Feng Shui Your Financial House — Day 29

Mariko O. Gordon, CFA
2 min readDec 29, 2023

𝐘𝐨𝐮𝐫 𝐝𝐚𝐲 𝟐𝟗 𝐭𝐚𝐬𝐤 𝐢𝐬 𝐭𝐨 𝐨𝐩𝐭𝐢𝐦𝐢𝐳𝐞 𝐭𝐡𝐞 𝐥𝐨𝐜𝐚𝐭𝐢𝐨𝐧 𝐨𝐟 𝐲𝐨𝐮𝐫 𝐚𝐬𝐬𝐞𝐭𝐬.

Worry about asset LOCATION, not just asset allocation.

𝐎𝐩𝐭𝐢𝐦𝐢𝐳𝐞 𝐭𝐡𝐞 𝐥𝐨𝐜𝐚𝐭𝐢𝐨𝐧 𝐨𝐟 𝐲𝐨𝐮𝐫 𝐚𝐬𝐬𝐞𝐭𝐬.

Each asset class is taxed differently (in the U.S., anyway). You can save a lot in taxes by stashing your different assets in the most tax-efficient places. Once you have your asset allocation done, figure out the best asset location for your holdings.

𝐈𝐧𝐭𝐫𝐢𝐠𝐮𝐞𝐝? 𝐇𝐞𝐫𝐞’𝐬 𝐰𝐡𝐚𝐭 𝐭𝐡𝐚𝐭 𝐦𝐞𝐚𝐧𝐬:

If the holdings in your tax-deferred and tax-exempt accounts are the same as your taxable accounts, you will waste thousands and thousands of dollars by paying taxes you legit, 100% don’t need to pay.

𝐓𝐡𝐢𝐬 𝐢𝐬 𝐞𝐬𝐩𝐞𝐜𝐢𝐚𝐥𝐥𝐲 𝐭𝐫𝐮𝐞 𝐢𝐟 𝐲𝐨𝐮’𝐫𝐞 𝐲𝐨𝐮𝐧𝐠 𝐚𝐧𝐝 𝐚 𝐡𝐢𝐠𝐡-𝐞𝐚𝐫𝐧𝐞𝐫.

Who wants to do that?🤷🏻‍♀️

After you’ve figured out your asset allocation (the mix of stocks, bonds, cash and real estate in your portfolio based on your risk tolerance, circumstances, and stage of life) you need to choose the best location for those assets.

𝐈𝐭 𝐦𝐢𝐠𝐡𝐭 𝐛𝐫𝐞𝐚𝐤 𝐲𝐨𝐮𝐫 𝐛𝐫𝐚𝐢𝐧, 𝐛𝐮𝐭 𝐢𝐭’𝐥𝐥 𝐬𝐚𝐯𝐞 𝐲𝐨𝐮 𝐚 𝐟𝐨𝐫𝐭𝐮𝐧𝐞.

Assets and taxpayers are both taxed at different rates. Bond income is taxed more heavily than qualified dividend income. Depending on your tax bracket, you may be taxed more on ordinary income than on capital gains (either short- or long-term).

𝐉𝐮𝐬𝐭 𝐬𝐞𝐞 𝐢𝐟 𝐢𝐭’𝐬 𝐬𝐨𝐦𝐞𝐭𝐡𝐢𝐧𝐠 𝐭𝐡𝐚𝐭 𝐧𝐞𝐞𝐝𝐬 𝐭𝐞𝐧𝐝𝐢𝐧𝐠 𝐭𝐨 𝐢𝐧 𝐭𝐡𝐞 𝐜𝐨𝐦𝐢𝐧𝐠 𝐲𝐞𝐚𝐫.

Look no further than this handy table and article provided by the folks at Fidelity.

Again, your whole financial picture, including tax, must be considered before you make any moves.

𝐅𝐢𝐧𝐚𝐧𝐜𝐢𝐚𝐥 𝐩𝐥𝐚𝐧𝐧𝐢𝐧𝐠 𝐢𝐬 𝐧𝐨𝐭 𝐚 𝐨𝐧𝐞-𝐬𝐢𝐳𝐞-𝐟𝐢𝐭𝐬-𝐚𝐥𝐥 𝐞𝐱𝐞𝐫𝐜𝐢𝐬𝐞.

But if you have a financial advisor or a financial planner and your taxable and tax-deferred /exempt accounts are identical, I would ask them why. You might save a…

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Mariko O. Gordon, CFA

Built $2.5B money mgmt biz from scratch. Coaching badass women to build & love their businesses, manage their finances, and make sure the thrill is never gone.