6 Resolute Steps for Future Wealth

Although the stock market crash of October 2008 experienced the largest point drop in history, there were no suicides on Wall Street that day. The real effect of the crash took a little longer to sink in.

By March 2009 the market had been obliterated and subsequently collapsed to half of all previous gains. Over the years that followed, trillions of dollars were lost and the market continued to hemorrhage until 13 percent of the work force was gone. It was the highest and longest period of unemployment since the Great Depression of 1929.  

After the 2008 crash, lavish lifestyles, which America experienced during the previous decade, ended in the highest home foreclosures, bankruptcies and college debt in U.S. history.  The years of discretionary spending and savings had reached its end and families would not begin to recover losses until the job market returned in 2018.

Going Strong

The last time the American job market was as strong as it is today, Astronaut Neil Armstrong was first to set foot on the moon and uttered the immortal words, “That’s one small step for man, one giant leap for mankind.” Those words clearly resonate with the current unemployment rate, which fell to 3.7 percent in September 2018, the lowest level since 1969.

In addition to “one small step” at the beginning of a strong job market, this year Congress passed new tax reform legislation that may affect your tax refund next year and give all of us “one giant leap” on the road to financial recovery. You work hard for your money and a tax refund may be the biggest check you get all year. The new tax law is the largest piece of tax reform legislation in 30 years and, overall, the changes associated with the new tax law may lower taxes for individuals and small businesses. Highlights of the new tax law include lower individual tax rates, increased standard deduction, increased child tax credit, elimination of dependent and personal exemptions and elimination of certain itemized deductions.  

Behind us are the days of home foreclosures, bankruptcies, business failures and other financial indebtedness that debilitated America for nearly 10 years. Having endured past unproductive years, your immediate future provides new tax incentives, job opportunities, and wage and savings growth, providing the opportunity to build personal and family financial success.  

Following are six resolute steps to help guide you in the coming years toward personal and family financial planning and prosperity.

1. Discretionary Spending: One of the biggest pitfalls of financial planning is the failure to recognize unnecessary spending known as discretionary spending. It includes travel, hobbies, luxuries, entertainment and charitable giving. A restart to prosperity is to avoid keeping up with and competing with friends and neighbors and spending unnecessarily.  For example, instead of buying the whole family the most expensive iPhones, purchase a less expensive brand on a minimal family plan.
2. Family Budget: More than 75 percent of all families fail to prepare a budget of any sort. If financial times are good, they spend lavishly as if the good economy will last forever.  In times of financial decline or failure, most people fail to recognize or believe the obvious signs and cut back spending too late to recover their losses. There are many software apps currently available that enable you to manage your lifestyle by demonstrating where to cut discretionary spending to manage mandatory spending and begin saving.
3. 50-30-20 Savings Rule of Thumb: This is a popular rule for breaking down your budget. The rule puts 50 percent of your income toward necessities such as housing and bills, 20 percent toward financial goals like paying off debt or saving for retirement, and 30 percent may be allocated to wants such as dining or entertainment. However, without saving first, dining out, gym memberships, hobbies, and holiday gifts become wasteful spending.
4. Florida Inheritance Tax: If someone dies in Florida owning assets valued at under the exemption amount, their estate doesn’t owe any federal or Florida estate tax. The heirs and beneficiaries inherit all property, personal or business, free of estate tax and there is no income tax since inherited property is not considered income. Rather than spend your inheritance, add it to your financial growth and wealth.
5. Decedent Assets: Although inheritance tax may not exist at the time of death, unfortunately, close to 75 percent of those owning assets at death fail to prepare any estate planning to protect beneficiaries from unnecessary court fees, attorney fees and other costs of probate for them to obtain what you intended for them to have at your death. Probate can be avoided through effective estate planning.
6. Family Lock Box: Estate planning is like having your own safety lock box in which all family assets, personal and business, can be held in trust during life for immediate disbursement to your beneficiaries following death. Effective estate planning protects your assets while living and passes assets at death without any need for courts or attorney costs.

As we look ahead to the New Year, don’t wait until the next financial collapse before setting a course toward financial prosperity for you and your family. We are at the beginning of great opportunity and prosperity for all. So, take heed of the historical financial impacts of the past that we all endured and consult with an estate planning attorney to help guide you in setting up future wealth planning.