How to Maximize Your Tax Benefits?

Tax and Death

“In this world, nothing can be said for certain, except death and tax.” Benjamin Franklin.

As savvy tax payers and entrepreneurs, we take any deductions and credits to lower our taxes. We’re not trying to avoid taxes, we’re just trying to minimize what we have to pay in tax legally so with the tax money we saved, we can use that to generate more wealth.

Related article: Wealth Building Strategies

Let’s start with the tax basics. Watch this video to learn how to calculate your taxes.

Tax Deductions vs Tax Credits

Tax Deductions are expenses that the US government allows to reduce your taxable income. For example, you make $70,000 a year, and incurred $10,000 in medical expenses. The $10,000 medical expenses are deducted from the $70,000. So instead of paying tax based on $70,000, your tax will be assessed based on $60,000 income.

Medical expense is only one of many allowed tax deductions.

Tax Credits are “free money” that the government gives you. Remember, back in 2008 when Obama was dishing out $8,000 tax credit to all new homebuyers? I’m a beneficiary of that credit.

Between tax deductions and tax credits, I’ll take tax credit anytime. It’s like free money, but, of course, you have to meet the criteria. And usually, it is a one-time deal.

Impact of Tax on Your Income

 

Tax and Inflation

As the above illustration shows, if you’re not careful, your income tax and inflation can eat up your savings like termites.
None of us can control inflation. But we can at least do something with our taxes to lessen the impact.

Tax now…

Brokerage account

Checking account

Certificate of deposit

Savings account

 

Tax now

Tax later…

401k/403b

Annuity

Pension

SEP IRA

Traditional IRA

Tax later

Tax free…

529 Plan

B.Y.O.B.

Coverdell

Health Savings Account

Life insurance

Roth IRA

Roth TSP

Tax never

Why You Want to Be Your Own Bank?

I always want to be the “bank”…not in Monopoly… in real life.

Why?

You know how everyone thinks banks are safe places to park their savings?

That’s exactly what the banks want you to think. So you’ll put your life savings with them.

What’s your interest rate in your bank savings account?

Inflation is 3.3% each year…are you making or losing money in savings account?

 

 

The bank borrow money for almost free and lend YOUR MONEY out at 5%, 7%, 10% interest.

Related article: Is Your Money in Your Savings Account Working Hard for You? Or for the Bank?

 

How Be Your Own Bank Works

The cash value life insurance is a little known secret tool for wealth building and investing.

If is actually 2 products in one vehicle – life insurance and a savings account.

The difference between this “savings account” and your bank’s savings account is that the “cash value” savings account grows tax-free and is distributed to your beneficiary as tax-free death benefit.

Let me clarify this a little. Every cash value life insurance policy is different. Most charge interest rate for borrowing…some charge more and some charges less.

The Transamerica Financial Freedom Indexed Universal Life Insurance that I own and represent, charges a net interest rate of 0.75% for first 1-9 years, then 0% after 10 years.

Also a very important point to remember is when you borrow money from your cash value, you are not taking money out from your cash savings account, you’re borrowing money against your cash savings account, which is being used as a collateral for your loan. This is an added bonus, because your cash savings account continues to grow money tax-free while you’re enjoying your extra cash interest-free.

Another bonus with borrowing from a cash value life insurance is that you don’t have to repay your loan it you don’t want to.

How? Good questions!

Remember it is a life insurance policy. So it also has a face value. When you die, the insurance company will pay off your loan from the proceed of the death benefit.

If this is the first time you’ve heard of this life insurance feature, don’t be alarmed. Life insurance has come a long way just like mobile phone has evolved into smart phones.

Related article: Do You Have the Best Life Insurance?

Consolidate high interest debts

Long term care

Critical or terminal illnesses

Invest in real estate

Pay for college tuition

Pay for private school tuition

Start a business (like Walt Disney)

Supplement retirement income

S.M.A.R.T. Retirement Planning

You CANNOT get a loan for retirement…

You CAN get a loan to pay for a vacation, a new car, a new home, college tuition, private school tuition, plastic surgery…but you CANNOT borrow for retirement. So don’t delay!!!

