Part III

During each of the last Jewish Link of New Jersey issues in 2016, I will be sharing Money Moves to consider before the end of the year. This being the third part of this series, in this article I will share Money Moves 11 through 13.

#11 Spending Mindfulness:

Although companies and not-for-profits live and die by their cashflow and budgets, there are very few people I know who enjoy living on a detailed budget, unless you’re like the regimented super geek Sheldon Cooper from “The Big Bang Theory” who thrives on details. Most people I come across wouldn’t and couldn’t handle this monotonous and arduous lifestyle. Also, the thought of sitting down to create a budget seems painful and overwhelming. So, instead, I want to suggest spending mindfulness—being aware of how much you spend on different things.

This information can empower you make better decisions. “Wow! I can’t believe I spend so much on that…” or “holy cow, I can’t believe that I spend 60 percent of my funds on frivolous things.” Maybe you’d be more interested in focusing on bringing down your credit card debt, stashing money away for your kids in a 529 account (will discuss next week) or put more away for retirement if you had greater awareness. Spending mindfulness allows you to better answer the question of “Do you want to be one of those people whose life just happens by or do you want to be the person who makes your life happen?” I am not suggesting you write out how you plan on spending $104.72 each month and put yourself in financial shackles. I am also not intimating that those who keep to a strict budget are doing something negative or minimizing those who seek support from credit counselors. Rather, for many it is helpful to simply be more aware of where you’re spending your money. A few months ago I was quoted in a Credit.com article titled “You Can Make $100K by Skipping Your Morning Coffee” that brought home this point!

How can you be mindful without huge effort? Is there an easy way to see a report of your spending? I would like to suggest four options, two options using a one-page worksheet, and two using simple technology tools. Please see yaishfinancial.com/budget to learn the simple details to utilize each option.

#12 Required Minimum Distribution:

Pension plans such as 401Ks and IRA allow individuals to begin taking money out at age 59 ½, and at age 70 ½ required minimum distributions (RMD) kicks in. This RMD is an amount of money based on a formula that must be withdrawn from your retirement vehicle every year (except in a Roth IRA). If an individual messes up and doesn’t withdraw the RMD, the penalty is severe; 50 percent of what you should have taken out. For example, if you were required to take out $6,000 in 2016 but didn’t take any money out, the penalty would be 50 percent of the required RMD of $6,000 which would result in a $3,000 penalty. If the person withdrew too little; in our example the RMD was $6K but he only took out $5k in 2016, the penalty of 50 percent would be on the shortage of $1K, so the penalty would be $500.

The first year someone turns 70 ½ there is a little bit of leeway into the next year. It’s a good idea to seek advice from a tax or financial professional to help you calculate what the RMD is and when it needs to be paid. If you care for someone older it’s a good idea to make sure they have this matter sorted out and under control.

For more info, including a RMD calculator, check out YaishFinancial.com/MoneyMoves.

#13 Rebalance Your Portfolio:

It’s not a mystery that it’s a good idea to buy investments when they are low and sell when they are high. But all too often this seems counter intuitive. Why would I want to sell something that is doing well? Shouldn’t I double down and invest even more in that “winner”? No. Not really. (Note that this is investment philosophy, not literal investment advice.)

I can’t do this topic justice here because it’s beyond the scope of this article, but I do believe in having a disciplined investment approach. There is a lot of academic research to support my investment philosophy. According to my school of “investment thought,” a properly designed portfolio would include an investor’s time horizon, risk tolerance, targeted asset allocations and a strategy with an objective to meet the client’s goals.

For example, if it was determined that a client’s properly designed portfolio was a 60 percent equity and 40 percent bond allocation, and suddenly due to a rally in the market the portfolio shifted to 65 percent equity/35 percent bonds. This may not seem like big deal today, but before you know it that portfolio could become an 80 percent equity/20 percent bond portfolio and, based on this client’s goals and risk tolerance, this portfolio would now be considered inappropriate.

By rebalancing, the client will stay on course to have and maintain an appropriate portfolio to meet his specific needs. Professional money managers do this regularly for their clients. It would be prudent to do this at least once a year.

By Ronn Yaish, MBA

 Ronn Yaish is wealth adviser and CEO of Yaish Financial Services, a New Jersey-based investment and wealth management firm. Ronn earned a master’s in education and an MBA in finance. He has been featured in Forbes, AOL Finance, Credit.com, GoBanking and U.S. News and World Report. His goal is to educate and help clients “keep things simple” when managing their money.