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Winter Tips to Save Your Home and Wallet

Written by Minich MacGregor Wealth Management on . Posted in Uncategorized.

Winter may bring snowy landscapes and cozy evenings by the fire, but it can also bring unexpected challenges for your home and budget. To make this season more about enjoying the cold and less about battling it, follow these practical tips to protect your space, save energy, and stay comfortable.

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Questions You Were Afraid to Ask # 15

Written by Minich MacGregor Wealth Management on . Posted in Uncategorized.

The only bad question is the one left unasked. That’s the premise behind many of our posts. Each covers a different investment-related question that many people have but are afraid to ask.

In recent posts, we’ve been breaking down some of the more common bits of financial jargon that you are likely to hear in the media.  In this message, let’s look at: 

Questions You Were Afraid to Ask #15:
What’s the difference between Large Cap, Mid Cap, and Small Cap stocks?

If you’ve ever researched a stock or listened to talking heads in the media, you’ve probably heard terms like “large cap stocks” before.  You may also have seen these terms when reviewing your 401(k).  If so, you’ve probably wondered what the word “cap” even means. 

A stock’s “cap” refers to its market capitalization.  This is the total market value of a company’s available stock shares.  In essence, it is a quick and easy way to determine how valuable the market perceives a company to be. 

To determine a company’s market cap, investors look at all the shares the company has made available and then multiply that number by its current stock price.  For example, let’s say the ACME Corporation has twenty-five million available shares with a current stock price of $50.  Twenty-five million multiplied by fifty is 1,250,000,000, so ACME’s market cap is $1.25 billion.

Now, this number doesn’t mean anything on its own.  It’s when you compare it to other companies that distinctions can be made.  That’s where the terms large, mid, and small come in.

There is no single agreed-upon definition of what makes a company large-cap versus mid-cap, or mid-cap versus small-cap.  But generally speaking, many investors break down these categories like this:

  • Large-Cap: Market value over $10 billion
  • Mid-Cap: Market value over $2 billion
  • Small-Cap: Market value over $250 million

So, in our example, ACME Corporation would be classified as a small-cap company. 

Some investors will make further distinctions.  For instance, you may sometimes see the term mega-cap, which is for companies with a market value over $200 billion.  At the other end of the spectrum, micro-cap refers to companies with a market value of less than $250 million. 

When people think about the stock market, they often think in terms of a specific index, like the S&P 500.  But different indexes often only contain companies above a specific size.  For example, the S&P 500 contains the five hundred biggest companies in the overall market. That means it only includes mega- and large-cap stocks.  Another popular index, the Russell 2000, contains only small-cap companies. 

One reason market cap matters is because it gives you more information about a stock than you can get just from its price.  For example, imagine two companies that each have a stock price of $75.  The first company has fifty million total shares available.  The second company has a billion shares.  That meansthe first company has a total market capitalization of $375 million.  The second company’s market cap, on the other hand, is $75 billion.  So, despite having the same price per share, the first company is a small-cap stock, and the second is a large-cap stock. 

Why is this important for investors to know? Because a stock’s cap can dramatically affect both its potential risk and potential reward. 

Generally speaking, large-cap stock companies are not going to grow as fast as a small-cap stock company can.  That’s because the former simply doesn’t have as much room for growth.  Large-cap companies tend to be older and more well-established. As a result, any future growth will likely be slow and steady rather than fast and explosive.  Small-cap companies, on the other hand, still have the potential to become large-cap companies in the future.  That means their potential for growth — and thus, reward — is greater. 

That said, large-cap companies have also tended to be more stable.  They have stronger financial situations, greater brand recognition, and more revenue.  That makes their stock price less vulnerable to market volatility.  Meanwhile, small-cap companies, even if they’re growing fast, may not technically be making any profit at all.  Their financial situation may be much weaker. That makes them much more vulnerable…and much riskier for investors. 

Of course, these are all just generalizations.  Large-cap companies can sometimes experience fast growth or even fail, of course.   Mid- and small-caps can thrive for years.  But as a general rule, there is an inverse relationship between a stock’s capitalization and both its risk and return.  Understanding that relationship is critical to making good investment decisions! 

So, that’s market capitalization in a nutshell.  Next time, we’ll look at a related bit of jargon: Blue chip stocks versus penny stocks.  Until next time! 