The 3-Legged Stool of Retirement

Pension

Fewer companies are offering retirement benefits these days – and for those that do, many are scaling back their plans. Will your pension be enough?

Social Security

It started out with 40 workers contributing for one retiree in 1940’s, now it’s 3 for one. Do you think there’s still Social Security when you retire?

Personal Savings

38 millions Americans live paycheck to paycheck. And only 59% of adults says they have savings. Do you have enough savings?

<center>maximize retirement savings and tax benefits, and create an endless stream of retirement income. </center>

VIP Insider Guest List

Be the first to be notified of events, workshops and promotions directly to your email.

Tax now

TAX NOW

Brokerage account

Certificate of deposit

Checking account

Savings Account

 

Tax later

TAX LATER

401k/403(b)

Annuity

SEP IRA

Thrift Savings Plan (TSP)

Traditional IRA

Tax never

TAX NEVER

Life Insurance

Health Savings Account

ROTH IRA

ROTH TSP

Related article: Tax-free Retirement

<center>The rule of thumb is you’ll need twenty (20) times of your current annual income for a comfortable retirement.</center>

Long Term Care Insurance

Estate Planning

Final Expenses

Are you also saving for college?

How to Live Debt-Free?

In order to live debt-free, you would need to have a positive cash flow. The concept is very simple…

Live Below Your Means

Live Within Your Means. This is a no brainer. If you spend everything you earn at the end of each month, you'll have nothing left to invest.

Remember, wealth is how much you accumulate in asset, not the doodads you accumulate.

Related article: Cash and Debt Management

Create a budget and stick to it. A budget helps you compare your monthly income and expenses, and determining needs versus wants. Be frugal. Buy only what you can afford and need. Don’t dress to impress your enemies.

You don’t need to wear expensive clothes or drive a Mercedes Benz to impress. You should impress others with who you are and your personality.

First and foremost, cut your expenses.

Here are a few ideas on managing your expenses to help you achieve your financial goals:

Take a look at your budget’s top 10 or so monthly expenses, there are almost always at least one or two items that you could do without, that you’ll end up with more cash at the end of each month.

I have a friend who moved her whole family back to her husband’s family for 6 months, saving the rent for their down payment for a bigger house. Go from two cars to one car to get rid of one car payment, or down size to a smaller car. Cancel cable services, or switching to a cheaper phone service providers. By the end of the year, you’ll be at least several thousand dollar richer.

Now is the time to ditch those bad habits of yours.

If you smoke, that will be the number one habit to kick. First- and second-hand smoking cause harm to both the one who smokes, and the people around him/her. Not to mention to raising tax on smoking habits.

Instead of eating out at restaurants with friends, invite your friends over for dinner or potluck.

Stop drinking and buying soda or any sugary beverages and alcohol beverages. These only add to your medical bills in the future. Water is your best friend.

Stop spending money on bottled water either. The plastic bottle contributes to pollution, and erosion of your wallet. Install faucet mount water filter system or use your water filter in your refrigerator and refill your own bottle.

Increase deductibles on your auto, homeowners and other insurance policies, which can help lower premiums

Pay off your mortgage as fast as you can, especially if you’re paying private mortgage insurance. Mortgage insurance protects the mortgage lender, not you or your family.

As soon as you get your mortgage loan down to 80% of your home value, call your mortgage lender and have them remove the mortgage insurance.

Related: Pay Off Your Mortgage in 7 Years

Pay off your bad debts

Employ these strategies to increase your income.

Sell extra stuff you have sitting around in your house. Things that you have no use of anymore. Sell them on Craigslist or have a garage sale.

Rent out your spare room. Millions of home owners worldwide are now renting out rooms or floors of their current homes for short periods of time on sites like airbnb.com and VRBO.

Rent out your car. Sites like uber and turo allow you to rent out the extra seats in your car - or the whole vehicle, if you’re not too faint of heart!

Learn more at How to Make Money with Your (Dream) Car.

Use your skills and time. Got extra time still after selling your stuff? Leverage your earning power during your off-time, evenings and weekends with your professional skills or personal hobbies to bring in some extra cash. If you love doing crafts, you can sell creative items on Etsy.

