You say you want a resolution

By David Jackson, MBA, CFP^®, C(K)P^™, Managing Partner – Investments, Southern Springs Capital Group

This is the time of year when many people start giving thought to how they want their future to look. The end of the year is typically a good time for someone to take stock of their current situation and decide what changes they would like to make going forward. It’s part of the reason why I have a very low demand for meetings in December and a very high demand for meetings in January.

I’ve never really understood the idea of the New Year’s resolution. If something is a good idea, why wait? But many people are energized by the calendar changing to a new year, so what are some things you might want to consider doing differently from a financial standpoint? We don’t even have to call them resolutions.

Buying vs. renting a primary residence. There are many valid reasons why someone might rent versus purchase their primary residence, and not everyone needs to stop renting. But there are many people that do. Remember, over the long term, any appreciation in home equity flows to the owner. If the house goes up in value, the renter doesn’t see the benefit. Also, most people carry a mortgage on their property, and for many people mortgage interest is one of the last good itemized deductions that they have available on their tax return. So, if this is the year you take the plunge, just remember that the earlier in the year you make the purchase, the more months of interest deduction you potentially have to claim. I’ve seen people buy in July and not have enough interest expense to itemize in that first year of ownership.

Maxing out contributions. The amount that can be contributed to retirement plans has gone up over the last several years, and if you haven’t taken a look at the maximums, you might be surprised to see how much they have increased. For 2021, employees who are saving for retirement through 401(k)s, 403(b)s, most 457 plans, and the federal government's Thrift Savings Plan can contribute up to $19,500 to those plans during the year. If you are 50 or over, the maximums are potentially even higher. You can take advantage of a “catch-up” provision that lets you contribute up to an extra $6,500. For IRAs, the limit is $6,000, along with a “catch-up” provision for an extra $1,000 for those age 50 and over. For the self-employed and small business owners, the amount they can save in a SEP IRA or a solo 401(k) is $58,000 in 2021 depending upon income.

Get some help. I get the privilege of speaking to many student groups and one of the questions I get asked frequently is “What do wealthy people do that is different from what everybody else does?” While it’s a complex question, there are some things I usually see without exception. They use the best CPA that they can find, they listen to the best legal advice available to them and they get excellent people overseeing their investments. They pay a premium for excellent advice, and more importantly, they act on it. Having other professionals concentrate on these things gives them the ability to focus their efforts on maximizing their income generation, which gives them a greater advantage toward becoming and staying wealthy over a long period of time.

Finally, as you look to the new year, remember that all good advice is not just about making money. I’ve known many people that would have been much better off spending a few hours a week exercising and working out instead of trying to manage their own investments or doing their own bookkeeping and tax work.

If you have been putting off getting financial assistance, perhaps this is your year to free up some time by getting a professional involved in your financial future.

For more information on Southern Springs Capital Group, visit www.southernspringscapital.com. Our offices are located at 2555 Meridian Boulevard in Franklin. We can be reached at 615-905-4819.

Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

Securities offered through Raymond James Financial Services, Inc., member FINRA / SIPC. Investment advisory services offered through Raymond James Financial Services Advisors, Inc. Southern Springs Capital Group is not a registered broker/dealer, and is independent of Raymond James Financial Services.