Ep 50:Summer Sizzle- Your Mid-Year Financial Check-In
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Do you understand the importance of conducting a mid-year financial check-in, especially for those with cross-border financial needs?
We cover various topics, including tax strategies, estate planning, insurance assessments, and preparations for college and travel that can be reviewed over the summer. We emphasize the importance of proactive financial management during the summer months, ensuring listeners are well-prepared for the remainder of the year.
Takeaways - Things you can do mid-year as part of your summer financial check-up
Engaging with tax advisors in the summer is likely to yield better results.
Charitable giving can provide tax deductions during the summer.
Tax loss harvesting is a strategy to reduce taxable income.
Estate planning is crucial before traveling overseas.
College-bound kids need financial and medical powers of attorney.
Insurance policies should be reviewed regularly for savings.
Emergency funds should be assessed and adjusted as needed.
Consult with immigration lawyers for visa holders.
Review and adjust financial plans.
Chapters
00:00 Mid-Year Financial Check-In
12:08 Estate Planning Essentials
19:45 Insurance and Risk Management
23:57 Preparing for College and Travel
25:54 Final Thoughts and Summer Financial Tips
Episode Links & Resources
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Jane Mepham, CFP (00:04.759)
Just because it's summer doesn't mean you need to take a break from your money, especially when you have cross-border needs. And so, in today's episode, we believe it's a perfect time to conduct a mid-year financial check. And that's what we're going to talk about. Manasa, are you ready to do this?
January – The Worst Time To Talk To Your CPA About Taxes
Manasa Nadig, EA (00:23.354)
Absolutely. I love that we are talking about doing a mid-year financial check because guess what? January is not the perfect time to ask for help from your tax advisor because that's when they are getting ready for the tax season, obviously. And then the previous year has passed, and there might be some money moves that you might not be able to accomplish. So, mid-year is the perfect time.
And if you have extended your return for the previous year, that's also a good time to start preparing so that you can complete it and file it by the October 15th deadline.
And, if you do need to file your taxes in another country, it is also a good time to make sure that your US tax advisor has a liaison with your professionals from the other country and they are all in sync with each other.
And just to kind of give you an example about this, because what happens is not every country is on the same tax year as January to December, like the US is.
For example, India is on a different tax year. They go from April 1st to March 31st every year.
It's really their tax deadlines and their tax due dates are different. So you need to file those taxes first before you can take the foreign tax credit on your US return. So all of these things you can do during the summer, the mid-year check, I think that I agree with you.
It's not a time to take a break from your money.
Jane Mepham, CFP (02:12.878)
What I love about this is that you can tell Manasa thinks a lot about taxes, which is lucky for us. So she jumped right into what you can do with your taxes over summer, which is absolutely awesome. So what I'm going to do, since you've talked a lot about the
extension. You know what? I'm going to stay with the same title, the same theme. What else can we be doing about all taxes over summer?
Manasa Nadig, EA (02:23.688)
Yes, I did.
Jane Mepham, CFP (02:40.31)
The other thing I think you can do with your taxes over the summer is think about how to reduce your tax liabilities for the year. And I have a couple of examples. Can I talk through them, Manasa?
Manasa Nadig, EA (02:53.446)
Absolutely, please. Yeah, give it a shot. Yes.
Charitable Giving – a Great Summer Checklist
Jane Mepham, CFP (02:55.382)
Okay, sure. One of them is charitable giving. If you are charitably inclined, summer is the perfect time to start figuring out what you want to donate, right? And get a tax deduction.
So one example that we use, and I'll talk about it here, is you can use something called a donor-advised fund, and we can get into the mechanics of that later.
But you're charitably inclined, you use a donor-advised fund, you have all these stocks that have appreciated over the last, say, six months or so, we can donate those shares of those stocks into this fund. And it gives you a really nice big deduction beyond the standard deduction.
Not to mention that you wouldn't have to pay taxes on the capital gains. it's a move that we've used with a couple of our clients. And I know they were really happy because they got the deduction, but they also got to help other organizations.
Along with this, and I think we need to do a whole episode, Manasa, on the new tax bill, you're now also allowed to deduct more if you're doing charitable giving without actually doing the normal deduction. You know what I'm talking about, Manasa, and we can talk about it. Okay, cool. Yeah, so that's something to definitely think about.
Tax Strategies
Tax-loss Harvesting, Tax-gain Harvesting And Asset Location
And then let's talk about another strategy you can use is what's called tax loss harvesting. This is where you take shares that have lost or they've gone down and you swap them out for something else and then rebuy them.
Jane Mepham, CFP (04:43.328)
Again, these mechanics of doing this and we'll have a link in the show notes of the exactly how you do this. But the whole idea is have XYZ stock, it's lost a bunch. You can use the loss to reduce my taxable income.
And then we have something else called tax gain harvesting. Now this works.
