How to Build Your Financial House From the Foundation Up
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If you’re a fan of home improvement shows, you know how this goes: The clients, usually a couple hoping to build, buy or renovate a home, are mostly focused on the aesthetics — the kitchen countertops, the bathroom tile, the light fixtures, the wainscoting.
But, of course, there’s more to designing a home than picking the flooring or the fixtures. Without a strong foundation, sturdy walls and a dependable roof, the couple’s beautiful house won’t hold up well against the elements, age and other risk factors during the years their family lives there. Their real estate agent or contractor often has to remind them about what’s really important as they move forward.
But, of course, there’s more to designing a home than picking the flooring or the fixtures. Without a strong foundation, sturdy walls and a dependable roof, the couple’s beautiful house won’t hold up well against the elements, age and other risk factors during the years their family lives there. Their real estate agent or contractor often has to remind them about what’s really important as they move forward.
And I have to say, I get where those pros are coming from every time — because the same holds true for building a family’s financial house. (Though I’ve yet to see an entire television network devoted to designing a financial portfolio.)
If you’re working with a financial adviser, you may have heard him or her refer to drawing up a “blueprint” for reaching your financial goals. And that’s an apt description. When you’re building your fiscal house, you’ll want to be sure you have a detailed plan that includes every aspect of your financial future and the methods and materials you’ll be using to help get you to your objectives.
Your financial portfolio — the collection of assets you’ll use to create a safe and comfortable future — should be allocated and managed in a way that helps you weather economic downturns, market volatility, fluctuating interest rates, rising inflation, risks that come with aging and other changes in your life.
Creating the blueprint for your financial house
What should your financial blueprint look like? It will be different for everyone. But a secure fiscal house will have the same basic characteristics as a well-built home.
A strong foundation
Your most stable assets typically will form the foundation of your financial portfolio. Although no investment is without risk, these are generally assets you can count on to stay solid — and provide a reliable income — when the economy or your personal finances take a hit or feel shaky. Some examples include:
Savings and certificates of deposit (CDs), which are protected by the Federal Deposit Insurance Corp. (FDIC)
Government bonds, which are backed by the U.S. Department of the Treasury
Fixed and fixed index annuities that are protected by a reputable insurance company.
Sturdy walls
The “walls” of your fiscal house should be sturdy — but because they can be repaired or rebuilt more easily than the foundation, these assets don’t have to be quite as invulnerable. Investments at this level can add value to your portfolio (by providing income, income protection and diversification), but they also may be exposed to moderate risk, so there’s some potential for growth. A few examples include:
Corporate and municipal bonds
Conservative dividend investments
Private real estate investment trusts (REITs)
A dependable roof
Of course, you want your roof to hold up against whatever the elements might throw at it. But if it is damaged, you likely can fix or replace it without the whole house falling in — as long as the lower levels are built to last. The roof of your fiscal house represents the investments that carry the highest risk you can tolerate (both financially and emotionally). And they can help you grow your money for the future. These assets might include:
Stocks
Mutual funds
Exchange-traded funds (ETFs)
Variable annuities
Where to start
Of course, every individual and family has different needs — and every financial plan will (or should, at least) be a little bit different to accommodate those needs. But if you’re looking for a good starting point, you may want to use the “Rule of 100” to determine how your assets should be allocated when building your fiscal house. That means taking the number 100, subtracting your age and using the difference to determine the percentage of your money you want to invest in riskier assets to maximize growth.
If, for instance, you’re 45 and in no rush to retire, you might feel comfortable investing 55% of your portfolio in stocks or ETFs. You’ll get the growth you’re looking for, but should you lose money in a market downturn, you’ll still have several years to recover.
But if you’re closer to retirement — let’s say 65 — you may want to limit the risk in your portfolio to 35% or less. You still can benefit from some growth, but with less time to recover from a market decline, you may choose to play it a bit safer.
Don’t forget ongoing maintenance
Making occasional upgrades and repairs can be an important part of maintaining your home’s value. And the same holds true for your portfolio. It can be helpful to reevaluate your investments and investing strategies at least once a year to be sure your plan stays aligned with your goals.
Over time, asset allocations may shift based on market performance, and you may need to rebalance your portfolio. You also may find that your tolerance for risk has changed, and a little remodeling is necessary. Or, if you realize your original design just isn’t functional for your family, you may want to seek a second opinion or go for a complete renovation.
You don’t have to look hard to find an example of why it’s so critical to design and maintain your fiscal house for the long haul.
