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5 Money Saving Tips You Probably Don't Know

| September 23, 2020
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5 Money Saving Tips You Probably Don’t Know

When choosing to save money, we immediately consider reducing our spending to have the ability to put more into our savings accounts. We may decide to eat out less or forego the annual family vacation to have additional funds to set aside. Although these are efficient savings mechanisms, there are other avenues you can also consider to help you meet your savings goals.

Consider Tax Rates

Always consider your effective tax rate on your investments! If you are in a high income tax bracket and have built up a considerable liquid net worth, you may be cognizant of your rate of return, but not necessarily how much of that rate of return you are losing due to taxation.  Consider tax-friendly instruments like municipal bonds and consult your CPA and advisor about pre-tax qualified savings accounts such as cash balance pension plans, SEP IRA’s and solo-k’s when possible.

Look at Your Health Plan

It may be beneficial to participate in a high deductible health plan and max out an HSA. By maxing out an HSA every year and paying medical costs with out of pocket dollars, you can build a massive nest egg over-time that you can use to cover retirement healthcare costs (like Medicare), convert to an IRA, or – most interesting – take out tax-free if you have saved your receipts for those out of pocket health expenses during the years you were covered by the HDHP, but chose to pay out of pocket instead.

The Roth May Just Be For Everybody

Consider exploring the use of Roth Conversions in order to build up tax-free dollars in retirement. If your 401(k) plan at work has an after-tax component, your plan may allow for you to substantially fund this portion and then convert it to Roth on an annual basis.  Be sure to consult with your advisor prior to moving forward with this.                                                                    

Investigate Opportunity Zones

If a significant amount of your wealth is tied to commercial real estate, investigate Opportunity Zones.  Opportunity Zones provide a tremendous opportunity to both invest in potentially underserved areas as well as defer capital gains, consult your advisor on if this might make sense for you.

Compare Spending to Credit Card Rewards

Take a look at your spending last year and compare it to your credit card rewards.  If you are spending a great deal with one merchant but not using their rewards card – this is a missed opportunity.  For example, a family spending $5,000 a month on Amazon could receive back $3,000 in rewards from their 5% Chase rewards.  Other cards offer as much as 2% cash back on all purchases.  Using these surplus rewards in a targeted manner to cover a specific annual expense (such as a car payment or insurance premium), an extravagance, (such as an annual vacation), or a savings goal (such as funding a child’s 529 college plan), can lead to substantially greater cash flow and savings.

 

Representatives do not provide tax and/or legal advice. Any discussion of taxes is for general informational purposes only, does not purport to be complete or cover every situation, and  should not be construed as legal, tax or accounting advice. Clients should confer with their qualified legal, tax and accounting advisors as appropriate. 

Chris Kampitsis is a registered representative of and offer securities, investment advisory and financial planning services through MML Investors Services, LLC. Member SIPC. www.SIPC.org   6 Corporate Drive, Shelton, CT 06484, Tel: 203-513-6000   CRN202209-271479

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