A happy New Year, and may it be a good one!
This is one of my favourite times of the year for money, because it is the time to do a “One Year Plan”. The One Year Plan is a very simple exercise designed to give you a quick overview of the upcoming year. It is a chance to list your goals and check that they are feasible financially.
The One Year Plan looks at the year quarter by quarter, with just a few lines for income and expenses. The main goal, of course, is to make sure that income will exceed expenses for the year. For the self-employed, it also tracks cash-flow, so you don’t accidentally take your bank balance to zero because expenses came in before the income.
However, the benefits go well beyond the numbers. Doing a one-year plan lets you relax by alleviating the anxiety of not quite knowing where you are. For partners, it can reduce power struggles during the year by getting both people on the same page from the beginning, working towards the same goals. And for everyone, it sets a powerful intention regarding your finances that can produce amazing results. This is the time to plan that trip to France that you’ve always wanted to take, or consider whether you can take some time off work, or pursue other dreams.
Many of you have worked with the one-year plan before – now is the time to make a new one for the upcoming year. If you would like some help, please don’t hesitate to contact me. Also, please refer your friends – the first appointment is always free. And…for the first paid session in January, I am offering a small Chilean pig. The pig is a symbol of prosperity, and we just returned from a trip to Chile. This little pig has 3 feet, representing “salud, dinero y amor” (health, money & love).
In other financial news, here is a brief summary of the U.S. federal budget bill passed on January 1st. The existing income tax structure will stay in place for the vast majority of us: individuals with taxable income below $400,000 per year, and couples under $450,000. Those earning more will see the top tax bracket increase from 35% to 39.6%, and the long-term capital gains rate increase to 20%. Itemized deductions will also be capped for individuals making more than $250,000 and couples over $300,000. Payroll taxes (Social Security) will return to their regular rate of 6.2%, after being temporarily decreased to 4.2% in 2011. The bill delayed for two more months the implementation of spending cuts and raising the debt ceiling.
I found a superb article on the U.S. Federal budget at this link:
https://personal.vanguard.com/us/insights/article/red-ink-092012
It is short, clear, and puts everything into context. This is an important topic for everyone to understand – I read it to my teenagers.
And on the subject of taxes, remember that January 15th is the deadline for fourth quarter estimated taxes if you’re self-employed in the U.S. Also, for those interested in free tax preparation, now is the time to contact VITA (Volunteer Income Tax Assistance) to make an appointment – openings fill quickly and may be unavailable by March. Find the locations in your area through the IRS website or through this link: http://www.irs.gov/Individuals/Free-Tax-Return-Preparation-for-You-by-Volunteers
Wishing you all the best in the New Year!
First published January 2013