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Here at CayDen Wealth Management, we emphasize the fact that creating a budget is one of the most crucial steps toward achieving financial stability and reaching your financial goals. Whether you're saving for a big purchase, trying to pay off debt, building long term wealth, or simply want to manage your money more effectively, a well-thought-out budget can be your roadmap to financial success. Here are five of CayDen's essential tips to help you create and maintain a realistic budget.



1. Be Realistic with Spending Behavior



One of the biggest mistakes we see people make when creating a budget is being overly optimistic about their spending habits. It's important to be honest with yourself about where your money goes each month. Start by tracking your expenses for a few months to get a clear picture of your spending patterns. This will help you understand your true financial behavior and identify areas where you might need to cut back. CayDen's Sr. Financial Planner, Shane Dennehy, CFP®, ChFC®, says, "Awareness is key for success. Tracking spending brings awareness to where your money is coming from, and more importantly, where it is going to. Once you have awareness of your cash flow you can determine if that money is being spent and saved the way you want."



For example, if you enjoy dining out, don't set an unrealistically low budget for meals and entertainment. Instead, allocate a reasonable amount that reflects your current lifestyle and look for gradual ways to reduce it if necessary. Being realistic about your spending will make your budget more sustainable and easier to stick to over the long run. Consistency is critical for long term success.


2. Budget for Miscellaneous and Unforeseen Expenses



Life is full of surprises, and not all of them are pleasant. That's why it's crucial to include a line item in your budget for miscellaneous and unforeseen expenses. This should be in addition to your emergency fund. And this can cover anything from a sudden car repair to an unexpected medical bill. A good rule of thumb is to set aside around 5-10% of your monthly income for these expenses.



By planning for the unexpected, you can avoid financial stress and prevent these surprises from derailing your budget. It’s also wise to build an emergency fund over time, if you don't already have one, which can serve as a more established buffer for larger unexpected expenses.



3. Being Successful with a Budget Takes Practice. Consistency is Key.



Creating a budget is just the first step; the real challenge is sticking to it. Like any new habit, budgeting takes practice and persistence. Don’t be discouraged if you slip up or overspend in certain categories. The key is to learn from these experiences and make adjustments as needed. Consistency over time creates long term results.



Consider using budgeting tools or apps that can help you stay on track. These tools can provide reminders, track your spending in real-time, and offer insights into your financial habits. Remember, becoming proficient at budgeting is a journey, not a destination. With time and practice, you’ll get better at managing your money.



4. Track Your Progress and Make Changes



Regularly tracking your progress is essential to ensure your budget is working for you. Set aside time each week or month to review your spending and compare it to your budget. This will help you see where you’re doing well and where you might need to make adjustments.



If you notice that you consistently overspend in certain categories, don’t be afraid to adjust your budget. Perhaps you need to allocate more funds to groceries or transportation. The goal is to create a flexible budget that adapts to your changing needs and circumstances.



Additionally, celebrate your successes, no matter how small. If you manage to save money or stick to your budget for a month, reward yourself in a way that doesn’t compromise your financial goals. Positive reinforcement can motivate you to continue your good habits.



Conclusion



Creating and maintaining a budget is a powerful tool for achieving financial well-being and your own version of financial freedom. By being realistic about your spending behavior, budgeting for miscellaneous and unforeseen expenses, practicing your budgeting skills, and regularly tracking your progress, you can take control of your finances and work toward your financial goals. Remember, a successful budget is one that you can stick to and adapt over time. With persistence and flexibility, you can master the art of budgeting and enjoy the peace of mind that comes with financial stability. Consistency creates lasting results.



About the author: Daniel Caycedo is the Investment & Tax Strategist, as well as a Wealth Management Advisor for CayDen Wealth Management, a Colorado registered investment advisory firm with offices located in Broomfield, Colorado and Charlotte, North Carolina. Daniel works out of CayDen Wealth Management's Charlotte office, providing virtual, fiduciary, comprehensive wealth management and tax services for high performing professionals and their families. Services include proactive Financial Planning, Investment Management, & Tax Services.

Happy New Year, Savers and Investors! With 2024 upon us, now is a great time to start your new year financial planning because the IRS has released their updated and inflation adjusted numbers for the new Tax Year. So let’s dive into the top 3 tax minimization planning opportunities for you in 2024, so you can pay less in taxes, save more of your income, and build your wealth!


Three Big Financial Planning Updates:


  1. The IRS provided a $500 increase to the 401k maximum contribution limit! Now you can save up to $23,000 total, or a maximum of 25% of your income, for people under the age of 50.

  2. The IRS also has provided A 7% increase to the HSA maximum contribution limit! Which is now $4,150 for individuals, and $8,300 for family coverage.

  3. And lastly, the IRS has increased the Standard Deduction by $1,500. Now you will get a Standard Deduction of up to $14,600 for single filers and $29,200 for joint filers.


