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Is a 529 Plan the Best College Savings Plan?

Where do you put your money?

You contribute after-tax money, so gets US off your back because the money growing from now on is all tax-free as long as it’s use for college expenses.

There is a contribution CAP of about $300k to $350k, depending on the state of the plan.

What if you child decide to not go to college and wants to be a rock star instead?

In that case, you can change the beneficiary of the 529 plan to a close relatives, such as you other children, grandchildren or even yourself or your spouse.

However, if no one is going to use that money for college education and you decide to withdraw the money, you’ll be hit with a 10% penalty PLUS income tax.

Besides, money in a 529 Plan is considered during financial aid application process as parents’ assets.

Let’s take a look at another very similar savings vehicle…the ROTH IRA.

The ROTH IRA is not just for retirement.

You contribute after-tax money, so gets US off your back because the money growing from now on is all tax-free as long as you withdraw your money after 59 1/2.

But Uncle Sam is very smart, he limits what kind of money you can contribute AND how much you can contribute each year.

Contribution must be earned  income, meaning from a JOB.

The current annual contribution limit of $5,500, an extra $1,000 for catch-up if you’re 50 years old.

10% penalty on withdrawal before 59 1/2 PLUS income tax except if you’re using the money for college expenses, down payment for first home, and medical expenses.

An of course, if you take the money out after you turn 59 1/2, you can use it whatever way you want.

Best of all, money in an retirement account is not considered when applying for financial aid.

However, there is a income limit for contribution as well. So if you make too much money, you cannot contribute to a ROTH IRA.

What if you want to contribute more than $5,500 a year and still take advantage of tax-free growth?

* QUICK FACTS: $5,500 a year for x40 years = $220,000. Is that enough for your retirement. Rule of thumb is you’ll need x20 times of your current income for a COMFORTABLE retirement.

Your next option is an indexed universal life insurance.

You contribute after-tax money, so it gets Uncle Sam off your back because the money growing from now on is all tax-free.

The money in the cash account can be used for anything, such as college tuition and expenses. If your child decides to not attend college, he or she can use the money as down payment for his/her first home or invest in a business, etc.

When my daughter earns her first paycheck at 16, I opened a ROTH IRA for her to get her started. Even though she does not make $5,500, but because I started her early, I put the full amount of her earned income, so she has more years to save. We all know $5,500 a year is not a lot. With the money in the ROTH IRA, we invest in low-fees index funds.

All her gift money from birthdays and holidays goes into her life insurance cash account making “money babies” safely at 10% annual return and tax-free.

 

Slow and Steady Win the Race…is the idea behind Dollar Cost Averaging

Remember your childhood story of the race between the tortoise and the hare?

Slow Steady Wins the Race

The hare thought he is a lot fast than the tortoise decided to take a nap and runs very fast to catchup, but did realize he over-slept. Even though tortoise was slow, he just grinds on slowly and steadily and beat the hare.

What we learn from the story is rather than trying to be aggressive to time the market, you contribute consistently small amount every month to a low-fee index fund.

Low-cost Index Fund Trading

As you see in the example of Andy and Brenda. Andy sporadically invest lump sums of money while Brenda invest smaller amount every month consistently.

Dollar cost average vs Lump Sum Investing

Andy ended up buying shares only once at a higher price, while Brenda was able to buy more shares at various prices, which averages out to be cheaper per share price.

Now, when the price per share goes up, who has the better return?

So do you want to be Andy or Brenda?

Real life example. I contribute every month to my employer-sponsored retirement account  because my employer matches a certain percent.

My contribution is taken out of my paycheck every month whether the market is up or down. So during the 2008 crash, I was still contributing every month. So I was buying shares at dirt cheap prices. The year after the crash, I noticed an extra $60,000 in my account value.

Where else can you make $60,000 in a year without moving a finger?

This is the magic of Dollar Cost Averaging

Why You Want to be a Business Owner or Investor?

How are you making money?

The Power of Leverage

As business owner or investor, you generate passive income through leverage.

This is what separates the LEFT from the RIGHT quadrant. The RIGHT side of the quadrant, you are trading TIME for MONEY; on the LEFT, you are LEVERAGING other people and/or money for money.

This also explains why everyone has the same 24 hours a day, but some makes millions a month, and others barely scrape by each month.

A business owner owns a system that generates income. An investor owns investment that generates income.

Tesla

Tax Benefits for Business Owners and Investors

As an employee, can you deduct your car expenses, driving mileage, dining out, country club membership, entertainment, life insurance premium, laptop, smart phone?

Let’s see what kind of deductions employees are allowed. Let’s use me as a demo.

I have a regular full-time job as a pediatric dietitian. Each year my tax deductions in job expenses includes any fees I paid for continuing education, conferences that I attended, professional membership fees, professional re-certification exams, licensure renewal. That’s about it.

I purchase a car to commute back and forth to my job, put gas in the car so I can drive, pay for registration, safety check, insurance and whatever maintenance fee for my car, just so I can get to work. As a professional, I have to wear nice clothes to be presentable to my patients. I buy lunch in the hospital or I may bring leftover from home for lunch. All these are other expenses that I cannot deduct.

Now let’s look at my tax deduction as a business owner.

I’m in the financial and real estate business.

For my business, I deduct any fees I paid for continuing education, conferences that I attended to learn more about personal finance to help more families, professional membership fees, professional re-certification exams, licensure renewal, laptops and cell phones to write contracts, articles, advertising and contacting clients, legal and professional fees for professional advices, meals when I’m out meeting with clients, part of my car expenses when driving to meet clients, travel expenses when visiting my rental property in California, which happens to be where my daughter goes to college.