You can sell fruits from your tree at local farmer’s market. In Hawaii, many houses have fruits trees in the yards. Do you have a special recipe that everyone enjoys? Sell that at local farmer’s markets.

You can also earn extra money with cooking, house cleaning, babysitting or dog walking. The opportunity is limitless. You can list your services on sites like TaskRabbit or Fiverr You can also sign up for Mechanical Turks at Amazon, where you can complete tiny miscellaneous task for a fee.

Starting a second career or a part-time opportunity to earn additional income.

Adjusting your W-2 allowances if you are expecting a tax refund, but consult with your tax advisor before making this change.

Cashflow & Debt Management

What is cashflow and why it is important?

Cash flow is the difference between your income and expenses.

When your income is greater than your expenses, you have a positive cash flow. If your expenses is greater than your income, you have a negative cash flow.

Knowing where your money is coming from is an important part of any financial strategy.

Cashflow and debt management is the fundamentals of money management and wealth building. Without money or positive cashflow, there is nothing you can do to create more money.

Cashflow & Debt Management

Do you know where is your money coming from and where it is going?

Income can come from employment (earned income), investment (portfolio income) or from business or rental properties (passive income).

Expenses are any money you spend. There are living expenses, such as rent, mortgage payment, grocery, car payment, gas for your car, childcare, health insurance, life insurance, etc.

Poor people buy stuff.

Middle class people buy liabilities that they think are assets.

Wealthy people buy assets.

Which one are you?

Related article: How to Live Debt-free

ASSETS vs LIABILITIES

Assets are anything that generates "income" and increase your monthly cash-flow. Examples are businesses, stocks, bonds, mutual funds, cash value life insurance, real estate investments, rental properties, etc.

* Notice that savings and checking accounts are not listed, because they don’t generate income. Believe me…earning 0.01% on your $1 million sitting in your savings is not earning. Inflation averages 3% each year. Your $1 million is disappearing in front of your eyes if you let it sit in your bank account.

Liabilities are anything that generates "expenses" or creates “debt” and reduces your monthly cash flow. Examples are your primary residence, car, expensive watch collection, boat, yacht, country club membership, etc.

Sorry, your brand-new Mercedes Benz is not an asset even if it's worth $90,000. It is accruing expenses every month - auto insurance, gasoline, car wash, maintenance, etc.

Unless you use your car to generate income, such as driving for Uber or loaning it out on Turo.

If you become an Uber driver, and use your Mercedez Benz to take riders and generate an income, now your car is an asset.

The same is true for renting your car out via Turo.

In these cases, you can claim your car for business and deduct business expenses on your income tax.

Learn more at Turn Your Car into a Money-Making Asset with Uber

Same for your primary residence. It is a liability. You have monthly living and maintenance expenses - mortgage payment, water, sewer, electricity, yard, etc.

You can turn your home into an asset too with house-hacking on airbnb.com with you extra room, or extra unit.

College Planning Timeline

S.M.A.R.T. College Planning for a Debt Free Future

Are you concern about not able to provide for your child’s college education? Are you worry that you may have to take out home equity or personal loan to pay for your child’s college education? Are you worry that your child have to work during college to help pay for college tuition?

Cost of college is certainly a big concern nowadays. Most families do not have proper college planning. Most people focuses on saving for retirement and paying off debts, and only few plan for their children’s future.

College tuition, like everything else, has increased significantly over the years. In fact, cost of college goes up 6-7% every year. Currently in-state public school average $20,000 per year and private college average $40,000 – $60,000 for an undergraduate degree.

Did you know the average student takes 8 years to complete an undergraduate degree, which is usually a 4-year degree? That’s an additional 4 years of college tuition and 4 less years of potential earnings.

Most students change major about 3 times during their college years.

TRUE STORY…

The son of a friend of a friend. I hope we had help this family with college planning. The son of a friend of my friend went to college and graduated from medical school with a medical doctor degree. After all the years and money spent acquiring the medical degree, the son decided he did not want to be a doctor.

You would never figure out what he became…

…a Catholic priest.

The parents did not know if they should feel blessed or angry with their son’s decision.

 

Because of the indecisiveness, many students graduate from college with enormous student loans.