Bonus Tax Saving Tip: Combining the max HSA contribution, max 401k contribution, and full Standard Deduction means you could reduce your taxable income as an individual by $41,750, and a couple married filing jointly can reduce income by $83,500. That’s powerful tax savings that benefit you both presently and in the future.


So the ball is in your court! The IRS has made the updates and now it’s time for you to take action. Proactive planning can mean saving hundreds to thousands of dollars, every year, on your taxes. So plan proactively to pay the government less in taxes, keep more of your cash flow, and save and invest to build your wealth and reach your own version of financial freedom.


About the author: Daniel Caycedo is an Investment & Tax Strategist and Wealth Management Advisor for CayDen Wealth Management, a Colorado registered investment advisory firm with offices located in Broomfield, Colorado and Charlotte, North Carolina. Daniel works out of CayDen Wealth Management's Charlotte office, providing virtual, fiduciary, comprehensive wealth management and tax services for high performing professionals and their families. Services include proactive Financial Planning, Investment Management, & Tax Services.

With the dawn of a new year comes a wave of changes to tax laws and fresh opportunities for tax minimization within your financial planning! The recent release of IRS figures for 2024 signals the perfect time to embark on your Financial & Tax Planning journey for the new year, adopting a proactive approach to tax minimization.


At CayDen, our clients frequently hear us emphasize the value of proactive planning, which translates into saving hundreds to thousands of dollars on taxes both in the present and future—an easy financial win-win. In light of the palpable impact of inflation over the past couple of years, which may have adversely affected your short-term savings rate, it's reassuring to witness the IRS providing inflation adjustments that can directly benefit our financial situations. The simple prescription? Plan strategically to maximize your situation and minimize your taxes. Let's delve into the 2024 financial and tax planning opportunities.


IRS 2024 Tax Planning Updates


Planning Highlights of the IRS Updated Financial Figures for 2024:

(Click the carrot next to the figures below to read more about the changes)

$1,500 Increase To The Standard Deduction

The standard deduction for married couples filing jointly for tax year 2024 rises to $29,200, an increase of $1,500 from tax year 2023.

For single taxpayers and married individuals filing separately, the standard deduction rises to $14,600 for 2024, an increase of $750 from 2023;

and for heads of households, the standard deduction will be $21,900 for tax year 2024, an increase of $1,100 from the amount for tax year 2023.

$500 Increase To Individual Retirement Accounts Contribution Limits

$500 Increase To Company Retirement Account Contribution Limits

$400 Increase To Earned Income Tax Credit

Increases To The Marginal Rates, But Top Rate Remains 37%

$1,000 Increase To Gifting Limits

7% Increase to HSA Contribution Limits

The items listed above represent just a snapshot of the IRS-announced adjustments for tax year 2024. These figures are universally and critically important for successful financial planning and wealth-building, especially during the accumulation phase of your financial journey. While these adjustments are significant, it's essential to recognize that your specific situation may present unique tax planning opportunities. Therefore, we strongly recommend thorough research into tax law changes or, even better, consulting with a professional tax advisor to tailor your strategy and maximize your specific financial situation.


Big Tax Minimization Opportunities For Individuals & Couples


For an individual maximizing contributions to both a 401(k) and HSA, the potential reduction in taxable income is an impressive $27,150.

A couple, married filing jointly, could save and reduce their taxable income by a substantial $54,300. This translates to tremendous tax savings that benefit both the present and future. Your contributions not only decrease your income today but also grow tax-deferred into the future.


According to CayDen Wealth Management's Senior Wealth Advisor and CFP® professional, Shane Dennehy, "Maximizing retirement accounts each year provides a dollar-for-dollar reduction in your taxable income, helping you pay less in taxes and can also prevent you from entering a higher marginal tax bracket, or even lower the bracket you are in." This underscores the importance of regular financial planning and tax minimization to adapt to the dynamic nature of life and changing laws. Proactively planning your household finances can result in savings ranging from hundreds to thousands of dollars on taxes, providing you with more resources to allocate towards what matters most to you.


In essence, proactive planning is a gift to both your present and future selves. With the IRS providing inflation-adjusted figures, the ball is now in your court. Engaging in proactive financial and tax planning not only positions you to pay less in taxes but also to save more money and foster the growth of your wealth. Seeking professional help? Don't hesitate to reach out. Your financial future awaits.



About the author: Daniel Caycedo is an Investment & Tax Strategist and Wealth Management Advisor for CayDen Wealth Management, a Colorado registered investment advisory firm with offices located in Broomfield, Colorado and Charlotte, North Carolina. Daniel works out of CayDen Wealth Management's Charlotte office, providing virtual, fiduciary, comprehensive wealth management and tax services for high performing professionals and their families. Services include proactive Financial Planning, Investment Management, & Tax Services.

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