In this episode, John emphasizes the necessity of taking the long view in your financial plan. While most financial decisions are made in isolation (one tree), they will have ripple effects throughout your entire plan (the forest). It’s best to make decisions with the broad and long view in mind.
John is the author of 5 Ways Your Wealth is Under Attack. He has lectured extensively on financial planning. He has received the Five StarSM Wealth Manager Award for 2011, 2012, 2013, 2014, 2015 and 2016.
John’s strength lies in his ability and commitment to continually improve the level and quality of the financial planning process. His dedication to his clients’ growth involves an evolving strategy that strives to meet the demands, desires, and needs of his clients in a continually changing economic environment.
John’s detailed examples illustrate how to protect your wealth now and in the future:
- The micro view of a 15-year mortgage says, “This is a good idea because I’ll pay less interest on my mortgage and less for my house overall.”
- But if you take a macro view, you see that as your mortgage interest deductions lower over time, your taxable income increases.
- With the macro view, you see that as you make the high monthly payments that come with a short-term mortgage, you will have more of your money tied up in it. This violates the economic goal of the efficient use of capital, which is to get the maximum amount of benefits for every dollar spent.
- With a macro view, you see that as your interest income compounds, your taxes compound too. And as your taxes increase, your savings rate decreases. It will be hard to compensate for that with high mortgage payments.
- With a macro view, you surmise that over 15 years property taxes are likely to increase, as will homeowners insurance, and other expenses.
- With a macro view, you might take a 30-year mortgage instead. For details on what that looks like, listen to the full podcast.
For more on mortgages, taxation, and how to take the macro view of your plan, talk to an experienced wealth manager at Smallwood Wealth. Make an appointment here or by calling 732-542-1565.
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