“I’m a Tax FREAK”
If you focus on taxes a lot, you’re not alone.
15 July 2019
Someone recently told me this. The person was trying to tell me she is very focused on the tax consequences of any investment or planning decisions made. I can certainly understand her feelings, given many small details left unattended in planning can have crushing consequences.
My advice to this person: don’t get tunnel vision. Focusing on one part of your financials too closely is likely to make you not only miss out on growth opportunities, but also make you not enjoy life as much.
If you are like this person, and are focused on taxes your investments generate more than you should be, but still want to enjoy your gains your choices are:
Get over it, pay your taxes, and go enjoy.
Never cash out and (hopefully) have the satisfaction of compounding gains.
Use lines of credit backed by investments...knowing that if you can’t repay the lines, your investments will be sold to cover it. This can also happen if your investment goes down in value too much. Oh, and I almost forgot, you’ll get charged interest in the process.
Match up selling investments for a loss when you sell other investments for a gain, this is often called “loss harvesting”. Be careful when you do this, if you buy the same investment again in the next 30 days, the IRS will basically pretend you never sold it in something called “Wash Sale Rules” so when you go to sell that investment again, you’ll be taxed on the gain from the price of the first purchase.
I’m a big fan of loss harvesting, I encourage it. I’d rather sell out each year and have a small tax consequence each year than end up in a position five years from now that you don’t want to sell in order to get rid of the risk and diversify or take your dream vacation because the tax consequences would be too painful.