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Financial Independence (Getting to Point X): A Comprehensive Tax-Smart Wealth Management Guide, 2nd Edition



Financial Independence (Getting to Point X): A Comprehensive Tax-Smart Wealth Management Guide, 2nd Edition

John J. Vento

ISBN: 978-1-119-51035-2 August 2018 480 Pages

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Discover how the Tax Cuts and Jobs Act of 2017 will change your journey to financial independence and what you need to do now to take advantage of the new law

Financial Independence (Getting to Point X) offers practical, time-tested advice for reaching your financial goals—whatever they may be. Whether you’re recovering from debt, putting kids through college, planning for retirement, starting your own business, or just seeking a healthier financial outlook, this book shows you how to get it done. No platitudes or empty advice here—just a clear roadmap to your goals, based on the effective management of the 10 Key Wealth Management Issues that threaten to derail us all.

This new second edition has been updated to reflect President Trump’s massive income tax changes. These historic changes will reduce the tax obligation of most Americans, but not all. This is the most significant tax reform in over 30 years, rendering old advice obsolete while opening new opportunities. This edition also includes a new chapter on becoming financially independent by starting your own business. Author John Vento knows exactly what these new laws entail, and this book puts his wisdom of experience to work for you to help you get on track to financial freedom.

Saving, budgeting, managing debt, minimizing taxes, and living within your means—all classic financial advice, but easier said than done, right? In this book, you’ll find real, practical advice for actually doing it—to the extent that makes sense for you.

  • Understand the enormous changes taking place in the federal income tax code
  • Learn which financial strategies have become obsolete, and what new opportunities you should take advantage of
  • Negotiate your way through the 10 Key Wealth Management Issues with expert advice
  • Find out if you have what it takes to reach financial independence by starting your own business
  • Follow a clear roadmap to financial independence, no matter how you define it

The goal is not perfection on all fronts, it’s simply tailoring your journey to suit your destination. No unnecessary deprivation, no obsessive adjusting—simply paying attention to key issues may be enough, depending on your goal. Regulatory changes close some doors but open others, and opportunities still exist if you know where to look. Financial Independence (Getting to Point X) provides you with a roadmap to financial freedom, so that you can achieve your life goals and dreams. 

Foreword by Bob Oros xi

Preface xv

Acknowledgments xvii

Introduction Getting to Point X 1

Financial Literacy and the Move Away from Capitalism 2

Point X: Our Fundamental Financial Goal 4

Ten Key Issues to Comprehensive Wealth Management 5

Our Biggest Expense 6

Take a Financial Planning Checkup 8

The Power of This Book 10

What’s New in the Second Edition 11

Chapter 1 Committing to Living Within Your Means 13

The American Dream Becomes the American Nightmare 13

Living Within Your Means: The Essential Step 14

Simple Saving 18

Chapter 2 Understanding Taxes 23

A Brief History of the US Tax System 24

Organizing and Retaining Your Records 27

Tax-Preparation Services 28

Accumulating Wealth Through Tax Planning 31

Chapter 3 Determining Your Financial Position 37

Figuring Your Financial Net Worth 38

Case Study: How One Couple Learned They Were Spending More Than They Earned 38

Making Sense of Cash Flow 49

Establishing Your Financial Goals 71

Finding Trusted Advisors 75

Chapter 4 Managing Debt 83

Case Study: How Two Doctors Went Bankrupt in Only a Few Years – What Not to Do 83

Basic Principles for Managing Debt 87

Good Debt Versus Bad Debt 89

Credit Card Debt 90

Auto Loans 96

Student Loans 97

Home Mortgage Loans 98

Business and Investment Loans 103

Understanding Credit 104

Your Credit Report and Your Credit Score 105

Preventing Identity Theft 110

The Equifax Breach 111

Analyzing Your Debt 112

Chapter 5 Insuring Your Health and Life 119

Choosing a Health Insurance Plan 120

Long-Term Care Insurance 135

Disability Insurance 142

Life Insurance 146

Buying Insurance Policies 152

Chapter 6 Protecting Your Property with Insurance 157

Case Study: How a Lack of Insurance Wiped Out One Woman’s Life Savings 158

Homeowners Insurance 160

Automobile Insurance 164

Umbrella Liability Insurance 167

Buying Insurance Policies 170

Chapter 7 Paying for College 175

Is College the Best Choice for You and Your Child? 175

The Cost of College and What You Can Expect to Pay 179

Case Study: How Not Saving for Your Child’s Education Can Ruin Your Finances – and Your Child’s 181

Conducting a “Needs Analysis” for Your Children’s College Educations 185

Strategies for Saving Money for College Education 189

Education Tax Breaks and Credits 204

Chapter 8 Planning for Retirement 213

Case Study: Saving Versus Not Saving for Retirement: The $1.7 Million Difference 213

Retirement Equation: Calculating Your Personal Point X 217

The High Cost of Waiting to Save for Retirement 219

What You Can Expect to Receive from Social Security 222

Qualified Retirement Plans 225

The Difference Between Traditional IRAs and Roth IRAs 229

Fixed and Variable Annuities 235

Retirement Funding: “Needs Analysis” 239

Chapter 9 Managing Your Investments 249

Analyzing Your Ability and Willingness to Take Risk 250

Stocks, Bonds, Hybrid Securities, Mutual Funds, and Exchange-Traded Funds 255

Diversification, Asset Allocation, and Rebalancing 264

Dollar-Cost Averaging 275

Inflation and Taxes: The Biggest Drains on Investment Return 276

Medicare Surtax on Net Investment Income 277

Cryptocurrency and Its Tax Treatment 278

Chapter 10 Preserving Your Estate 283

The Federal Gift and Estate Tax System 284

Legal Documents to Consider for Estate Planning 284

The Probate and Administration Process and Why You May Want to Avoid It 289

Using a Planned Gifting Strategy 293

Ownership of Property and How It Is Transferred 294

Reasons for Creating a Trust 297

Benefit from a Family Limited Partnership 309

Estate Tax Planning and Life Insurance 310

Asset Protection and Long-Term Care 313

Chapter 11 Starting Your Own Business 319

How Starting Your Own Business Can Lead to Financial Independence 319

The Three Pillars of Establishing a Successful Business 320

Sobering Statistics on Business Success Rates 321

Business Plan 321

Establishing and Operating a Successful Business 323

Entity Choices 326

Tax Identification Number 333

Accounting Methods 333

Reporting Business Income and Expenses 336

What Is the Number-One Expense in Operating a Business? 338

Employee Versus Independent Contractor 338

Business Tax Deduction Versus Business Tax Credit 340

“Ordinary and Necessary” Test 341

Deductible Business Expenses 342

Nondeductible Business Expenses 344

Home Office Deduction 344

Travel Expense As a Business Deduction 347

Deducting Automobile Expenses 348

Depreciation Deductions 350

Choosing the Right Retirement Plan for Your Business 352

Recordkeeping 361

Financial Statements 362

Financial Management Team 366

What the Tax Cuts and Jobs Act of 2017 Means for Your Small Business 367

Chapter 12 The Time Value of Money 379

Appendix A: Selecting a Trusted Advisor 395

Appendix B: 101 Ways to Save $20 or More per Week 405

Appendix C: Basic Concepts and Definitions of Various Types of Taxes 415

About the Author 435

Index 437