The Best Financial Advice I ever received was?

This week you get a twofer in one post. The first is on the best financial advice I ever got, and the second is a follow on to my capital gains on your home post.

What is the best financial advice you’ve ever received?

I read an article this week entitled “The Best Financial Advice I Ever Got” written by Lexy Swall, Audra Melton, and Michael Bucher for The Wall Street Journal. Let me summarize some of the advice by different individuals.

• Don’t look at your 401K statements. – Charles Rotblut, Vice President of the American Association of Individual Investors

• Live on one income. – Lazetta Rainey Braxton, CEO of Financial Fountains

• Don’t trust people who ask for money upfront. – Rick Ferri, Financial Analyst, Investment Advisor, and Consultant

• Don’t sweat the small stuff. – Colin F. Camerer, Robert Kirby Professor of Behavioral Economics at CalTech

• Not a borrower be. – Manisha Thakor, Vice President Brighton Jones

• Invest 2% of your income in you. – Ted Jenkins, Co-CEO of oXYGen Financial

• Be prepared for the unexpected. – Marguerita Cheng, CEO Blue Ocean Global Wealth

• Don’t depend on somebody else for money. – Stacy Francis, President Francis Financial

• Be smart about probabilities. – Benjamin H. Harris, Former Chief Economist to Vice President Biden.

• Follow a formula for retirement savings. – Maddy Dychtwald, Author, Co-founder Age Wave

• Always take a positive, long-term view. – Michelle Perry Higgins, Principal at California Financial Advisors

• Don’t be a copycat – Peter Lazaroff, Chief Investment Officer at Plancorp

• Wait to buy a starter home. – Patrick Lach, Assistant Professor, Indiana University Southeast, and Founder of Latch Financial

• Let the Job find you. – Beth Kobliner, Author and Financial literacy expert

• Investors are predictably irrational. – Allan S Roth, Founder Wealth Logic

• Ignore the advice of others. – Bruce E. Wolfe, Principal C.S. Wolfe & Associates

Do you sense a theme here?

For me the best financial advice I ever got was not actually advice, but action. When my parents passed away, they were completely out of debt and had saved a little money plus the equity in their house to give to the four of us kids. As I get older, I think this is the best advice I can give to myself. Being out of debt when I pass on. We all think we are going to get there, then life gets in the way. I think the theme of all of this is saving early, letting your money work for you for the long term, and don’t live beyond your means.

I do have one other piece of advice that I give to myself as well as others. I try and be a learner every day. I try to learn a new tool, or read something that broadens my knowledge base each and every day.

I read and interview of Keanu Reeves. He was talking about working with Anthony Quinn, who at the time was over 80 years old. He was amazed that while on the set, Anthony was always on the phone hustling up more business. And I quote, from the article in GQ Magazine, The Legend of Keanu Reeves, by Alex Pappademas.

“There's this idea that, like, at some point you're going to be set,” Reeves says. “And then maybe there won't be so much working on working. It just struck me that this gentleman, this legend, at 80…”

Still out there selling it. Trying to get parts.

“Yeah,” Reeves says. “Anthony Quinn.”

This should be a lesson for us all. Always be hustling.

Drop a comment in the comment section. Would love to hear what has been the best piece of financial advice you ever got.

Secondly, a follow on for the blog post “You’ve Sold your Home. Now the IRS wants your Money.”

I’ve had a couple of questions related to taxes owed on selling your home. The questions were:

Is this related to a 1031 or 1231 exchange?

What if I live in my house less than two years, do I still get the $250,000 (Single filer) or $500,000 (Married filing Jointly) tax on selling your house exclusion?

What is a 1031 or 1231exchange?

A 1031 or 1231 exchange allows owners to avoid paying taxes on sold real estate when the new real estate is alike. These codes only applies to Commercial Real Estate so have no bearing on the sale of your private residence.

The second question is harder. Say you buy a house, but for some reason need to sell before the two-year allotment period (You have to have lived in the home two years to take the exclusion). The IRS says you can take a portion of the exclusion. If you buy a home and then sell after one year, you can still get a portion of the Gain on Real Estate Tax Exclusion.

Here is an example:

As a single person, you bought a condo and lived in it for a year, after which you get laid off from your job and can’t make your mortgage payments. You decide to sell your condo and move in with your college roommate. You may get ½ of the exclusion for Single filers. $250,000/2 = $125,000 Exclusion on the Gain from Selling your Home.

From my research, the IRS is semi lenient on reasons you can still get a partial exclusion even if you haven’t lived in the home for a full two years. Some of the reasons the IRS will give you a partial exclusion are:

• A death in the family.

• Losing your job or having to file for unemployment.

• Can’t afford your home anymore due to a of change of employment or marital status (Divorce).

• Natural disaster destroys your home.

• You have twins or multiple births

There are some other reasons the IRS will bend the two-year waiting period such as extreme bullying, personal safety, etc., but they seem to be on a case by case basis. Contact a tax advisor with additional questions.

Stay safe out there and have a great week.