1 “Market Cap Explained,” FINRA, https://www.finra.org/investors/insights/market-cap

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Happy Thanksgiving

Written by Minich MacGregor Wealth Management on . Posted in Uncategorized.

🦃🍂 HAPPY THANKSGIVING 🍂🦃

Today, we pause to reflect on all we’re grateful for—family, friends, and the moments that bring us together.

Here at Minich MacGregor Wealth Management, we are thankful for our relationships with our clients and for the opportunity to help you however we can.

We wish you a day filled with love, laughter, and, of course, delicious food!

Earth image of North America

The Pale Blue Dot

Written by Minich MacGregor Wealth Management on . Posted in Uncategorized.

On February 14, 1990, the Earth was being watched. 

The object watching Earth was small; small enough to fit inside a four meter-large cube.  And it was distant, being over 3,000,000,000 miles away.  It is even farther away now—in fact, it recently became the first man-made object in history to venture into interstellar space. 

It was the Voyager 1 spacecraft. 

Voyager 1 is a probe built by NASA, launched in 1977 to study the outer Solar System.  Its primary mission was to study the planets Jupiter and Saturn and their various moons.  Having accomplished this, the probe is now winding down its secondary mission, which is to study the distant regions beyond the planets before it loses power and becomes destined to drift through the Universe as a mute, lonely messenger until the end of time. 

But this post isn’t about Voyager.  It’s about Earth. 

On that date in 1990, Voyager 1 had completed its primary mission.  Carl Sagan, the famous astronomer, and author, asked NASA to turn the probe’s camera around to take one last photograph of Earth and the other planets.  Between February 1 and June 6, Voyager took sixty still images.  Each image contained about 640,000 individual pixels, and as the probe was so far away, it took about 5½ hours for each pixel to reach Earth. 

The most famous of these photographs was of our home planet—now just a pale blue dot amidst the infinite blackness of space. 

If you’ve ever seen this photo, you know what a stirring, thought-provoking image it is.  Imagine our great, grand planet … filled with life, oceans, mountains, deserts, forests, and cities, reduced to nothing more than a speck.  It serves to illustrate just how small we really are compared to the unceasing vastness of the Universe.  But it also serves another, more powerful purpose. 

April 22 is Earth Day, a celebration of our planet, of nature, and of the importance of protecting the environment.  Hundreds of thousands of people will observe the event in their own way, but many more will probably fail to remember that Earth Day exists at all.  After all, there are already so many holidays demanding our time, our attention, and our money.  Most of us probably don’t even get Earth Day off from work.

And yet, we wonder if we wouldn’t attach more importance to Earth Day if we all took a few minutes, once a year, to simply look at that pale blue dot.  Because there’s something else the picture illustrates, something we should all remember. 

Take a minute, to pull up the picture on your computer.  Search for “pale blue dot” on Google® or go to this address at http://en.wikipedia.org/wiki/Pale_Blue_Dot to see it directly.  After you look at the single pixel that is our planet, gaze around the edges of the image.  What do you see? 

Nothing. 

Of course, we know that the Milky Way galaxy isn’t empty.  It’s bursting with stars, cosmic rays, solar wind, clouds of dust, asteroids, comets, and even other planets.  But it contains no other life, not that we’ve found.  The closest planet potentially capable of supporting life is so far distant, it would take millions—millions!—of years to get there.  That’s longer than our species has even been alive. 

Until further notice, we are alone. 

Our pale blue dot is just one of billions in the night sky, but it is unique.  We are on an island amidst a dark, silent ocean.  An oasis inside the barrenness of space.  A single, precious garden surrounded totally by desert. 

What the pale blue dot photo really shows is that our planet is significant.  It’s all we have.  It shelters us, sustains us, provides for us, and entertains us.  If there is another world richer and more beautiful than ours, we’ve yet to find it. 

In short, we’ve been given the greatest gift of all. 

This is why Earth Day is important: because it’s our chance to reflect on what we can do to truly deserve that gift.  It is our chance to reflect on how we can protect it, because it certainly needs protecting. 

This April 22, we invite you to celebrate Earth Day.  Even if you do nothing else but feel the warmth of the Sun on your face, smell the flowers in bloom all around you, and ponder the depths of the night sky, it will be enough.

And as you celebrate Earth Day, ponder the words Carl Sagan left us about our precious, pale blue dot. 