Did you know the average student loan today is $37,172 for an undergraduate degree. Student with a professional degree can easily end up with a $150,000-$200,000 student loan after graduation.

And many college graduates end up in jobs that’s not even related to their course of study because they NEED a job to pay for their living expenses and start repaying their student loans.

That’s what happened to my friend’s daughter who graduated with a fancy but obscure science degree that she cannot find a job for, so she’s now working for some insurance company getting $10 an hour pay, the same pay as my teenager.

Do you want that for your son or daughter? Is that how you want your son or daughter to start their adult life?

In fact, student loans have now surpassed consumer debts in US.

Related article: Student Loan Debt In 2017: A $1.3 Trillion Crisis

 

help you maximize tax-free college savings & minimize cost of attending college

Tax-free money…

529 college savings plan

Coverdell education savings plan

Be your own bank (life insurance)

Free money…

Grants
Scholarships

Last resort money…

How do you plan to pay for college expenses?

College-saving-vs-borrowing

VIP Insider Guest List

Be the first to be notified of special events, workshops and promotions directly to your email.

 

Are there better ways to navigate the higher education without incurring debts?

The answer is YES!

How about matching your child with a career path that matches your child’s talent and personality? How about matching your child with a college that he or she will excel, which in turn improving his/her job outlook? How about someone to help you navigate through the complicated financial aid application process and matching your child with little-known scholarships available?

These are all possible…

There are expensive ways to get a college degree…and there are also S.M.A.R.T. ways.

Does the idea of your child graduating from college on time with minimal debt appeal to you?

Related article: The High Price of Not Completing College in Four Years

  • help you create a financial plan to maximize growth and tax benefits to maximize reward when applying for financial aid,
  • maximize tax-free college savings accounts, such as 529 plans, Coverdell and cash value life insurance,
  • help your student graduate on-time in a field that he/she enjoys with great job outlook and minimal debts
  • find the right major so your student does not have to change major multiple times to find his or her calling,
  • find the right college that offers degrees in your student’s chosen major, so your student does not have to transfer college later, wasting more time,
  • locate free money in form of scholarships and grants opportunities to minimize out-of-pocket expenses,
  • help navigate the financial aid application process.

 

Financial Strategies Workshops for Beginners

Are you tired of living paycheck to paycheck? Are you worry you're not saving enough for emergency, for retirement or for college? Do you want to learn better ways to make money?

We are here to Transform Your Finance and help you achieve financial independence.

Financial freedom is within reach…you just need to know how to get there.

The reason why many people live paycheck-to-paycheck is the lack of financial education and planning. Have you noticed that you're now making more money than you were 10 years ago, but you're still struggling every month with nothing left to save or invest?

We believe financial freedom can be achieved through simple personal finance and money strategies.

Your financial freedom depends on how you address your current financial situation. There is no one way of planning for the future that is right for everyone, but there are common elements.

It all begins with understanding the basic principles of how money works.

Our mission is to help families in Hawaii achieve financial freedom and the lifestyle they've always dreamt of by empowering them with financial education and money strategies to make more money, save more money, so their money can work for them.

Remember, money is tool. When used properly, money can build you great wealth. But, when used in the wrong way, it can dig your grave.

Come and learn financial strategies that will transform your finance and change your life...

Remember, money is tool. When used properly, money can build you great wealth. But, when used in the wrong way, it can dig your grave. Learn how to use it wisely...

What You Need to Know About Life Insurance?

What is Life Insurance?

Do you have insurance for your homes? cars? Apple watch? MacBook? iPhone?

Great…

How about your most valuable asset? YOU!

Today, people purchase all kinds of insurance to protect everything from their house, cars, phones and appliances. They even buy travel insurance for their vacation.

Life insurance plays an important part in your financial plan...It protects against income loss due to disability, chronic and critical illnesses and premature death.

Financial Planning Protection

What is Life Insurance?

Who needs life insurance?

Everyone...everyone of us die eventually unless you're immortal.

TERM VS PERMANENT LIFE INSURANCE

TERM LIFE INSURANCE

PERMANENT LIFE INSURANCE

Which Life Insurance is Best for You?

That depends on your financial situation.

Related article: Best Life Insurance