If you're going to have a low income here, most of the clients that we work with tend to have high incomes. So this may not happen a lot, but we are always on the lookout for this type of opportunity.
So let's say for whatever reason, your income is going to be less than 40k single or 80k married filing jointly. You can actually harvest gains by selling a bunch of shares that have appreciated and not have to pay taxes on that.
But of course, it needs to be carefully planned and carefully discussed. And again, summer is a perfect time to go through this.
Let's see, another one I'm thinking of is what we call asset location strategies. Again, summer is a perfect time to do this.
So this is where we think of if you have a Roth, assuming a Roth works in your situation,
Think about having what we call growthy things in Roth. So things that we know grow very quickly and are likely to cause you more taxes. We can talk about asset location strategies and put them into a Roth. And then in your IRA, your 401k, your taxable account will have different assets in there.
Let's see, anything else you want to add to just the tax strategy stuff or do you want to jump into something else, Manasa?
Use QCDs - To Reduce Income
Manasa Nadig, EA (06:38.728)
Well, let's stay here for a second, You know, when you're talking about charitable deductions and charitable giving, there's also the fact that, well, if you are close to the required minimum distribution age, which right now is 73. You're planning for that and what money you're going to take out and all of the factors that go into that plan.
There is also a possibility for you to set up a qualified charitable donation through your required minimum distribution. So that reduces your tax burden right there if you are already in a high income tax bracket and many other factors that go into that. that's one other way of giving charitably through your RMDs.
Roth Conversions
Manasa Nadig, EA (07:37.122)
And really quickly when we're talking about tax loss harvesting and tax gain harvesting. I think also this is a good time during the year, the summer vibe check is when if you think that for that year you're going to be in a lower income bracket, maybe also look at doing Roth conversions or other you know, other strategies right there where, you know, your tax hit from doing the conversion may not be, you know, that big a deal if it wouldn't be otherwise.
So a couple of things to add there for the harvesting part of it. Yes, yes. And also, you know, lately, of course, we are getting a lot of questions about people want to hedge their bets about
you know, the volatility of the market in the US, the stock market, it's pretty out there. So they want to hedge their bets to see, what happens if they can take cash or their money overseas? We have covered all of that in great detail on our episode number 48.
So you could listen to that and see if this is a good time for you to investigate that.
Also, another thing that I personally work with my clients during this time of the year is I look at people's pay stubs, year to year. And this helps a lot, you know, with a lot of things we track.
Paystubs Review
Manasa Nadig, EA (09:27.812)
See if they are keeping up with their workplace retirement contributions, and if they are not, then this is a good time to adjust. We look at whether they are expecting to get RSUs. Are they also getting ESOPs? What if they're getting a bonus? So this is a good time to look at their pay stubs and make adjustments for that and make sure that they are withheld, the taxes are withheld correctly because, You know what, the estimated tax penalty is at 7%, which is a very big penalty to pay if you are short on your taxes.
So you don't want that. So this is a good time, folks, to talk to your tax advisor and see if you're on track with your retirement contributions and your tax withholdings. And that's all I think I would like to say about paystubs.
Jane Mepham, CFP (10:24.894)
So the other thing actually I'll ask about the pay stat is one of the things we do. So you filed your taxes. Let's say you made the April 15th date. I'll ask all clients to share their tax returns with me. And the idea is to see, okay, kind of see what happened last year. Where did they end up paying more that maybe they shouldn't have paid more.
And so we review the tax return over summer.
And then to your point, we use the paystub to see if we need to make any adjustments. So those two work great together. And again, I think, yeah, I think that summer is really the perfect time to do some of these checks.
I know you want to spend a lot of time at the beach, but all I'm asking for is let's say an hour or two. We go through these things and we kind of set you up for this year's taxes, but also set you up for moving forward. So yeah, I think that's a great point. Yeah. Yeah.
Manasa Nadig, EA (10:59.3)
I agree.
Manasa Nadig, EA (11:20.038)
Yeah, yeah, just a quick note there about tax withholdings. To your point, you know, it's not always a great idea to get a huge refund at the end of the year, which just meant that you didn't have access to that money that you could have invested.
Jane Mepham, CFP (11:39.522)
Yeah, so I think the ideal situation in which we can work this out is where you end up with having to not send the IRS any money at the end of the year, and they end up not having to send you any money at the end of the year.
So you sort of at zero, which would be awesome if we can do it. And I think one of these days, if we're able to help our client do this, we should come back and put an episode together to kind of talk about this is how we helped sort to come out at zero at the end.
So yeah, perfect timing.
Okay, I'm going to move on to the next topic because this is summer. We end up, most of us, traveling a lot. And you know, I know you're probably going to be visiting your cousin in another state. For most of us who were foreign nationals on work visas or those born overseas, we tend to do a lot of traveling overseas over the summer.
