Increase your chance of winning the financial game by choosing the best players
It’s been said that if you cannot handle $10,000, then you will not be able to handle $100,000. There is certainly some wisdom behind this comment, but the majority of people feel that the more money you have, the better life is. There is certainly some wisdom behind this notion as well.
So how do you explain the couple living on a very modest income who have accumulated substantial wealth and are living a very comfortable retirement with plenty of assets to leave their heirs? Or the multi-millionaire living “the life” who ends up poor, with nothing to show for the mass wealth once accumulated?
It has been proven that mismanagement of money is often the reason for financial turmoil or financial freedom failure. Therefore, a wise consumer/person surrounds himself with a dream team of talented, resourceful and experienced professionals to help plan and strategize a successful financial future.
To be successful at most things, it generally requires some outside influence and expertise. To stay on top of your health, you seek a medical professional. To parent well-rounded and confident children, you seek guidance through books, previous generations, prayer, etc. And if you are running a business, you may have an advisory board of sorts to assist you in execution and implementation.
Your personal financial matters are no different.
Although you probably handle many of your own financial affairs, sometimes you may need the services of a financial professional. Financial professionals include financial planners, attorneys, securities brokers and tax specialists. Selecting the right financial professional means evaluating the services they can offer and their credentials.
Finding someone whom you can rely on to give you sound advice and/or service when you don’t have the time or expertise to completely handle these issues on your own can really make the difference in your future.
A financial planner is a professional advisor who can help you set financial goals and who can write and implement an objective and comprehensive plan to manage all aspects of your financial picture, including investing, education planning, retirement planning, estate planning, and protection planning.
A financial planner can give you information and advice on a wide range of other topics as well, like buying a home and managing your cash flow. An essential benefit to hiring a financial advisor is the added value they provide by coordinating with a team of specialized experts in the fields they are not certified or specialized in. The complexity of your situation will dictate how hands-on or hands-off your financial planner will be.
KRC Research, in partnership with the Certified Financial Planner Board of Standards, Inc., conducted a study of just over 1,100 adults over the age of 18 in June 2011 and found that 86 percent of respondents believed that everyone should have a financial plan in place, but only a few had a documented official plan.
The other professional to consider in your “dream team” is a CPA or tax professional. The goal of income tax planning is to minimize your tax liability. A professional stays current on tax law as legislated and can offer you a host of tax benefits that apply to your specific situation.
Reducing your taxable income, perhaps by deferring your income, shifting income to family members, and implementing year-end strategies can be identified by a tax expert. You may be surprised by a lower overall income tax burden.
It is still your responsibility to keep the federal tax rates at the top of your mind as you consider your situation, regardless of hiring a tax professional. The federal tax rate will continue with the same six federal income tax rates in 2011 and 2012. So, depending on your taxable income, you’ll fall in either the 10, 15, 25, 28, 33 or 35 percent rate bracket (see www.irs.gov).
It is also advantageous to have an understanding on how and at which rate your taxable income is taxed. It generally increases as your income increases. Other rates to know are long-term capital gains and qualified dividends rates that continue through 2012 at a maximum of 15 percent.
Finally, the 2010-2011 AMT (Alternative Minimum Tax) Relief for Middle-Class Taxpayers has been extended for two more years. In a nutshell, about 20 million taxpayers are no longer subject to AMT.
Knowing and comprehending various financial strategies and current tax laws takes time, diligence and expertise. No one person can do it all. But having a “dream team” of professionals in your corner that are aware of your situations and goals will help you prepare for a bright future.
Freelance writer, financial consultant, entrepreneur and mom, Tamela Saulsberry brings a combined 16 years of experience in business, finance, sales and coaching. She is delighted to receive your questions and feedback. She can be contacted at email@example.com or 612-269-2341.