Everyone should have financial goals. Everyone should have an idea of how they want to live, and what it’s going to take to live that way. The hard part is knowing how you’re going to get there. What are the things you can do now to help you achieve your financial goals later on?
A complete answer to this question is usually quite complicated. It’s based on factors like your age, income, current living situation, and others. However, there are two things that everyone can focus on now to help their situation: their debt obligations and their taxes.
First is the debt obligations. When it comes to debt there are two things to look at: total debt, and then debt servicing obligations. Debt servicing basically covers the interest and payments that you would make over time. If you can eliminate or minimize your debt servicing obligation you’ll save more in the long run, as well as on a month-to-month basis.
Maybe I financed my kid’s braces, or a new car, or a boat, or some other big expense. Sure, you’re not paying for it all upfront, you’re instead breaking it down into smaller payments. It sounds good at first, until these payments build up and you realize a large portion of your income is going to these debt payments. The interest builds, and you end up losing a lot of value in the long run.
I think the first thing would be to say look at where your debt services are. Just see where your liabilities rest? Is there anything you can do to reduce those liabilities, to reduce the amount of debt servicing you’re paying?
For example, Brad Randall, in our office here, his daughter was going into dance lessons and he could pay just monthly, like everyone else does. Instead of just doing that–making another monthly payment, he went to the dance instructor and said, “Hey, if I just paid you upfront for the entire year will you reduce my payments by one month?” She said, “Sure.” Why wouldn’t she? She’s gonna get all that cash up front. She doesn’t need to worry about that person paying late or, maybe, not paying at all.
As a result, Brad was able to save that amount of money. In essence, we can look at that as a forward-going debt service, right? He has to make those monthly payments, that monthly expense, but, now, he’s been able to reduce that down.
The same goes for all debt payments. Whatever you can do to pay more upfront, the more you’ll save in the long run, and the sooner you’ll get out from under that debt.
The next point, and probably one of the most important things we need to be looking at, is our taxes. We pay taxes in so many ways. We have federal tax, state tax, sales tax, city tax, gift taxing–I mean, the list just goes on and on and on of different types of taxes that are out there, taxes that we’re paying.
Just looking at averages, it’s typically around 40% of our income. Most people, when that number is used, say “There’s no way I fit into that category.” But they start to break it down into all of the purchases made and just all of the little things here and there, it can really make a massive impact.
If we wanna look at maximizing our finances, we need to do everything we can not to skirt around taxes because the tax code is written to teach us different ways we can reduce our taxes down. Find out what’s going on. If you’re just using TurboTax, things look great and maybe your taxes are easy. But maybe paying someone a couple hundred dollars who really understands what’s going on in taxes, they’re going to save you thousands or tens of thousands of dollars in the long run by helping you properly plan your taxes now.
Now, here at Paradigm Life, we’re not tax advisors nor do we want to be tax advisors, but if you need someone, please call us. Ask us who do we use, personally. Ask us who our clients use that are good. We’re happy to help point you in the right direction because there’s a lot of tax advisors out there but, like anything else, you gotta make sure you got the right one. You need the right person on your team.
So debt and taxes, those are two areas you can absolutely affect NOW. If you can find out how to minimize your debt servicing obligations and find ways to save on your taxes in a legal and effective manner, you’ll be much more likely to reach your financial goals.
There are some other factors that determine how you achieve your financial goals that we haven’t gotten into. Your lifestyle, how are you living your life? Not to say you’re giving away your hobbies. How much are you giving away as a gift? How much savings you’re actually putting away. Just ten percent. Is that truly enough money?
We are more than happy to help out with any of your questions at any time. All you have to do is request a free consultation, no string attached.
This blog was created based on our podcast with Justin Martin and Jennie Steed. Click here to listen to it now!
