Top 5 Financial Planning Tips for High Income Earners in 2025

In this episode of the 'Retire Early Retire Now' podcast, host Hunter Kelly, a certified financial planner and owner of Palm Valley Wealth Management, reintroduces himself and the mission of the podcast. Aimed at simplifying financial planning for high-income earners, especially physicians and attorneys, the episode covers essential financial strategies to undertake at the beginning of the new year. Topics include reassessing financial goals, tracking net worth, adjusting savings rates, optimizing investments, reviewing insurance, and planning for major expenses. Hunter offers practical tips on using technology for better financial management and emphasizes the importance of periodic check-ins to ensure financial goals are met.

00:00 Welcome to the Retire Early Podcast

00:31 Introduction and Podcast Mission

01:53 Five Financial Planning Checklist Items for High Income Earners

02:47 Checklist Item 1: Reassess Your Financial Goals

12:02 Checklist Item 2: Review Your Tax Strategies

14:39 Checklist Item 3: Optimize Your Investments

18:24 Checklist Item 4: Review Your Insurance

19:14 Checklist Item 5: Plan for Major Expenses

23:04 Conclusion and Call to Action

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Transcript

0:00

And welcome to the retire early return out podcast. I'm your host hunter Kelly owner, Palm valley wealth management. And if you're a new listener today. Thanks for coming in and listening. Uh, we're on YouTube at hunter Kelly CFP, and we're on every podcast. A. App that you can find. So, uh, go ahead and follow and subscribe to those respective channels, but just wanted to take a step back. You're getting a lot of new listeners lately. I'm with the new year. I think it would be good to kind of reintroduce myself. Uh, uh, as a financial planner, but also, uh, what this podcast is about and what we're trying to achieve here. So again, uh, my mission for this podcast is to help simplify financial planning for high income earners specifically, or especially with physicians and attorneys. Again, my name's hunter Kelly. I'm a certified financial planner. Uh, with about a decade of experience, uh, including, uh, spending six years at a very large broker dealer. Where I helped clients kind of work their way and, and me learn the business and things of that nature. And then, uh, about two years ago, I found it Palm valley wealth management. Uh, where I started this podcast. Uh, where I want to be a little bit more conversational, but really give some education. Uh, allow you to get to know me, uh, hopefully help you make better decisions about your financial life. And so we'll cover topics like tax strategies, retirement planning. Uh, managing how to manage your investments or what to think about. Uh, when managing your investments. Protecting your legacy through a state planning. A wide gamut. I have different topics, uh, that I hope can give you better, uh, confidence, uh, better tools to help make those decisions and, and live that financial life that you want on your own terms. So. Uh, again, my name's hunter, Kelly, thanks for listening. I really appreciate it. And, and so today we're going to talk about five financial planning checklist items that high income earners should be doing, uh, here in January as the new year rolls over. And so. What better time to reassess your situation, then the new year. I know it's cliche, but the reason why it's cliche is because it's true, right? Whether you do it in January, whether you do it in July. Uh, it doesn't really matter. You should do this periodically to where you're checking. Uh, to see how your goals are going, see how your progress is going to make sure that. You're kind of meeting those goals and those values that you set for yourself. So we'll cover those five key action items that you should be doing. Uh, in your financial life. And again, remember to share this with a friend. And so let's jump into checklist item number one. So the first thing should be reassessed your financial goals. So take a look back at 2024. Uh, how did I do. Um, what happened? Uh, ask yourself, did I meet my savings goals? Uh, did I meet my debt repayment, goals, whatever. Um, those goals were. Um, and are those goals still realistic? If you have not met those goals? Right. And so, um, maybe your situation has changed. You have new family members, you had a baby. Maybe there's career changes or divorce or death, whatever that situation was. How's it going to affect my decisions. Moving forward. Right? So we want to track this progress and we want to reassess and make sure that the goals that we set out for in 20, 24 are still realistic and still achievable. Um, and if they're not no big deal, let's reassess, let's make changes. Um, maybe it's only a good thing. Maybe you save way more than you thought you would. And you're meeting, uh, some goals quicker, like buying a house or a car, or, um, Retiring a little bit earlier, whatever that may be. Right. And so we want to reassess and make those small tweaks, um, so that we can again, achieve those financial goals. And so one of the metrics that we want to track, just like a doctor would track blood, blood work, or any other data inside the body to make sure that their patients are healthy or at least on going. Toward the right track. So a metric and financial planning is net worth. Right? We want to regularly calculate our net worth. Generally. I would say we should calculate it once or twice a year. Um, but how do we do that? Right. So we want to calculate all of our assets, like cash, our investments and our IRAs 401ks, brokerage counts. Real estate. And then we want to calculate our liabilities, right? Our debts. Um, that we owed people, things of that nature. Right? So