We are almost 2 weeks into 2024 already. My goal to get financially organized to start the New Year 2024 has already failed miserably.
We did our annual ‘Round-Up Day’ a couple weeks ago, rebalanced our portfolio for last year’s gains, but otherwise haven’t done too much, financially speaking. Instead. I’ve goofed off and been playing with public domain Mickey Mouse memes.
Reader Bob, a fellow MegaCorp retiree, suggested I ask all of you for financial ideas / activities / strategies you find helpful to start the new year? It’s a topic I’ve never really focused on before, but I bet you have some interesting suggestions. Do you?
Image Credit: No Credit Required (I Guess?); Public Domain Steamboat Willie, 1928
MrFireStation 
I recommend that your Mega Corp amigo start by understanding his previous year’s spending with a special emphasis on finding Vampire fees so that he can reduce them. As an example, my wife and I cancelled a satellite tv contract and switched to a combination of an off air antenna and several streaming packages. We are saving around $1,000 annually and don’t feel like we are missing out. We are really happy with our decision and really got a reminder about how bad the bundle (with commercials) was when staying at a hotel recently.
Next he needs to put together a financial plan that forecasts what his income will be for next year and subsequent years going forward. Our current plan goes out ten years to handle the transition from a Deferred Compensation Payout to starting Social Security at age 70. Our dividend based investment strategy offers reasonably forecastable income, because most of our holdings are very stable and offer consistent dividend increases. The plan has annual increases in it to keep us ahead of inflation, including FJB level inflation.
Finally, we put together a budget for the next year. Don’t forget to include most household’s largest vampire expense, which is taxes. Take the time to understand the drivers of your taxes. As an example, we were able to harvest the maximum energy conservation tax credit for 2023, because it stopped being income capped. Also be aware that making a few dollars more, can make a huge difference in your taxes. I include Medicare IRMAA, which is an income based surcharge on your Medicare premium into my taxes bucket. It is easy to have 65% of your incremental dollars get frittered away as taxes by the time you add up Self-Employment, Federal, State, Sales Taxes, Excise Taxes, and Medicare IRMAA.
Our funds are allocated into buckets in a spreadsheet, so we can pay ourselves monthly. Be sure to have funds earmarked for emergencies and large projects. We had just completed a planned replacement of our Heat Pump for a $2,000 credit and to lower electric bills plus replace very old equipment, and surprise-surprise, our tankless water heater gave out a month later. Having the funds set aside, allowed us to handle these without worry or losing sleep.
One of the biggest upcoming challenges we foresee is if Trump doesn’t get back in office, his tax cuts will expire at the end of 2025. This will mean having to take time to understand what the changed tax code will look like, so we can plan ahead for the best outcome.
It is a shame that the corrupt morons in Washington do not run our country’s finances with the same stewardship that your forum participant’s use.
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Lots of good suggestions, Klaus – ! You’ve been preaching the ‘vampire fees’ gospel for awhile and many people would be shocked to see how many subscriptions they have inadvertently subscribed to.
I’m getting to the point (almost 58 yrs old) where I also need to do a longer-term view of which accounts were tapping when.
Good point on the Trump Tax Cuts expiring in 2025. I’m surprised this hasn’t been discussed much as a campaign issue.
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Our strategy for order of funds:
1) Currently drawing down my Deferred Comp and receiving dividends from our taxable brokerage account. Qualified dividends are lightly taxed. REIT distributions are currently reduced by 20% by the QBI deduction.
2) As my wife and I reach age 70, we will start Social Security. Two Social Security payments will offset quite a bit of the Deferred Comp payouts.
3) The year that the Deferred Comp is drawn down, we will start receiving dividend payouts from our Roth IRAs and taking RMDs from self-directed taxable IRAs which were funded via rollovers from 401-ks whenever we changed jobs.
My neighbor is a CPA who is about the same age and specializes in successful small businesses. He doesn’t like the constant short term tinkering with the tax code, such as the Trump Tax ‘Cut’, because it means that he is constantly having to study up on the changes, and get his clients geared up to take advantage of any opportunities.
There is money to be made understanding what drives your taxes and how to reduce them. Participating and understanding your 2023 tax filing, will help you plan improvements to your 2024 taxes.
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Thanks, Klaus –
I’m sure your CPA friend realizes that his business benefits by all those changes! 😆
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