Complete Estate Planning – Before Summer Travel
Jane Mepham, CFP (12:38.63)
And this is probably a trip you've been planning for a couple of months, unless, of course, it's an emergency, in which case that's a whole different story. As part of your planning, if you haven't done what I'm going to discuss, we need to ensure we do this. Before you travel overseas, especially, let's ensure your estate planning is all in order. And what we're looking for is one.
We want to make sure all your accounts have beneficiaries. So, think your 401k accounts, your taxable accounts, pretty much all accounts should have a named beneficiary. That's probably something you can just log in tonight and sort of take care of very quickly, and also let them know. Right.
And then if you have kids, anybody under 18, it's critical. It's crucial that you have your will done and that you have guardians named for these kids in case anything happens to you.
And I know that many of us, since most of our family is overseas, want to have guardians abroad for our kids. You really do want to work with an estate planning attorney, and we're happy to introduce you to some people who can help you put this in place. So even if you have overseas guardians, you probably still need to have local guardians, maybe close friends, maybe your local priest, somebody that could kind of step in if something happened to you and somebody needed to take care of your kids.
And then of course you want to have your attorney, medical, financial powers in place. This is all obviously part of estate planning. And if you get somebody good to help you with this,
we can sort this out right away. And then one more thing I want to add on this, Manasa, is you really want to have what's called a letter of instruction.
A letter of instruction is not really a legal document, so it's something you can easily draft on your own. And the whole idea behind the letter of instruction is to think of it as instructions - literally, a document that tells your loved one where everything is. You've completed your estate plan, and so now you have this letter that says, okay, this is where you can find my will, this is where you can find my account.
So, basically, just making it easy for anyone who would end up having to sort out your affairs if something happened to you. Anything else you want to add to that or move on?
Insurance
Manasa Nadig, EA (15:13.864)
I love what you covered just now and kind of sort of connected with that, but not to be a Debbie Downer, folks, or a wet blanket, thinking about insurance.
I think summer is also a good time to really assess your risk tolerance and where you are with all of the different insurance premiums you pay.
I know this is something everybody loves to hate on, but you know, it's life. We can't live without this. So this would be a good time for you to look through all of the different insurance policies you have on your home, on your rental property, maybe on your car, on your kids, life insurance, all of that good stuff.
Maybe a good conversation to have with a different insurance company and see whether you can save on premiums and maybe renegotiate your policy with your current insurance company. Additionally, consider getting an umbrella insurance policy if you don't already have one, as it can sometimes be a good deal. If you have a lot of different things to cover, then an umbrella insurance policy works out better.
Also, that would, I think, be life insurance, which I leave to Jane to talk about, and disability insurance and all of that. However, I think that summer is a good time to really examine this. What do you think, Jane?
Jane Mepham, CFP (16:58.962)
I agree with you and coming to the umbrella insurance part of it, the key thing is, and we just did this for our family. If you have new drivers, ensure they are also added as part of the household. So make sure the umbrella insurance covers them because if you have a new driver, and something happens, like an accident,
Jane Mepham, CFP (17:28.018)
and your insurance does not cover it, if they've been added as part of the household umbrella insurance, that will be able to cover whatever damage needs to be covered. So I agree with you.
And actually, we have an episode coming out, I think in another maybe two weeks' time, where we address a lot of just life insurance when you're looking at it in a cross-border context. That'll be a good one to keep an eye out for. Now,
Manasa Nadig, EA (17:55.92)
Yes, yes, yes, I love that one. Yes.
Kids Turning 18 – They Need Their Own Basic Estate Plan
Jane Mepham, CFP (17:58.062)
Yes, let's talk about kids. I want to go back to something you mentioned earlier. So, if you have kids who are going to college this fall, which means they're already 18 or will be turning 18 sometime this year, you don't want what happened to me to happen to you.
So what happened was, my oldest actually turned 18, and I was doing a thing, and I was trying to make an appointment for her and myself. And suddenly I couldn’t see her stuff. I can't even make an appointment for her. And I'm like, hmm, what just happened? So, I called the office and they kind of laughed at me and said, Oh, you know, your daughter turned 18 yesterday - I know that we had a big party for her.
Um, so now she's an adult and so you can't see her stuff anymore. And I'm like, you're kidding me. And so, what we realized was, and we ended up obviously fixing it is once you turn 18, the law considers you an adult. And as an adult, nobody can look at your medical staff, can look at your account, you know, that sort of thing, unless you give them powers of authority, so powers of financial authority or medical authority.
And so what we ended up doing is basically just put a quick will together for her, have her appoint us as her agents in case of any financial or medical things, and then literally had to drive to the doctor's office together to ensure that she could give us that permission.
The lesson for us is if you have kids who are going to be 18, they're starting school this fall. If you still want to be able to continue helping them, and I think we all should in some of these areas, make sure they have a will, a very simple will.
