Tax RX:
Make Taxes Less Taxing in 2004
Congratulations--you survived April 15th! But don't breathe a sigh of relief just yet. Now is the time to implement new tax savings strategies to make next year's process less taxing.
Three obstacles stand in your path: time, paperwork and an ever-changing tax code. But whether you consider yourself an organized individual or not, having a clear understanding of your options will help you be a better financial consumer.
Investments
Did you know that most people spend more time planning their next vacation than they do planning for financial success?
Make time amid your daily obligations to review your investments and maintain your positive financial health. Not tracking your annual results could result in costly consequences. Follow these key investment strategies:
- Coordinate your investment strategy with your risk tolerance--take into account your knowledge of investment options, retirement goals, annual income, total wealth and time until retirement.
- Keep your plan on track--revisit your asset allocation periodically (every 6 months to a year) and see whetherit needs adjustments. You should also periodically re-examine your investment profile, especially as you get closer to your goal. You may discover you need to adjust your portfolio's risk exposure over time.
- Know the turnover rate of your portfolio--an unnecessary cause of capital gains can be your portfolio's turnover rate, which measures how long a fund holds on to a stock--and the less trading a fund does--the lower the turnover rate. Since funds incur costs every time a buy or sell is made, a lower turnover can mean lower transaction costs to the investor and potentially lower taxes.
Business Strategies
Business owners often find themselves struggling to balance managing a successful business, maintaining quality relationships with their families and monitoring a financial plan. A successful plan should include a coordinated evaluation of both business and personal goals using easy management strategies. Business owners should conduct a complete evaluation annually, reviewing legal documents such as wills, trusts, or agreements such as buy-sell or operating agreements. An annual financial checkup would include all of the following:
- Meet with your financial planning team;
- Obtain a snapshot of your overall planning, noting changes since last review;
- Review business structure, corporate entity, buy-sell and operating agreements;
- Review your portfolio including its performance, your risk tolerance and changes in timelines or goals, if any;
- Updating net worth statement.
Because small business owners often rely on a multitude of business advisors and consultants--such as an attorney, accountant, banker and investment advisor--coordination of the entire team is essential to financial planning success. Open communication between advisors offers business owners the best opportunity to achieve financial goals. Business owners should also be informed
of changing rules, regulations and tax savings strategies, and the possible consequences. A coordinated approach can help business owners achieve long-term success and eliminate potential problems.
Stay on Track Now is the time to act. Just as you would carefully research your next vacation, you should invest the time to research your financial success. Remember: your next vacation may last two weeks, but your retirement could last 25 years. By obtaining a financial snapshot now, you will be available to develop a customized roadmap to financial success.
Kerry L. Lawing is the President & CEO of Lawing Financial Group. He may be reached at 913.491.6226 or at klawing@lawingfinancial.com