I can keep going on with this list. Business owners and real estate owners enjoy tax benefits that employees do not. And the impact of tax on your income can significantly affect how fast your wealth accumulates.

Learn about WFG Business Opportunity

Why Earn Extra Income with WFG Business Opportunity?

Why WFG Business Ownership

Be Your Own Boss…

Why climb the corporate ladder, when you can build your own?

Who Owns the Corporate Ladder
  • $100 lifetime membership fee
  • Free accounting services
  • Free payroll services
  • No inventory
  • No capital investment
  • No employees to manage
  • Full back office support staff from Transamerica
  • Professional marketing/sales materials

So you can focus on running your business and helping families. 

Power of choice
  • Trainee Associate (entry-level) – 30%
  • Associate – 45%
  • Marketing director – 62%
  • Senior Marketing Director – 81% + bonus
  • Executive Marketing Director
  • Chief Executive Officer
  • Executive Vice Chairman

You can choose to be full-time or part-time…YOUR CHOICE!

Click here to complete the WFG Associate Membership Agreement to get started.

Free Download Guide To Estate Planning

Who will make decision for you?
Guide to Estate Planning

Download this FREE guide to learn more about how proper estate planning can protect your family legacy and relationships.

 






Download “Guide to Estate Planning”

How to Make Money with Your (dream) Car

Dream Car Tesla

All we business- and money-savvy few knows that a car is NOT an asset, unlike what the banks like to tell everyone.

Our car is a liability that keeps the expenses going each year and keeps depreciating every second.

One of my goal for financial freedom is drive my dream car for FREE.

First of all I have not acquired my dream car yet. It would have been against all the “Millionaire Next Door” principles. I have to amess my wealth first.

So what does uber have to do with my financial goal of driving my dream car for FREE?

Let use my current car as an example. I drive a 2014 Prius II. Here’s my breakdown of my monthly car expenses:

Car payment $350
Gas $40
City & County registration $25
Auto insurance $67
Safety check $3

Remember, you don’t get to write off any of these expenses on you tax return if you’re AN EMPLOYEE, and does not own any business.

Now with uber, you’re using your beloved vehicle to generate income as a sole proprietor, which switch you to a business entity.

Say you make $900 a month with uber, you are now $415 richer after all your usual monthly auto expenses. This is what I mean by drive for FREE.

Now apply this same principle to your dream car. You got the idea?

This is not it yet. At the end of the year, you can deduct your auto expenses (prorated for the portion you use your car for your uber business).

In order to get your tax deduction for your auto expenses, remember to keep good mileage record. This will help you determine the percentages of your car that is used for business to generate income. Say you drove a total of 14,000 miles this year, and out of that you drove 7,000 miles making money with uber. In this case, you can deduct 50% of all your auto expenses, don’t forget you can deduct your car washes too.

Turn you car into a money-making machine with Uber Honolulu.

If you love meeting people, driving uber is super fun…

If driving strangers around is not your thing…consider renting your car out when you’re not using it.

Just like Airbnb and VBRO.com

You list your car and keep a calendar of when it’s available. Then wait for some interested party, then you meet, you check their license, insurance, etc.

For a limited time, you can earn up to a $100 bonus by listing and renting out your car as a new host. Your bonus will be 25% of your earnings for trips you approve in the first 60 days, up to $100.

Check it out at turo.com

Same as with driving Uber, you can still write off vehicle expenses, such as auto insurance, car washes, gas, maintenance, etc.

Related article: Deducting Business Expenses

This is how the US government rewards people who make an effort to make a better life for themselves.

How to Bullet Proof Your Family Fortune & Sanity?

Financial Check-up

You understand the importance of protecting your assets and belongings. You insure your homes, cars, computer, iPad, iPhone, etc. Are you really properly protected? Is your most valuable asset (YOU) protected?

What if you die too soon? Who’s going to continue to pay for your family’s mortgage? Your family’s living expenses? Your children’s college tuition? Will your spouse and children be able to support themselves without your income?

What if you become disabled or chronically ill? Where’s your income coming from? How will you pay for your care? Will your family have to quit their job to take care of you?

What if you live a long life? Will your retirement savings be enough to provide for you until you die? Will you still be able to take care of yourself? Will you still be able to work and earn an income? Will your medical expenses increase?

These are all the question that you want an answer to when the time comes.

Replaces your income and provides for your family after you pass,

Provides an endless stream of retirement income you can’t outlive,

Pays for your long-term care when you cannot take care of yourself anymore,

Pays for your medical expenses when you’re chronically or terminally ill.

Life Insurance is Like Real Estate

Do You Rent or Do You Own Your Life Insurance?

Deciding what life insurance to buy is like deciding whether to RENT or OWN your life insurance.

When you buy TERM life insurance, it’s just like RENTING. You get to live in the home for a fixed period of time. After that you either renew your rental lease agreement or you move on. All the money you pay each month for rent is all gone paying for your landlord’s mortgage and building his/her wealth.

 

When you buy permanent life insurance is like buying your own home.

When you BUY your home, you own your home for life AND you have equity.

When you buy PERMANENT life insurance, you own your policy for life AND you have cash value.

As the year goes by, your home EQUITY goes up in value. Same is true with your CASH VALUE in your life insurance policy. As the year goes by, your CASH VALUE goes up in value as well.

In time of need, you can borrow money against your HOME EQUITY for emergency, down payment for a second home, private school or college tuition, supplement retirement income, medical expenses, etc.

In time of need, you can borrow money against your CASH VALUE from your policy for emergency, down payment for your first home or a second home, private school or college tuition, supplement retirement income, medical expenses, etc.

Related article: Be Your Own Bank (B.Y.O.B.)

When you die, your family will inherit your home, equity and mortgage.

When you die, you family will receive the death benefit pay out PLUS cash value.