mortgage auto loans, student loans. Credit card debt, things of that nature. And then we want to take her, those assets, whatever those add up to minus our liabilities, and that's going to give our net worth. And if we're in the accumulation phase, If we're in our thirties, forties, and fifties, right. We should see that number increase year over year. Right? And so if it's not, why is it not? Is it just because our net worth is at a point where if the market pulls back, uh, it just happened to decline, uh, that year. Or is it because we didn't save as much or we had to, we had more expenses than we were prepared for whatever that case may be. And so. As long as we can see a healthy growth of our net worth year over year. Uh, then we know we're on the right track. And so everyone's net worth is going to. Increase a little bit differently every year, depending on your, your investments and, uh, how much you're saving and things of that nature. But generally we would like to see our net worth grow somewhere between 10 and 15% each year. A year, like the last two years where the market has done really well. Um, if you're more aggressive, aggressively invested and you have a significant amount of money. Uh, in the stock market, uh, you may see it grow a little bit more. Um, and years where there's downmarkets you may see a grow a little bit less, but we do want to see it grow. Uh, generally year over year, right? The next metric. Uh, especially if you're in this accumulation phase is savings rate. So how do we track our savings rate? Talked about this a bunch, but we want to take, uh, how much we have saved and a dollar amount, right? So if we've saved$10,000,$20,000, a hundred thousand dollars, we want to divide that by our total income. And that will give you some sort of percentage, um, generally. If you're wanting to retire early, we want to be in that tool and 15 to 25% range. Um, but if you're like, Hey, I'm just going to work forever. Generally somewhere between 10 and 20% will suffice. Obviously. Everyone's situation's a little bit different, but if you're in that 10 to 20% range, you're probably doing just fine. But, um, if you have more, uh, Goals where you want to retire early, become financially independent. In a shorter amount of time, you'll need to save more. Right. Um, and then we want to look at our debt rate, right? So, uh, do we have student loans? Do we have mortgages? Do we have auto loans and how much of that those payments are taking from our income? Right. So. If we have a$10,000 a month pay income coming in, how much of that$10,000 is going to debt. We generally want to keep that under. 25%. Um, and so, uh, especially. That consumer debt. We want to keep, uh, quite a bit lower. We want to keep around 10%. Um, whereas our mortgage, we can push to that 25 to 30%. Um, but we want to keep that in a manageable position because we have 40 or 50 or 60% of our income going to debt. Uh, that's really going to hinder our ability. Uh, to save long-term. So we want to, these metrics are just going to say, okay, this is where we're at. My net worth is here on January 1st. This is where I expect it to be on January 1st, the following year. Uh, what do I need to do to get there? My savings rate. It was 10% in 20, 24. I really would like to get it to 15%. What w what do I need to do? Do I need to create more income or do I need to cut my spending, uh, to get to that 15%? Right. And so these metrics are. Are neither good, nor bad. They're just a point, uh, where you can look at and say, okay, this is where I'm at. And this is where I need to go or what to do. To, to get to my financial planning goals. So. Once we have those metrics, then we can kind of reset or reassess those goals. Um, set some milestones for us in 2025. Yes. We may have a long-term goal of retiring at age 50 or 55 or 65. Whatever that goal may be. Um, but let's try to say, okay, this year in 2025. I need to save 20% of my income. Or I need to increase my income by 10% so I can meet these goals, whatever. Uh, that may be. So breaking down that larger goal of retirement into a year of 2025. Um, so that you can have it more. Uh, manageable chunks, um, and see progress as we move along. Right. Uh, the next thing is to. Uh, use technology to your benefit get organized, right? So if you haven't made some of your contributions to, uh, your retirement accounts or brokerage accounts and things of that nature, automatic. Go ahead and start working on that. Uh, make those things automatic. So you don't have to think about it and you can get those money into the proper accounts. If budgeting is your issue, and you're worried about. Uh, where my money's going, things like why NAB. Uh, personal capital. A rocket money. Uh, there's a bunch of different apps and tools out there that can help you budget and get your money. Right. Right. So, um, so things to help you track your money. And then, uh, goal specific tools. There's always Betterman fidelity, and there's a bunch of other tools. We have our own proprietary tools here at Palm valley wealth management, but. Uh, uh, use tools to your advantage, use this technology to your advantage so that you can get organized and meet these goals for 2025. And then schedule time. Each month, each quarter, uh, so that you can track your self. Uh, over the course of the year. So I'm going to meet with my clients. At least three times this year. Um, and we're going to talk about different aspects of financial planning, but in each time that we're meeting, I'm checking on their situation. Uh, it allows them to kind of put their financial situation in the forefront and not just throw it to the side and forget about it because they have other fires that they're putting out, whatever that may be. Family work. Uh, and so. Uh, making sure that you