Just a few short years ago, pretty much everyone’s financial portfolio was doing well thanks to an 11-year bull market. Then in March 2020, the COVID crisis rolled in and caught everyone off guard. And we all got a good reminder of how important it is to build a fiscal house that holds up against the storms we can predict — and those we can’t.
Is your fiscal house move-in ready?
One thing we’ve all learned from watching home improvement shows is that doing it yourself isn’t always the best way to go.
Similarly, some parts of investing may be doable on your own — and even fun. And you should have plenty of input into what you want from your plan.
But you’ll likely find it makes sense to work with a pro when you’re drawing up your overall financial blueprint — or making any big choices or changes. Mistakes and oversights can be costly, especially when you’re closing in on retirement. You’ll need a portfolio that’s carefully planned to keep you secure for the many years ahead.
Kim Franke-Folstad contributed to this article.
The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.
Kurt Supe, John Culpepper and Brian Quick offer securities through cfd Investments, Inc., Registered Broker/Dealer, Member FINRA &SIPC, 2704 South Goyer Road, Kokomo, IN 46902, 765-453-9600. Kurt Supe, Andrew Drufke and Brian Quick offer advisory services through Creative Financial Designs, Inc., Registered Investment Adviser. Creative Financial Group is a separate and unaffiliated company. The CFD Companies do not provide legal or tax advice.
Credit: ANDREW DRUFKE
I just finished reading a report on what tax professionals should expect from the Internal Revenue Service (IRS) in the very near and distant future. These changes are coming from the new Trump administration cuts via DOGE. First off, is a 40% planned workforce deduction by May 15. This will affect all parts of the IRS but mainly in audit and tax assistance areas. Second is the closing of over 110 taxpayer assistance centers. These centers help taxpayers file tax returns, answer questions and help in resolving issues. Lastly, the Direct File Program started in 2024 is under review and may not be continued. So, what does the mean for the taxpayers? A smaller workforce means less person-to-person interaction on matters. Any attempt to directly contact a person at the IRS will probably be met with a long time on hold. The IRS will also be using technology to replace a lot of what is being done by a person. Systems will be put into place that will review returns and flag entries that may or may not be “normal”. One should expect to see more correspondence from the IRS from this questioning an item on the return. IRS will push taxpayers to communicate with them via digital platforms like through an IRS account, which we talked about in previous blog post. IRS will also push that more documentation will have to be submitted digitally to work in their systems. Taxpayers will either have to work with the IRS via their platforms or seek out the assistance of a tax professional to help with issues. Tax professionals are also going to have to improve the way they work with the IRS to have an efficient and effective way of communicating. Taxpayers who used the Direct File Program in 2024 may have to find another way to file in 2025 and beyond. They will either have to look at one of the other “free” programs from a third party, buy the tax preparation software or employ a tax professional to prepare their return. With these changes, taxpayers are also going to have to be careful with their documentation of items claimed on the return. Documentation will need to be more real time via dates of transactions and real documents, not estimates. The reduction in the IRS is going to result in headaches, less human interaction, and more reliance on technology
You think planning a wedding ceremony is complicated? Wait till you see the possible tax issues involved. If you are getting married this year, there is a long list of things you need to be aware of and plan for before tying the knot that can have a significant impact on your taxes. And there are a number of tax-related actions you should take as soon as possible after marriage. Considerations Before Marriage Filing Status – For tax purposes, an individual’s filing status is determined on the last day of the tax year. Thus, regardless of when you get married during the year, you and your new spouse will be treated as married for the entire year and, therefore, can no longer file as single individuals or use the head of household status as you may have done prior to this marriage. Your options are to file using the married joint status, combining your incomes and allowed deductions on one return, or to file two separate returns using the married filing separate status. The latter is not the same as the single status you may have used in the past and can include some negative tax implications. Filing separately in community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin) can additionally be complicated. Also, the terms of a prenuptial agreement, if you have one, can affect your filing status choice. Deductions – The standard deduction for each year is inflation adjusted and for 2025 for a married couple is $30,000 and for a single individual is $15,000. So, if both of you have been filing as single and taking the standard deduction, there is no loss in deductions. However, if in past years one of you had enough deductions to itemize and the other took the standard deduction, after marriage you would either have to take the joint standard deduction or itemize, which might result in a loss of some amount of deductions. There could also be an overall reduction of the standard deduction if one or both of you previously filed as head of household. New Spouse’s Past Liabilities – If your new spouse owes back federal taxes, past state income tax liabilities or past-due child support or has unemployment income debts