But the key thing is that you've been appointed as the power of authority, both medical and financial, if you don't want to lose that part of what we call access. That's probably best way of thinking about it. Anything else you want to add to that, Manasa? We've covered quite a bit here.
F1 Students Coming To The US – Your Mid-Year Checklist
Manasa Nadig, EA (20:19.94)
Yes, yes. Now, yeah, let's hang out here for a second with college-going kids. Yeah, because, you know, a lot of our listeners are also people who are overseas, and they are looking to come to the US. And I know that you work with Harvard, where people are looking to come to the US on an F visa.
So if you are, you have your visa and you are looking to come to the US to go to college, then all of what Jane just said about insurance, appointing authorities who can access your medical records is also important because you know what, if you're here on your own and you have to deal with all of that and God forbid something untoward happens, then you should have things in place where people or someone else can intervene on your behalf and be an advocate for you. So, right Jane, what do you say?
Two Country Wills
Jane Mepham, CFP (21:26.57)
Yeah, and that is so critical and I'm glad you bring it up. So I do these sessions with the Harvard Business School every summer where I actually talk to students before they get to the US. And we're talking a lot about the US financial system, the tax implications, what they can expect. And yes, that's something they all need to think about that they probably never had to think about.
The thing I do want to say is now if you straddle two borders, like what happens with a lot of our clients, you need country-specific will. So I'll tell people, ' Yeah, I understand you
already have things set up in your home country, and everything looks good. ' As soon as you cross the border, you come to the U.S. That's literally all null and void as far as the U.S. is concerned. So we need to put something together on the U.S. side.
And again, this is the perfect time to start putting some of those things together or at least start thinking about it. So, we come up with a plan, and thank you for bringing that up, Manasa. That is a key component of being ready not only to survive, but also to succeed in the US when you're new.
So, thank you for bringing that up.
Manasa Nadig, EA (22:43.496)
Absolutely, because you know what, when you're thinking summer vibes, going back to school is one big thing for a lot of us. I mean, I know that you and I are now kind of past that, but there are still a lot of people who are still there.
One quick other thing, maybe to think about over the summer, and perhaps this is not all of that again, going back to Debbie Downer status.
Jane Mepham, CFP (22:48.3)
Right. Absolutely. Absolutely. Absolutely.
Check To See Where You Are With EF And Expenses
Manasa Nadig, EA (23:11.624)
I'll take that responsibility. Yeah, you're welcome. Check your expenses and see where you stand with your spending plan. Also, ensure you're keeping track of things, as it's media, after all. Is your emergency fund doing, okay? Are you putting money into it? Are your credit cards paid off? You know, things like that.
That's definitely one other thing that maybe a summer check could be a good thing. Perhaps you could sit outside in the sun, enjoy a refreshing drink, and review your finances.
Jane Mepham, CFP (23:57.23)
I love that. So, you when we start working with different clients, the one thing we always insist on or we talk about is we say, okay, when we come to discussing our emergency plan, we want you to have 12 months plus the cost of flying home, return ticket for the whole family in case of the emergencies, because we do know this emergencies come up. So I love what you say. Check to see where you are on that line. If you're nine months.
Maybe we need to make a few tweaks to your summer budget to make sure we hit that number. And especially today, with what's happening in the job market and people losing their jobs, this becomes really critical. And if there's anything you need to postpone to hit this number, I agree with you—one more thing to add to this.
I think summer is the perfect time to actually especially if you're on a work visa or green card and you don't have a good immigration lawyer. And by good, I mean not the company immigration lawyer, but your own immigration lawyer. You want to make sure you spend the time over the summer to talk to a few lawyers and add someone to your contact list, just in case something happens and you need to reach out to someone.
Jane Mepham, CFP (25:22.314)
Okay, it's summer. I think we've covered enough, Manasa. So what do think? Yeah, yeah, yeah.
Manasa Nadig, EA (25:27.4)
I know, I think we did a good job of bringing a lot of these up. And, know, dear listener, if you are with us here to the end of the episode, thank you very much for hanging out with us and listening to our episodes. And if you want to pass this on to your friends and family, we would be ever so grateful to you.
Please subscribe to our podcasts on whichever is your favorite platform. It helps to drive up our visibility. Another thing with the summer vibe check before we go is, of course, a lot of things that's going on with the new tax bill. OBBA, ABBA, OB3, mean, however you want to say that. We will be bringing you more information about it soon. So look forward to that.
We will be sharing more content here. So again, have a happy summer. Remember, don't slack off with your taxes and finances. We'll be back with more. Thank you. Bye.
Jane Mepham, CFP (26:38.254)
Bye.
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The speakers' views and opinions discussed in this episode should not be considered financial, tax, or legal advice. Consult your advisor for any legal, cross-border tax, and financial advice.