have time to sit down and track periodically throughout the year. Uh, we'll help you stay focused on the goal, right? So none of these are. Uh, very, wow. Oh, this is. A novel idea. Um, I want to make sure that you're tracking your progress, reassessing your goals, um, so that, uh, you can kind of do the blocking and tackling. Uh, financial planning. Um, And get the basics, right? Because that's the vast majority of financial planning get these basics. Right. And then you can start to optimize. Uh, the rest of your financial world. The next checks. Checklist item number two. Uh, is to review your tax strategies. So you may have just come off of running some calculations to, uh, maybe do Roth conversions or charitable giving things of that nature. Well, now we should start thinking about, okay, well, Um, one or do we need to make adjustments to our withholdings? If we're a W2 employee? Do we need to make adjustments to, um, our quarterly payments. If we're business owners. Um, should I start to think about, uh, some Roth conversions for this year? If I know that I'm going to have a down year in income, for whatever reason. Or tax loss, harvesting. Uh, if maybe there's a big loser. Uh, that you have in your portfolio that you want to just go ahead and take advantage of, uh, so that you can capture that loss move forward into the year. Uh, things of that nature. So. Uh, those are some things to think about as far as reviewing your tax strategies. But also, um, maybe adjusting your 401k, right? So, uh, maybe you're putting into Roth and because you had a big increase of income. Uh, it may make sense to go into pre-tax deductions or maybe you need to increase. Uh, the amount that you are payroll deducting to put into that 401k. Uh, so that you can meet your savings rate goal, right? So just reviewing, uh, your savings contributions. Whether it's pretax or Roth, um, adjusting your withholding or quarterly payments, and then looking at potential other tax savings strategies like charitable giving, um, broth versions, tax loss, harvesting. You may not, uh, uh, actually do these things right away. Uh, especially the, the ladder of, um, the strategies, but you want to start thinking about them so that you can have an idea and a game plan as the year move forward years, move forward. I'm here. Uh, in 2025. Tax planning is a year round thing. It is not, uh, uh, April 15th things. So, uh, if you can wrap your head around, Hey, we should always be thinking about tax. Tax planning. Um, then, then you'll be able to maximize, uh, kind of what your situation calls for. Um, cause again, I always say taxes are your biggest expense. Do what you can to avoid paying the tax man. Uh, a tip. And, uh, and that will. Significantly help your net worth over time, more so than, uh, some of these other strategies that people throw out there. So checklist item, number three, optimize your investments or review your investments. So conducted an investment portfolio review. So. Uh, should you be rebalancing? Because this market has, um, increased quite a bit over the last two years. Maybe you have some big winners that you need to take some overconcentration away rebalance. So sell those over concentrate positions and rebalance back into maybe some, uh, uh, less big winners, um, or just get back to that original allocation that you want. Um, and so making sure that we're properly diversified. Uh, reassessing your risk tolerance and your risk capacity, right? So yes, the market has been good. The last two years. Um, but if you start to fill a pool back of 5, 10, 15, 20%, for whatever number of reasons. Uh, are you going to freak out and sell? Right? And so. Reassess where you're at, or maybe you're getting closer to a goal where it doesn't make sense to be as heavily invested in stocks. Maybe you need to take some risk off the table. Um, and move into some more stable investments because you're, you're getting ready to buy this house. And then the next year or two, or you're getting ready to retire and you need a little bit more cash on hand. Whatever that may be reassess, that risk tolerance and that capacity and what your goals are. Um, and that will help you get into the proper allocation. Um, Again, check for those rebalancing opportunities and then explore a tax deficient. Uh, vehicles. So if you maybe got into investing last year, Um, and, and you started out in a Tod account and you're investing in mutual funds. Well, ETFs may be a little bit more tax advantage for your situation. Or single holdings, maybe even more tax efficient depending on your situation. Right? So are you based off the type of account that you have in the investments inside of there? Are you taking advantage? Of, uh, the type of holdings that you have, um, and, and making sure that your, your accounts are as advantaged as possible. Now, if you're an IRAs, things of that nature, Um, your, your holdings don't necessarily matter from a sense of what type of investment vehicle they are. Um, now in your Ross and things of that nature, your post-tax. Dollars. You're going to want to, you're going to want to, uh, have more growth type investments in there, and then your pre-tax you'll want to have more your bonds and. Uh, dividend type investments, but. Um, everybody's a little bit different. So, uh, please seek a financial advisor to counter. Walk you through that. If you're unsure. Um, and so the next thing, just a quick reviewer fees. Um, make sure that you're not getting overcharged for, um, the same type of, uh, let's say you're in a mutual fund and there's a similar ETF. Uh, well, generally mutual funds causal, but more so. Uh, maybe switching to an ETF will save you a little bit on that management fee, things of that nature. Uh, so just take a quick review of your fees, whether inside your