to a state, the IRS will apply your future joint refunds to pay those debts. If you are not responsible for your spouse’s debt, you are entitled to request your portion of the refund back from the IRS by filing an injured spouse allocation form. Combining Incomes – Individuals filing jointly must combine their incomes, and if both spouses are working, combining income can trigger a number of unpleasant surprises, as many tax benefits are eliminated or reduced for higher-income taxpayers. The following are some of the more frequently encountered issues created by higher incomes: Being pushed into a higher tax bracket. Causing capital gains to be taxed at higher rates. Reducing the childcare credit which begins to phase out when your combined incomes (MAGI) reach $400,000. The childcare credit may be reduced if either or both of you have a child and you both work, because a lower percentage of expenses applies as income increases. The possible loss or reduction of the earned income tax credit which applies to lower income individuals. Limiting the deductible IRA amount. Triggering a tax on net investment income that only applies to higher-income taxpayers. Causing Social Security income to be taxed. Reducing or eliminating medical itemized deductions. Filing separately generally will not alleviate the aforementioned issues because the tax code includes provisions to prevent married taxpayers from circumventing the loss of tax benefits that apply to higher-income taxpayers by filing separately. On the other hand, if only one spouse has income, filing jointly will generally result in a lower tax because of the lower joint tax brackets. In addition, some of the higher-income limitations that might have applied to an unmarried individual with the same amount of income may be reduced or eliminated on a joint return. Filing as married but separate will generally result in a higher combined income tax for married taxpayers. The tax laws are written to prevent married taxpayers from filing separately to skirt around a limitation that would apply to them if they filed jointly. For instance, if a couple files separately, the tax code requires both to itemize their deductions if either does so, meaning that if one itemizes, the other cannot take the standard deduction. Another example relates to how a married couple’s Social Security (SS) benefits are taxed: on a joint return, none of the SS income is taxed until half of the SS benefits plus other income exceeds $32,000. On a married-but-separate return, the taxable threshold is reduced to zero. 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More complicated yet, if either or both of you are included on your parent’s’ Marketplace policy, those insurance premiums must be allocated from the parents’ return to your return. Spousal IRA – Spousal IRAs are available for married taxpayers who file jointly where one spouse has little or no compensation; the deduction is limited to the smaller of 100% of the employed spouse’s compensation or $7,000 (2025) for the spousal IRA. That permits a combined annual IRA contribution limit of up to $14,000 for 2025. For each spouse age 50 or older, the maximum increases by $1,000. However, the deduction for contributions to both spouses’ IRAs may be limited if either spouse is covered by an employer’s retirement plan. Capital Loss Limitations – When filing as unmarried, each individual can deduct up to $3,000 of capital losses on their tax return for a possible combined total of $6,000, but a married couple is limited to a single $3,000. 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In either case, it may be appropriate to review your withholding (W-4 status) and estimated tax payments, if any, to make sure that you are not going to be under-withheld and that you don’t set yourself up to receive bad news for the next filing season. The IRS provides a W-4 Webpage that provides links to the form and a tax withholding calculator. Notify the Marketplace – If you or your spouse has purchased health insurance through a government Marketplace, you must notify the Marketplace of your change in marital status. If you were included on a parent’s health insurance policy through a Marketplace, then the parent must notify the Marketplace. Failure to notify the Marketplace can create tax-filing problems. If you have any questions about the impact of your new marital status on your taxes, please call this office.
Identity Theft. We hear about this all the time. It is on TV, on the radio or the internet every day. We think about this being where someone uses your personal information to get a loan, set up a credit card in your name, etc. Did you know that thousands of tax returns are filed every year that are fraudulent. Someone uses another person's social security to file a return, receive a refund and then disappear. Every year we have a client or two who has had their IRS account “hacked” with an identity theft issue. How can you secure your tax filing better? It is called Identity Personal Identification Number (PIN). This is a unique number assigned to you each year by the IRS which must accompany your e-filing of your tax return. Each year, the IRS will send you a notice via mail, with the unique number assigned to you that year. You will need to give it to your tax preparer to file your return. Without the return will be rejected. That notice will also be available in your online account. The first thing you need is an online account with the IRS. We spoke about this in a previous post. You can go to this link to find out more about individual PINs. Get an identity protection PIN | Internal Revenue Service. When you file a joint return with your spouse, both the taxpayer and the spouse should get a PIN. Without that, the return is only 50% secure. We highly encourage our clients to get this PIN to secure their filings each and every year from here on out. If you have any questions, please feel free to contact us.