The Earth is the only world known, so far, to harbor life. There is nowhere else, at least in the near future, to which our species could migrate. Visit, yes. Settle, not yet. Like it or not, for the moment, the Earth is where we make our stand. It has been said that astronomy is a humbling and character-building experience. There is perhaps no better demonstration of the folly of human conceits than this distant image of our tiny world. To me, it underscores our responsibility to deal more kindly with one another and to preserve and cherish the pale blue dot, the only home we’ve ever known.  

Carl Sagan, Pale Blue Dot: A Vision of the Human Future in Space (Ballantine Books, 1994)

On behalf of all of us here at Minich MacGregor Wealth Management, Happy Earth Day! 

March Madness Jumbotron

2024 Q1 Market Recap

Written by Minich MacGregor Wealth Management on . Posted in Uncategorized.

Did you fill out a March Madness bracket this year? 

If you did, or if you ever have before, you know what a challenge it can be to predict what will happen during the annual NCAA Basketball Tournament.  Maybe you should just pick the higher-seeded team in every game.  After all, they’re seeded higher for a reason, right?  Or maybe you think a lower-ranked team will surprise everyone and beat one of the favorites.  It happens every year, doesn’t it?  Or maybe you’ll just look to see which teams enter the tournament on a “hot streak” and bet their winning ways will continue. 

Or maybe you’ll just pick whichever mascot you like best.

Whatever strategy you use, every decision forces you to question what you think you know.  Is that top-seeded team’s record for real, or does it hide the real story?  If that underdog David manages to slay the heavily favored Goliath, will it continue winning, or will its story end in the next round?  Does Team A’s superior shooting outweigh Team B’s better defense?  The fact is that there are a million ways to guess, but there’s no single way to know. 

The reason we mention all this is because many investors are facing a similar March Madness-style dilemma with the markets right now. 

Last year, the markets surprised many experts who had predicted a recession by going on a tear.  The S&P 500 finished 2023 up 24%.1  That hot streak continued through the first quarter of 2024.  The S&P gained 10.2% in Q1, its best start to a year since 2019.  The NASDAQ finished up 9.1%.  And the Dow saw a 5.6% gain.2 

This performance was largely driven by one thing: Expectation.

Now, expectation always drives the markets, more or less.  Market performance is dictated by what investors expect will happen in the future based on data they’re seeing now.  In a sense, every investor, expert or amateur, is filling out their own version of a March Madness bracket whenever they make a decision, but for individual companies rather than individual teams…or for the markets as a whole. 

What’s less common is when such high expectations are centered around two very specific things:

  1. That the Federal Reserve will lower interest rates sometime in the near future.
  2. That the potential of AI will yield major profits for companies down the road.

Because many investors expect that one or both things will happen, they want to be positioned to take advantage of them when they do.  So, more money flows into the stock market – especially into companies that would seem to benefit most from these developments – and we experience the kind of quarter that we just saw. 

But now, that leaves investors with questions.  Questions that are eerily like what sports fans ask themselves when filling out a bracket. 

  • Is this performance real…or is it a mirage? 
  • Is it sustainable, or just temporary? 
  • Are we in a bull market…or a bubble? 
  • Does Metric A matter more than Statistic B?  Or should I only pay attention to Indicator C? 
  • Should I just invest based on whichever company logo I like best?

Okay, that last one isn’t real.  But the rest are real questions that investors – expert and amateur – are asking themselves. 

And just like with your bracket, there are a thousand ways to guess the answers.  For example, here are a few arguments – all based on statistics – for why the market’s Q1 performance is “real.”  (Which is to say, sustainable.) 

Inflation is much lower than it was last year, and the Fed has specifically said it wants to cut rates this year.  By the end of February, the Consumer Price Index was at 3.2%, whereas in February of 2023, it was at 6%.3 

The economy remains strong.  Corporate earnings appear healthy, the most recent unemployment rate was 3.9%4, and the Fed’s latest estimate was a 2.5% increase in GDP during Q1.5 

The market’s performance is actually broadening.  It’s an open secret that a major portion of the market’s gains last year were driven by just a small handful of tech companies.  (Most of which are major players in the AI race.)  But that portion broadened significantly in Q1.  Approximately 23% of the companies in the S&P 500 reached 52-week highs.6  And if you gave each company in the S&P 500 an equal weight, the index rose 25% since October.6  (If you gave each company an equal weight in 2023, the index would have only gone up 12% for the year instead of 24%.7)  In other words, more companies are driving the markets rather than just a few.  And that’s good! 

