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).

While I was exercising recently, I was 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.

Thomas Marshall’s
“Real World” Personal Strategy
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.

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.

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!

www.myverpa.com

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.

Thomas Marshall’s
“Real World” Personal Strategy
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 & 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.

http://myverpa.com/taxadvice.html

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: 800-279-3768 . 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!

Your Richmond Financial Planner.