You're Investments: That’s not hametz, its $40,000
Investing a few thousand dollars every year for 10 to 15 years will leave you potentially with an extra couple of hundred thousand dollars.
Money Photo: Wikicommons
While I am well aware that US President Obama is in Israel, and that the banking system in Cyprus is in shambles after the attempted theft of individual deposits earlier in the week, it is still the week before Pessah. So however tempted I am to write about one of those issues, I am going to stick to a more practical issue for investors.
As the holiday of Pessah is quickly approaching, cleaning preparations are in full force. While we are knee deep in cleaning solutions trying to get that little, elusive piece of hametz, sometimes we are often in for a pleasant surprise. While my 10- year-old son is happy at finding a pack of unopened sour sticks that he stuck in his underwear drawer to hide from his sisters, I am quite content to find some loose change or even the elusive matching sock underneath my bed.
As is inevitable this time of year, this past week I received three calls – each one telling me how they were cleaning for Pessah and they were going through some drawers and they found some kind of investment statement, detailing the value of an account they had long since forgotten about. After some probing it turns out that each caller had moved to Israel over the past 10 years and had what they thought was a small amount of money in an account in the old country, and they just decided to leave it and eventually they forgot about it.
The potential loss of not taking care of your investments over the long term can be staggering. You can literally be talking about leaving tens of thousands of dollars on the table because of the inaction. Don’t think that just because you have $50,000 no one will talk to you. It’s simply not true.
There is a common perception that one needs to have a lot of money to work with a financial adviser. People often tell me they just assume financial advisers only work with clients who have hundreds of thousands of dollars, and that their $25,000 to $50,000 just isn’t enough to bother with. While there maybe some advisers who specialize in high-net-worth clients, many advisers work with smaller accounts. It’s important to make a few calls and find an adviser who can help you out in your situation.
Just as with your Pessah cleaning, you need to start somewhere.
Your $50,000 isn’t going to double or triple magically.
You need to create a financial plan and start understanding what your short-long term needs and goals are. You can speak to a financial adviser to help you define those goals and needs.When creating the long-term plan with your adviser, it’s also important to take into account future expenses. For example, the purchase of a car in five years, or marrying off children in eight, 10 and 12 years, is all relevant information necessary for the adviser to give you an accurate picture of what you need to do to be able to meet these future expenses.
Start building wealth
Many individuals feel they don’t need to start saving while living in Israel because conventional wisdom says it’s a waste of time. I beg to differ. How many of you own an apartment? Even if you are holding a mortgage by making your monthly payments, you are saving. Just because it’s conventional wisdom doesn’t mean it’s right.
You can save in Israel, you just need to start. Let’s say you have $25,000 to $50,000 and in addition you have children. If you are an American citizen, it’s very important to apply for the child tax credit. In this scenario you could be the recipient of thousands of dollars each year.
I like to encourage investors to take that child tax credit and invest it every year. A few thousands of dollars every year may not seem like the way to grow your wealth, but taken with your starting sum, investing a few thousand dollars every year for 10 to 15 years will leave you potentially with a couple of hundred thousand dollars.
Happy cleaning and hag kasher v’sameach.
Aaron Katsman is a licensed financial adviser in Israel and the United States who helps people with US investment accounts.