But there are equally compelling arguments for why the market’s performance may not be sustainable.  For example:

Inflation ticked up in Q1 and the Fed has said they’re in no hurry to cut rates.  Consumer prices increased by 0.4% in February after rising 0.3% in January.8  This was largely due to seasonal factors – prices usually go up in winter, partially because fuel tends to be more expensive – but it means the Fed must be even more cautious about lowering interest rates prematurely.  If investors stop expecting rate cuts soon, the markets may well pull back. 

Stocks may be overvalued.  When you divide the size of the U.S. stock market against the size of the economy, you can see how fast the stock market is growing compared to GDP.  If the ratio is heavily skewed in favor of the stock market, it suggests stocks are overvalued relative to how much the economy is producing.  Right now, that ratio is near a two-year high.6 

The hype around AI may be overblown.  Recent technological advances have investors salivating at the possibility that AI will help companies produce more at lower cost…and by doing so, return more value to their shareholders.  But this hype has been going on for well over a year now.  How much AI has contributed in terms of tangible results is an open question.  Developing AI technology is extremely expensive, so if investors decide the return is not worth the expense, the hype may die out. 

So, like with a March Madness bracket, how do we decide what to predict?  Which argument, which statistics, matter? 

The answer: All of them…and none of them. 

Here at Minich MacGregor Wealth Management, we pay attention to all these statistics but are beholden to none.  We use statistics to be alert to any possible opportunities and to be wary of any potential pitfalls.  In other words, we use statistics to help us be prepared for possibilities…not to make predictions. 

You see, what really matters is that we don’t treat investing like March Madness. 

When you fill out a bracket, you are then locked into whatever choices you made.  If you make a wrong choice, you must live with it. It’s too late to change anything.  But our strategy is far more flexible.  Imagine you filled out a bracket but could then adjust in real time depending on how different games were trending.  Furthermore, imagine you could exit out of your bracket altogether, if necessary, and then start participating again later. 

That’s what we can do every day with the markets.  Furthermore, we’re able to focus on the metrics that are proven to matter: Primarily, the law of supply and demand.  As a result, we don’t have to make predictions, hope we’re right, and then hold on no matter what.  We measure how various stocks and sectors – or teams and regions, in March Madness parlance – are trending.  When they trend above a certain point, we play offense with your portfolio.  When they trend below, we play defense.  Experience has convinced us that this approach – being flexible and adaptable – is the surest way to your destination. 

As always, though, let us know if you have any questions or concerns.  While we’re hardly qualified to give bracket advice, our team is always here to help you with a different sort of Big Dance: The one that takes place where you want it, when you want it, with the people you want to share it with.  

1 “Stocks close out 2023 with a 24% gain,” CBS, www.cbsnews.com/news/stock-market-up-24-percent-2023-rally/
2 “The SP 500 just turned in its best first quarter since 2019,” CNN Business, www.cnn.com/2024/03/28/investing/premarket-stocks-trading-first-quarter/index.html
3 “12-month percentage change, CPI,” U.S. Bureau of Labor Statistics, www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category-line-chart.htm
4 “The Employment Situation – February 2024,” U.S. Bureau of Labor Statistics, www.bls.gov/news.release/pdf/empsit.pdf
5 “GDPNow,” Federal Reserve Bank of Atlanta, www.atlantafed.org/cqer/research/gdpnow
6 “Warren Buffett’s favorite market indicator is flashing red,” CNN Business, www.cnn.com/2024/03/27/investing/premarket-stocks-trading/index.html
7 “S&P 500 Equal Weight Index” https://www.spglobal.com/spdji/en/indices/equity/sp-500-equal-weight-index/#overview
8 “Consumer Price Index – February 2024,” U.S. Bureau of Labor Statistics, www.bls.gov/news.release/cpi.nr0.htm

Pre-Retirement Spring Cleaning Checklist

Written by Minich MacGregor Wealth Management on . Posted in Uncategorized.

Spring is in the air, and that means it’s time for spring cleaning.  But wait!  Before you pick up that dustpan, give a thought to your financial spring cleaning first. 

What do finances and spring cleaning have to do with each other?  If you’re preparing for retirement, the answer is “A lot!” 

