“Real World” Personal Strategy Blog

Thanking ahead

“The best years of your life are the ones in which you decide your problems are your own. You don’t blame them on your mother, the ecology, or the President. You realize that you control your own destiny.”

- Albert Ellis

It’s Thanksgiving Week around here [and, I suppose--everywhere ], and we’re all getting set for turkey on Thursday.

The holiday has an interesting history, and not just the original story (which I won’t rehash now –you can Google that one). I did want to highlight for you, though, when it actually became an official holiday. It was in 1863, when President Abraham Lincoln finally proclaimed the last Thursday of November as a national day of Thanksgiving that should take place every year.

Now … I believe that President Lincoln struck on something very important. You may have noticed the date–the country was mired in civil war, and, of course, the national mood was bleak. But President Lincoln understood that the mindset of a nation (and a family) is to be protected at all costs. Yes, it may have *seemed* a ceremonial gesture, but I can assure you that if a war-torn nation can turn its eyes upward–so can you and your family.

And, therein lies the wealth (and happiness) “secret” of Thanksgiving: When you walk in gratitude, you never feel poor.

I’ve told you that I’ve worked with families with seven, eight figures in their bottom line…but some of them are flat-out miserable. Why? They’ve forgotten gratitude, and they can never get enough. Yes, they may *seem* wealthy, but they sure ain’t rich.

“Rich” is a state-of-mind–and it’s tied to gratitude. It can affect how you see savings, retirement and investment. And, of course, gratitude is the enemy of fear. It’s like an opposite magnet for it–walk in gratitude and fear just melts away.

So, here’s my advice for this week: Whatever financial situation you happen to find yourself in, be thankful. There are hidden blessings in any trial … and hidden fear-traps in any windfall. Find them, savor the blessings, and watch your family thrive.

For my part, I’m simply grateful for YOU.

I’m grateful for your trust, for your attention to my weekly ramblings, for your business, for your referrals…for so many things. I don’t forget that it’s people like you who enable me to do what I do–to breathe life and hope into families, and their financial situations.

And to help them enjoy the fruit of their labors, while carrying the peace-of-mind that the grasping hand of taxation is minimized.

So thank you. For everything.

What things *should* look like in your accounts

“Beware of undertaking too much at the start. Be content with quite a little. Allow for accidents. Allow for human nature, especially your own.”

- Arnold Bennett

Well, we’re getting ready to see what Congress is going to do in the final session before the new members are sworn in (called the “lame duck” session).

I was recently thinking: Isn’t it interesting how decisions made by a few hundred men and women in a distant building actually *can* impact our life so much? Truly, the decisions on tax cuts, spending, etc. will have a significant impact on your wallet soon, perhaps more than most years I’ve been doing this.

I don’t know about you, but I hate having to “wait” on other people’s decisions to plan my course of action. That’s why I try to set up specific benchmarks for my business and my life by which to judge success–regardless of how other people might react.

And this is a good week to write about benchmarks for YOU, –specifically when you find yourself at a certain point in life. While I’m not a financial planner per se, I do happen to deal with these issues on a regular basis…enough that I know what I don’t know, at least. And, of course, I know what I know…

Your Mid-Life Financial Checkup

Generally speaking, many wise adults see a doctor when they hit 50. And the great thing about (most) doctors, is that they’re not financially-incentivized to advise you towards a specific course of action.

Would that were true about financial advisers.

So, I thought I would take the time this week to give you an objective, “incentive-free” look at what your finances should look like when you hit the half-century mark. If you are close to that mark, I thought it might be useful for me to lay out the “perfect” scenario.

And look–if you’re not perfect, at least let it be a benchmark…

We should have been saving and investing 15% of our income regularly. Even if we don’t want to retire until age 70, by 50 we should be well on our way toward securing our retirement. We have managed to save about eight times our annual lifestyle spending. With a $100,000 per year lifestyle, that means we should have saved about $800,000 toward our retirement.