investments. And then look for new opportunities, right? Uh, should I be investing in something different? Should I turn my risk type appetite up? Um, because maybe our low, more competent understand how the market works now. Um, or maybe I should turn it down. Uh, I really didn't like how volatile the market was in the last quarter of the year. Um, even though that we were still up 15, 20, 20 5%, whatever ends up being. Um, so just think about those things. Checklist item number four. Uh, review your insurance. Um, so. We want to, uh, just check our beneficiaries on our accounts. Right? So if we have life insurance, Uh, disability insurance, things of that nature. We want to make sure that those benefits still make sense for us. Um, do I have enough life insurance? Are the beneficiaries, the beneficiaries that I, that I desire them to be. So whether that be my wife or my husband or particular family member, if things have changed, maybe they have passed away. Um, maybe they're no longer married to you, whatever that is. Make sure you're checking those beneficiaries and then, uh, re reassessing, do I actually need this million dollar term? Or do I need more or can I get rid of it? Whatever that may be. Right. Checklist item number five. Plan for major expenses. So this is a good opportunity to think about, okay. My going on a vacation this year with my family. Uh, am I doing any major home renovations? Do we have college to pay for weddings to pay for, uh, what are some things that I need to pay for this year and how do I start to budget for those? Right. So. Um, if you're not thinking you off that it'll creep up on you. Right? So we just. Uh, most people just celebrate it either at Christmas or Hanukkah. And if they weren't planning and they plan to have a significant amount of spending, whether that's for presents or parties or whatever for the holidays. They don't. Plan for that, that can sneak up on you and, and then you have a larger credit card bill, then you expect it. And now you're having to take out a savings and things of that nature. So go ahead and think about those things, even if you don't know for sure what it would cost. Uh, setting some, some money aside each month until you get to that vacation or that home renovation. Uh, will greatly increase your. Uh, ability to pay for that expense and not have to dip into other areas of your wealth. Um, to make sure that those things are paid for or financing it and having to take out loans and all that craziness. So, um, So understand where those expenses are coming from. Um, the next thing, evaluate your debt management strategy. So if you're still paying off student loans or credit cards or automobiles, whatever that may be. Uh, think back to, uh, 20, 24, did you pay off the amount that you want it to pay off? If you're paying things off quicker? Um, and are you taking advantage of a certain type of debt payment plans such as the avalanche debt payment repayment plan? Uh, or the snowball effect. Um, if debt is important to you and you need to get it paid off because maybe your debt to income ratio. Is higher than it should be me again, like I said earlier, if it's in that 30 to 40 or plus percentage, um, you really should concentrate on getting some debt pay down because that's going to inhibit your ability to save. Um, and, and honestly just have a more fruitful lifestyle because your essentially working to pay off debt. Right. So, um, evaluate that debt. And, uh, and then one thing that is often forgot, um, a lot of people don't revisit this, uh, very often they just assume the$5,000, they put it into a savings account as good for their emergency fund, even though their lifestyle has increased over the last five years or whatever it is. Right. So revisit your emergency fund levels. If you. I created an emergency fund four or five years ago, and maybe you're a resident. Uh, and then now you're an attending physician. Your situation is going to look a lot different. Or maybe you were an associate attorney now you're a partner making much more money, right? Uh, and you've increased your lifestyle. You bought a bigger house, you have more kids and more expenses and things of that nature. If your, uh, emergency fund is at the same level, it was in those previous five years. It's probably not enough. So reassess and say, what is a good level of six? Uh, three to six months worth of expenses. And do I have enough to cover that? In the event I have. Uh, I hit my out-of-pocket max on my health insurance, or I have, um, some sort of car wreck or I can't work for a few months or whatever that may be. Um, making sure that you have enough cash on hand to handle those expenses, um, because that can really throw off your plans, especially in the short term, especially for 2025, like we're talking about this podcast, but. Could have a longer lasting effects. So those are some things to think about. Um, If you were, uh, worried about getting organized and, uh, your 20, 25, um, I encourage you to go to my website, Palm valley, wm.com. Schedule call with me. We can talk about how to get organized, how to calculate all, all, a lot of these metrics to look at how to achieve getting from point a to point B. Um, that's what I do for clients. I've been doing this almost a decade now. Um, so it's, it's no cost to you to schedule a call. You can figure out, Hey, do I need this? Do I not? Um, and so. Uh, I think it's. Worship time to go ahead and get your finances, right? So that, um, you can start meeting those financial goals and give you more flexibility and optionality in your financial world. So if you feel like a friend would benefit from this podcast, go ahead and share with a friend, leave a five-star review and subscribe to my YouTube channel on R Kelly CFP and. Uh, we'll see you in the next one.