These days, the term spring cleaning is often used as a metaphor for getting your affairs in order.  As you can imagine, getting your retirement affairs in order is critical if you intend to actually retire when and how you want.  There are many things to keep track of, many tasks that need doing, and many decisions to make. 

So, how do you begin?  Well, when many people do their actual spring cleaning, they make a checklist.  What supplies they’ll need, what rooms to organize, what needs to be mopped, vacuumed, dusted…it’s the most efficient way to clean.  We suggest doing the same for your finances.  So, without further ado, here is a sample Spring Cleaning Checklist to help you better prepare for retirement. 

Pre-Retirement Spring Cleaning Checklist

  • Contribute the maximum amount to your IRA if you have one.  Remember, an IRA is a valuable way to save for retirement in a simple, tax-advantaged way.  For 2024, the annual IRA contribution limit is $7,000 up to age 49, and $8,000 for those 50 and older.1 
  • Review your 401(k) and increase your contributions if necessary.  How has your 401(k) been performing?  Do you understand how your money is being invested and why?  Are you contributing enough to take advantage of any employer matching?
  • Start looking at your existing expenses.  Which are likely to continue after retirement?  What expenses can you remove right now?  This is a good way to find extra ways to save for retirement, and it will make your life a lot simpler once retirement comes. 
  • Make sure you know where all your estate planning documents are.  You should have a copy of your will, power of attorney, advance medical directives, letter of instructions, and other documents in a secure but easily accessible place.  Make sure your spouse (or other loved ones) knows where these documents are kept. 
  • Review your current insurance policies.  Are there any potential gaps you see?  (For example, Critical Illness and Long-Term Care insurance are two types of policies many people don’t have but are often extremely valuable for retirees.)  

But most of all …

  • Make a list of your top retirement concerns.  Is there anything you are confused or nervous about?  If so, start getting the answers you need now instead of waiting till you’re already retired.  Remember, you want to enjoy your golden years, not stress over them. 
  • Similarly, make a list of any new goals or dreams you have for retirement.  What will it take to achieve or afford them?  Are you on track?  If you’re not sure, it’s time to start planning. 

Spring cleaning is never the most fun thing in the world, but it’s often one of the most beneficial.  Just as you probably enjoy living in a clean, organized home, you’ll enjoy the peace of mind that comes with getting your finances in order.  Trust us: if there’s one thing we’ve learned in all our years of helping people plan for retirement, it’s that a little organization today can make for a much happier retirement tomorrow. 

Of course, if you need help with any of the items on this checklist, please let us know.  For example, if you aren’t sure how your 401(k) is doing, we’d be happy to help you analyze it.  If there’s a valuable estate planning document you don’t have, we can point you in the right direction.  And if you have any questions or concerns about retirement, the chances are good that we have the answers. 

In the meantime, we wish you a happy spring—and a happy spring cleaning! 

1 “401(k) limit increases to $23,000 for 2024, IRA limit rises to $7,000” Internal Revenue Service, accessed November 9, 2023.  https://www.irs.gov/newsroom/401k-limit-increases-to-23000-for-2024-ira-limit-rises-to-7000

Q2 Financial Checklist

Your Q2 Financial Checklist

Written by Minich MacGregor Wealth Management on . Posted in Uncategorized.

Did you know that trees have checklists?

Okay, so maybe they’re not written checklists attached to a clipboard, but it’s true all the same.  Every year, when winter slowly makes way for spring, there are several criteria that trees must “check off” before they start to bloom. 

The first item on their checklist is more sunlight.  Trees can detect when spring is near because the days get longer, meaning they receive more sunlight each day.  Sunlight, of course, is what trees store and convert into sugars via photosynthesis. 

The second is moisture.  This isn’t a problem in most parts of the country, where spring rains or melting snow contribute plenty of water.  But if the area is going through, say, a massive drought, then trees will often delay blooming.

Finally, trees wait for the temperature to rise.  Even if the day is longer, trees know that a sudden blizzard or even overnight frost can wreak damage to any new growth.  So, they wait until the average temperature is high enough before dazzling the world with a riot of color.

Why are we telling you all this?  As financial advisors, we love checklists, too.  After all, if they’re good enough for nature, they’re good enough for us!  And with spring – and a new quarter –arriving, it’s time for us to make like a tree and leaf through our own checklist.  These are the steps we must take to keep growing closer to our financial goals. 

