth, then it’s tax free. That advisor doesn’t want you to invest in a property because that means no compensation for them. At InSight, a core part of our business is enabling our clients to use the tools at their disposal to get to where they want to go. We help our clients make these types of investments a reality. We’re only fiduciaries when we’re using everything that is available to us and is in the best interest of the client. If a client has a high required rate of return, but hates the day to day fluctuations in the stock market, then riskier investing isn’t appropriate. This would be a case where we’d look at alternative investments and find another way to capture that rate of return required to get them to that goal. A client’s home and 401k are typically their two largest investments. But if your 401k is 4x your home value, then spreading your investments out into things you feel more comfortable with and gives you capital appreciation and income then real estate may be an option for you. If interest rates are low, then real estate is probably an even better option. As I stated before, you can easily mess this up and therefore you need to make sure you surround yourself like we always do with the right People, Processes, and Policies to hold you accountable. Be sure to read the Rules of Self-Directed IRAs and make sure it fits in your InSight-Full® plan.

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The Rules of Self-Directed IRAs

At InSight, our clients know that when you understand the rules you make better decisions. Our InSight-Full® plan is about marrying the goals that you have with the right Rules of Self-Directed IRAs and the right strategy. We cannot stress enough the importance of knowing the rules and how to avoid problems both now and in the future. By Kevin T. Taylor AIF® and Peter Locke CFP® The first rule is when you open a self-directed IRA you’re not the owner. The tax code requires the assets in a Self-Directed IRA (SDIRA) and its owner remain separate and not used in a way that one indirectly enriches the other (beyond permitted rules). When you think about investing into something using your IRA think of it as solely an investment and not for personal use.  The IRA owner and anyone else responsible for the account is prohibited from commingling their vested interests of the SDIRA with its owner or any “disqualified persons” which includes: The fiduciary of the account including the SDIRA owner Family member (ancestor, spouse, lineal descendant, or spouse of a lineal descendant Corporation, partnership, trust, or estate where 50% or more of the shares/profits/beneficial interests are owned by any of the above Officer, director, or 10% or more shareholder or partner of an entity above If someone is a disqualified person, they’re prohibited from directly or indirectly transacting between the SDIRA and the disqualified person in the following manners: Transfer, use, or benefit of the assets Lending or extending credit (both ways) Sale, lease, or exchange of property Furnishing of goods, services, or facilities Dealing assets for your own benefit as the fiduciary Personally receiving consideration as a fiduciary from a third party that engaged in a transaction with the IRA This means that if any of these transactions listed above with any disqualified person occur even if done at fair market value, will be subject to severe consequences. The standard penalty is 15% of the amount involved in the transaction which is imposed on any disqualified person engaged in the transaction. Furthermore, if it’s not resolved by the end of the year in which the violation occurred, the penalty is increased to 100% of the transaction amount. And to top it off, the entire account loses its tax-deferred status and is treated as if the entire account was liquidated and distributed as of the current year. The majority of clients for asset protection purposes and clean book keeping manage their self-directed IRA inside of an LLC. Don’t have your IRA own the property, have your IRA own an LLC that has a bank account that you’re the manager of.  Then the LLC is the owner on the contract. This like any other rental property gives you the ability to have limited liability in the event someone comes after your assets. These are investment assets not personal assets, this is definitely a breach of rules of self-directed IRAs. You cannot live there, your parents, kids, or grandparents cannot live there. You cannot sell your own property or buy a piece of property from yourself using the IRA. Don’t take a salary or commission (prohibitive transaction).  Any repairs or maintenance must be done by a third party. The reason is if you were to work on it on your own then you’re self serving and this could be viewed as a contribution to the IRA which is prohibited. Also, if you own a property management company and are a 50%+ owner, your company cannot do work on the property. The easiest thing you can do is separate yourself completely from the investment and let third parties do the work. If you follow through with the purchase, keep all accounting separate. You don’t want to accidentally make a mistake and disqualify yourself by accidentally mixing personal use assets with your Self-Directed IRA. For example, if you think you can use a credit card to pay for the repair of something you cannot. All expenses come out of the IRA not your bank account. Another prohibited transaction in this type of account is transacting with prohibited parties or disqualified persons such as kids, parents, spouse, grandparents, spouses of your kids and yourself. Although, siblings are allowed.  The rule specifies disqualified persons as ancestors. Keep your Self-Directed IRA separate from your business where you’re a 50% or more owner. In this case, your IRA is a prohibited party and therefore you cannot loan to an LLC that is associated with your business. If you’re not putting down the full amount to buy in this case a rental property, you’ll need to get a non-recourse loan. This means the bank will charge a higher interest rate but if you default then they will only take the property. Having a non-recourse loan in an IRA means you will be subject to unrelated debt taxable income (UDTI). UDTI is generated when you finance the purchase of property in an SDIRA. Unrelated Debt Financed Income (UDFI) and Unrelated Business Taxable Income both trigger UBIT (Unrelated Business Income Tax). To even the playing field for everyone (because using leverage in an IRA and collecting income is way to get huge contributions into your IRA which isn’t fair to non-exempt persons) the IRS made it so tax-exempt entities you must pay income tax on the income they realize from the UDFI that year at the Estate Tax level which is much higher than ordinary income levels. Lastly, invest in what you know. Don’t take unnecessary risk by breaking one of the Rules of Self-Directed IRAs, and don’t invest in your friend’s start-up that you know nothing about. If you know rentals buy rentals, if you know commercial real estate buy commercial real estate. Just like anything we do here at InSight, have the right people, process, and policies set up to hold yourself accountable so you make more informed investments.

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