We are probably at the point where our children are in college or have recently graduated. When college funding is complete, it’s time to reevaluate and perhaps drop term life insurance coverage depending on our individual circumstances. We purchased the insurance to make sure our children would have enough money to complete their education. When term premiums rise and college accounts are fully funded, we should probably drop our coverage.

Our estate plan should be in place and fully implemented. And, of course, various assets are handled differently. This is the time to make a complete review of how our plan is put together, to ensure that EVERY asset (not just the tangible ones) are still handled properly.

And, for you “imperfect” savers, we have one last chance after children and before retirement to catch up. Age 50 is the first year we are allowed to take advantage of increased savings and catch-up provisions. Maximum savings in a 401(k) or 403(b) account increases from $16,500 to $22,000 at age 50. Roth contributions also increase from $5,000 a year to $6,000. If we don’t have eight times our lifestyle spending saved, now is the time to press these limits.

Of course, saving well is half the battle; investing well is the other half.

That’s a subject about which I’ll have to point you in different directions. If you’d like a good recommendation for a competent financial planner, let me know!

Of course life is too short to ignore meaning at any age. But for many people 50 is a milestone that reminds us to stop and reevaluate. There is still time for a whole new life of significance.

Financial independence can open exciting possibilities that were otherwise out of the question. If we don’t need the money, we are free to do anything with our lives. People of purpose usually don’t choose 28 years of recreation. Not when we finally have the time and the wisdom to make a difference in the world.

And counting retirement as a new career is a perspective I’d encourage. When you reach the point in your life where you can celebrate the freedom to work instead of the freedom from work, that’s success. If just a fraction of people in the second half of life turn their experience, time and talent to our nation’s most pressing challenges, imagine the progress we could make.

Although you can have that attitude at any age, it is especially powerful when redefining the second half of your life!

I’m in your corner!

My analysis of your next year

“You will get all you want in life if you help enough other people get what they want.”

- Zig Ziglar

Our political landscape is very different this week. And it *does* have implications for your wallet (I believe).

I mentioned last week that I’d keep my powder dry, so to speak, and wait a few days after the mid-term elections to deliver my prognosis about what it all means for your taxes. So, here I am today…having gathered the expert analyses, spoken to a few wise hands, and having spent some days “sitting on it” (and enjoying my family before the tax season crush!).

Let me know if you have any comments, or questions.

2010 Election Results … and Your Taxes

Change came back to Washington last week, and, depending on your politics, you may still be basking in the afterglow–or fighting back depression.

But based on pre- and post-election statements, we can make a few educated guesses about what it all means for the taxes YOU will be paying starting next year.

Mind you, it’s still early November, and the “official” tax code hasn’t yet been released, so I hasten to add that this is (educated) prediction-making. But that said, I have been doing this for a while…

The “Bush Tax Cuts”

This is going to be the battle to watch, but with the political winds at their back, the Republicans seem to be indicating that they’ll be pushing hard to extend these tax reductions (from 2001 and 2003), at least for another year.

What makes this most likely is that President Obama seems to agree with them (http://news.yahoo.com/s/ap/20101105/ap_on_bi_ge/us_obama_taxes).

What does this all mean? A few things come to mind…

Capital Gains and Dividends Taxes Likely To Stay Lower

If the “Bush tax cuts” are indeed extended, the tax rate on profits from the sale of long-term assets should stay at 15 percent, even for folks in the upper income tax brackets. And investors whose income is in the 10 percent or 15 percent bracket won’t owe any capital gains taxes.

And, as for dividends, under the current tax law, qualified dividend income is taxed the same as long-term capital gains (that is, at a maximum tax rate of 15 percent). Similarly, those in the two lower income tax brackets received certain dividends tax-free.

Without special treatment, dividends would be treated as ordinary income, meaning they could be taxed at the top marginal tax rate, currently 35 percent (or as high as 39.6 percent in 2011 if the tax cuts expire).

But again, that doesn’t seem to be what will happen.

Tax Brackets on Ordinary Income

Without Congressional action and presidential approval, the current tax rate brackets of 10, 15, 25, 28, 33, and 35 percent would be replaced in 2011 by the “pre-Bush” brackets of 15, 28, 31, 36, and 39.6 percent. Which, of course, would mean across-the-board rate hikes for American taxpayers.