The tasks on this list are all things that should be taken care of in the second quarter.  Don’t worry –they’re not difficult!  In fact, some may be completed already.  But each is important in its own way. If you need help or have questions about any of these, please let us know.  In the meantime, we hope you have a great second quarter…and a wonderful spring!

Q2 Financial Checklist for 2024
Tip: Print this out and stick it on the fridge or somewhere else it will be seen.  That way, you can check off the items one by one as you complete them! 

Review All Your Holdings

These days, many investors adopt a “set it and forget it” mentality with their investment portfolio(s).  That’s certainly better than stressing about the markets daily, but it’s critical to review your holdings at least once or twice a year to make sure everything is in order.  Is your allocation still where it should be?  Is your portfolio still in line with your tolerance for risk?  Are your holdings providing the kind of return you need to reach your financial goals?  Do you understand everything you own and why?

If the answer to any of these questions is “No” or “I don’t know,” then it’s time for us to sit down and take a closer look at things.  And by the way, when we say, “review your holdings,” we mean all of them.  That includes any and all institutions you do business with!  (Many investors sometimes forget where all their assets are kept and thus fail to review them. Or they review them separately and don’t ensure they work together.)     

Review Your Exposure to Volatility

At the same time, it’s important to be sure that you are prepared to weather any market volatility that may happen in 2024.  As you know, we’re in an election year.  We’re also still contending with higher-than-normal inflation and much higher-than-normal interest rates.  All these factors can contribute to increased turbulence in the markets.  For that reason, we need to be sure you are not overexposed to certain sectors that may be particularly vulnerable to volatility this year.  If you would like a second opinion on investments held in other places, we would be happy to provide one. 

Determine Your Insurance Needs

In many parts of the country, the return of spring means the imminent return of storm season.  It also means new opportunities for outdoor recreation.  While it may be unlikely, that means an increased chance of both property damage and/or personal injury.  While you don’t need to go out and start buying more insurance, this is the time when you should review where you are covered and where you are not.  That way, you can determine if there are any critical gaps that are simply too risky to leave unfilled.  For example, while most mortgage lenders require customers to have home insurance, few people have property insurance.  For those with property in areas where major storms, wildfires, hurricanes, or tornados are common, that’s a type of gap that really should be filled.  

Budget For Your Summer Vacation Plans

This one’s more fun.  If you have plans for a big cross-country road trip, a long-awaited tour of Europe, or family fun in Disneyland, take time now to set a budget, purchase tickets, and make reservations.  It can save you a lot of money if you do it early.  Money you can use for further adventures in the future! 

Decide What to Do with Your Tax Refund

If you’re getting a tax refund this year, think about how you want to use it.  Approximately 1/3rd of Americans use their refund to pay off debts; others stick it in a savings account.1  One underrated and oft-underused option: Invest it instead.  It can help you catch up on saving for retirement, pay for a loved one’s college expenses, or enable you to achieve one of your long-term goals even sooner. 

Get Your Tax Planning Done Early

Finally, once your taxes are filed and the rush is behind you, consider pivoting from tax preparation to tax planning.  While tax prep is the process of filing taxes you already owe, tax planning is the process of minimizing taxes you will owe in the future.  By doing this early, you can potentially reap great rewards in the near future.   

1 “Over a third of Americans plan to spend their tax refund right away, mostly to pay bills,” CNBC, www.cnbc.com/2022/04/02/mostamericans-plan-to-spend-tax-refund-on-essentials.html

Last Minute Reminders for Tax Planning

Written by Minich MacGregor Wealth Management on . Posted in Uncategorized.

We’re well into tax season now!  Of course, some people have already finished filing their returns by this point.  If you haven’t yet, here are a few simple, last-minute tips to remember. 

1. Have all your necessary documents and information in place before you start

Have you ever heard the phrase mise en place?  It’s a French term professional chefs use that means “putting in place.”  You see, a good chef ensures that all ingredients and equipment are set up and in place before they start cooking.  This type of mindset is invaluable.  It reduces mistakes and accidents and makes the entire cooking process less stressful! 

You can practice mise en place with your taxes as well.  Before you do anything else, gather every receipt, invoice, bit of paper, and piece of data that may relate to your taxes.  Have it organized and close to hand.  That way, when you start the actual filing process, you never have to interrupt your progress to look for something.  Nor will you be likely to forget anything important.  It just makes the entire affair easier, quicker, and less stressful. 

