When someone can't see the forest for the trees, they are so focused on what is immediately in front of them that they are blind to the bigger picture.
This often is the case in financial planning and with inflation rising, the markets falling and our taxes paid or extended, the trees seem particularly huge. But stepping back is useful.
You finished your tax return and simultaneously Googled real estate in zero-tax states like Florida, Texas or Tennessee. I get it. You may be frustrated that you are paying more in taxes than what you perceive to be receiving in services. And those taxes saved could partially support a mortgage in those other states.
After a long winter, spending next year in a warmer climate is even more attractive. This may be a great idea for you, but it also is time to consider the forest.
In order to no longer be a Minnesota resident, you need to spend at least six months out of the state. There are other hurdles to jump through as well. But I cannot understate the significance of being banished from your home for six months.
The forest has family considerations, your network of health care providers, your house of worship, life long friendships, and many other things to which you have become accustomed. Are the dollars in taxes saved dramatic enough when compared to the cost of some of the things that you are giving up?
Moving to make a point only matters if someone is listening. Yes, there are really good reasons to move, and there are really good reasons not to.
You feel like leaves from the tree are falling from your portfolio as the markets have handed back some of the returns you have made over the last few years and you are getting more anxious each month you open your investment statement.
The forest is when you are going to use the money and for what purpose. For example, unless you have saved fully for tuition in a 529 plan (in which case you should have moved that money into cash), then you get to pick what years you spend the money. If markets are soft, use other means to pay. If markets recover, then use the 529's.
If you are retiring and your retirement account has dwindled, remember that you are hopefully only spending a piece of it. If you use a 4% spending policy, then a $100,000 drop in your portfolio cost you $4,000 of spending. Can you replace that in some other way until your portfolio recovers?
It is common knowledge that delaying Social Security will lead to higher annual income, but will it lead to higher lifetime income? Understand what you are really giving up by evaluating the forest and not a single tree.
Big trees make lovely forests. Stepping back allows you to enjoy them.
Spend your life wisely.
Ross Levin is founder of Accredited Investors Wealth Management in Edina.
