Automatically divert money from your paycheck into savings to the point where it hurts. Warren Buffett: “Rule No. 1 is never lose money. Rule No. 2 is never forget Rule No. 1!” Back a friend or relative’s startup with a convertible loan, so you share in the upside. Warren Buffett: “Be fearful when others are greedy, and be greedy when others are fearful.” When you get restricted stock in a startup, make an 83(b) election; if the company takes off, you’ll save big on taxes. Aim to have five times your salary in your 401(k) and IRAs by age 55 and eight times before you retire. Dan Ariely: “If you can’t save money, be really nice to your kids.” Never take on a mortgage just for the tax deduction. Add commercial real estate to your portfolio. Join an angel investing club. Warren Buffett: “Big opportunities come infrequently. When it’s raining gold, reach for a bucket, not a thimble.” Buy designer goods at consignment shops; when you get bored with them, sell for a profit on eBay. Start a 529 college savings plan for yourself before you have children. If you don’t use it for graduate school, transfer it to your kid. Make your kid rich by helping him fund a Roth IRA. Always know how a financial advisor is getting paid and what if any commissions she’ll earn. Buy a retirement annuity cheap by delaying Social Security until 70 If you earn too much to contribute to a Roth IRA, fund a nondeductible IRA and convert it. Hold illiquid assets in a Roth IRA, not a regular IRA. Ben Stein: Don’t move into a neighborhood of poverty. Avoid any situation that could leave you with too much unsecured debt. Don’t let your advisor manage you. Warren Buffett: “What is smart at one price is dumb at another.” Buy a gift annuity from your alma mater. John Neff: “When you feel like bragging, it’s probably time to sell.” Leon Cooperman: “Getting rich takes hard work, a passion for what you do and luck.” If you win the Powerball jackpot, hire a tax advisor before making any decisions. Hunt down pensions from old employers. Take a cue from Mark Zuckerberg: Get maximum tax savings for your charitable buck by giving appreciated assets to a donor-advised fund or supporting organization. Open a spousal IRA for a stay-at-home husband or wife. To maximize college aid, make Roth 401(k) contributions, not pretax ones, while your kids are in college. Name primary and contingent IRA beneficiaries so your heirs can enjoy the maximum years of tax deferral. Warren Buffett: “No matter how serene today may be, tomorrow is always uncertain.” Maintain at least some financial accounts separate from your spouse’s. Peter Lynch: “Know what you own and know why you own it.” Have your kid read The Little Book That Beats the Market by Joel Greenblatt. Register for Medicare at 65, even if you’re still covered by your workplace insurance, to avoid having to pay a penalty later. Start saving for retirement in your 20s to put the compounding winds at your back. Use the Rule of 72: Divide your expected percentage return into 72 to figure how long it will take you to double your money. Ben Franklin: “An investment in knowledge pays the best interest.” Read Warren Buffett’s favorite book, Benjamin Graham’s Intelligent Investor. Pay public school tuition for your overachieving teen by getting steep discounts at great private colleges. Read Money Masters of Our Time by John Train. Tap an IRA—not a 401(k)—without penalty for a first-time home purchase. Leave the dollars in a Health Savings Account growing tax free for retirement while you cover medical deductibles and copays from your current income. Read letters of great investors such as Warren Buffett and Jeremy Grantham online. Save $40,000 or more by sending your overachiever to community college and then have her transfer to a top public university or the Ivy League. Save on a master’s—for yourself or kids—by earning it in Britain in one year. Rothify—Roth conversions make sense in more cases than most people realize. Watch out for high fees hidden in some tax-sheltered products like 529s and variable annuities. Steve Jobs: “Your time is limited, so don’t waste it living someone else’s life.”
Posted on: Mon, 03 Feb 2014 17:10:18 +0000