Specifically, the IRS recommends that you have the following information before filing:

  • Social Security numbers for everyone listed on your tax return.
  • Bank account and routing numbers.
  • Any W-2s, 1099s, 1098s, health insurance statements, and records of digital asset transactions.  (Think bitcoin, NFTs, and things like that.)
  • Any notices from the IRS citing an amount received for a certain tax deduction or credit. 

2. Remember to report all types of income

In the rush to file, it can be easy to forget all the various ways you generated income last year.  These days, many people have second jobs and side hustles that bring in money.  Then there’s investment income, property, and even yard sales to consider!  So, as you file, remember to report all income from:

  • Any goods or items you have sold, whether online or in person
  • Investments
  • Part-time, seasonal, or gig work
  • Rental properties
  • Self-employment or other business activities
  • Foreign accounts and assets

This will help you avoid any notices or bills from the IRS – something no one wants! 

3.  Contribute to your IRA if you haven’t already done so. 

If you haven’t yet contributed to your IRA in the last year, there’s still time to do so.  The deadline to contribute for the 2023 tax year is April 15, 2024.  (Remember that if you do decide to contribute, you must designate the year you are contributing for.)  For 2023, the maximum amount you can contribute is $6,500 if you are under 50, and $7,500 if you are age 50 or older.1

4. Get a written acknowledgment from charitable organizations you have contributed to. 

If you gifted $250 or more to any charitable organization last year, the recipient must send you a written acknowledgment of the gift upon request.2  This should also state whether the recipient provided any goods or services in consideration for the contribution.  (If so, the acknowledgment must include a good faith estimate of the value of those goods or services.) 

5. Tell the IRS to direct deposit your refund to get it faster. 

These days, eight out of ten taxpayers get their refunds via direct deposit.3  There’s a good reason for this – it’s the fastest and most secure method available!  The IRS actually issues nine out of ten refunds in less than 21 days, but getting your refund via check adds unnecessary time to the process.3 

Many people are unaware they can have their refund directly deposited into as many as three different accounts.  That’s handy because it can help you allocate the funds in a more targeted way.  For example, let’s say you want to use part of your refund to pay off a debt, another part to go into your rainy-day fund, and the leftovers to go on vacation.  With direct deposit, you can ensure all three boxes get checked.  Just have the refund portioned into the appropriate accounts! 

Finally, you can track the status of your refund using the IRS’s Where’s My Refund Tool.  You can find that here: https://www.irs.gov/wheres-my-refund

We hope you found this helpful.  Wishing you a smooth, stress-free tax season! 

SOURCES:
1 “IRA Contribution Limits,” IRS, www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits
2 “Substantiating Charitable Contributions,” IRS, www.irs.gov/charities-non-profits/substantiating-charitable-contributions
3 “Get Your Refund Faster,” IRS, www.irs.gov/refunds/get-your-refund-faster-tell-irs-to-direct-deposit-your-refund-to-one-two-or-three-accounts

Tax Mistakes header image

4 Common Tax Mistakes

Written by Minich MacGregor Wealth Management on . Posted in Articles, Featured, News, Uncategorized.

mistake 1

MISTAKE #1: Filing Too Early

It may be surprising to hear, but many people are so anxious to get their filing done ahead of time, they file their taxes before receiving all the proper documentation they need to ensure their information is accurate. This can lead to mistakes and processing delays.

mistake 2

MISTAKE #2: Missing Eligible Credits and Deductions

There are many credits and deductions you may be eligible for. But some of these, like the Earned Income Tax Credit, the Child Tax Credit, energy tax credits, and various itemized deductions, can be difficult to figure out, causing some to skip out on them entirely. This is why working with a good tax professional can really pay off.

mistake 3

MISTAKE #3: Forgetting to Contribute to an IRA

Some taxpayers forget to contribute to an Individual Retirement Account each year. These contributions are tax-deferred, meaning they can help reduce your taxable income. For the 2023 tax year, the contribution limit is $6,500 for those under age 50 and $7,500 for those over.*

mistake 4

MISTAKE #4: Not Reporting All Income

Many taxpayers only think of their paycheck when reporting income, forgetting to factor in dividends, bank interest, and other income sources. This information is critical for both calculating the credits and deductions you can take as well as the refund you are entitled to.

* “IRA Contribution Limits” – Internal Revenue Service