And though I could be wrong, it’s looking good that these lower rates would be retained.

All This Being Said…

There is nothing better than sitting down with someone who will look at YOUR specific situation. Because no matter what Congress does, there are moves you MUST make to lower your tax bill in 2011. I can say with confidence that not sitting down with us before year-end will still cost you.

Email or call us (952-445-8753) now!

I’m in your corner!

Could this be why you’re living month-to-month?

“Our life is frittered away by detail. Simplify, simplify.”

- Henry David Thoreau

This week, I thought I’d reach for something, put on my “coach” hat, and do what I can to inspire you into greater financial prosperity.

Simple Reasons For Being Broke

As I mentioned, I’m going to risk being a bit blunt here. If you follow my writings, you’ll know that it’s a practice I’ve long-adopted, and (apparently) you like it.

That said, I’ll apologize ahead of time for those of you in truly tragic financial circumstances. I’m referring to events, completely out of control, which wreck your balance sheets. Like a medical emergency, not covered by insurance–and which no reasonable person would have expected.

But for the rest of you, call this your early intervention.

I know life is hard. I know being single is expensive. I know being married is expensive. Having children is expensive. And there’s no doubt that getting divorced can be a drain too. Yes, working two (maybe even three) jobs is exhausting. I haven’t been all of these things. Maybe you have. But on the surface all these reasons for being broke are just the result of a much bigger problem. So if you’re ready to stop complaining about life’s circumstances, then here’s the remedy — the real reason why you’re “broke”.

1. You spend good money on junk.

I’m sure the marketers love you since you’re spending your hard-earned money on modern debris.  It’s the stuff that’s cluttering your home and bursting out of your front door. It’s the disposable, upgradeable, and superfluous stuff you buy in a heartbeat because “you’re worth it!” But it costs. It consumes your space, can initially make you feel good but can lead to feelings of guilt, and can make you broke. Please, learn to identify junk and end the spending spree — because yes, you’re worth it. Smile.

2. You don’t have a budget.

Yes, starting a budget can be scary and learning about your true financial situation can be a downer. Get over it. Please. At least get some help with it, find your net worth, add up all your debt, track your spending, and build a budget that reflects your true reality — not the world you prefer to live in. Only when you face the facts–by spending the time to manage your money–will you stop being broke.

3. You don’t earn enough.

This is a toughie. If you’ve cut the junk, you’ve made a budget, and you’re still underwater, you need to fix the income side of the equation. I’ve known people with 3 jobs –THREE JOBS — to make ends meet. They work their tails off to earn enough cash to cover the rent, buy better quality food, and pay off student debt. If need be, they didn’t own a car, didn’t wear fancy clothing, and didn’t wine and dine on the weekends.

The answer here isn’t easy — you’ll have to find a way to make more money. Even in this recession, *if* you can swallow your pride, there’s always a way.

4. You don’t pay off your debt.

If you don’t have a plan to conquer your debt, then you’re going to be broke forever.

Once you’re in the know, it’s time to look at ways to increase your minimum payments. Paying just the minimum balance is a sure-fire way to keep the debt around your neck like a noose forever, so dig into that debt by paying it off sooner.

5. You don’t save.

Saving even a smidgen of your salary for a rainy day or in an emergency fund is a wise way to get started.  Start a savings plan by taking a good hard look at your spending patterns, your subscriptions and services, and find ways to cut back. For example, downgrading your television package — or canceling it completely — adds up to money that could be put into a high interest savings account. The idea is to be consistent and set up automatic deposits into a specific account set aside for emergencies.

6. You’re paying too much in taxes!

Of course, if you’re a current client of ours, we’re on top of this, on your behalf. But we can only go as far as you let us! So … give us a call: 952-445-8753. Let’s fix THIS one, and you can start on the rest of the list!

I hope this little dosage of “tough medicine” goes down smooth, and that you’ll forgive me my possible insensitivity. I’m in your corner!