November, 2021 | Live a Life By Design

A Little Gratitude Goes A Long Way

Posted on November 24, 2021November 24, 2021 by Ashley Stieb

Thankfulness versus gratitude. What does that mean? Well, they may have the same meaning at the end of the day, but lately gratitude has become something that holds a little more meaning. I am not sure if it has been the rollercoaster we have all been on for the last two years or not, but I have certainly noticed a theme on social media centered around that word and it has me thinking that some people may be onto something.

Gratitude has become more than just being thankful for something. It is as if it has become a lifestyle rather than a simple feeling. Sharing the things you feel gratitude towards on a daily basis has become a bit of a norm. It’s like intentionally starting the day on the right foot. Seeing the things that people are sharing can really make you think about the things in your own life that you are grateful for. It can be the simple things, such as being able to hear the crunch of the leaves when walking on a on a crisp Fall morning. The type of things that you wouldn’t look at and normally say, “I am so glad this is a thing!” Or it can be something big like being grateful to have a roof over your head.

I think that this can be especially healthy when we find ourselves getting upset. Imagine you are in a drive-thru line and it is moving rather slow. You expected to be through the line in under 5 minutes, but it has been 10 and you are not even to the first window to pay for your food. Something to feel grateful for in that moment could be having the opportunity to listen to the song on the radio or finish it while you wait. This kind of mindset can help you stay grounded and take your mind off the thing that is upsetting.

I want to challenge you to look around the room you are in and find at least two things you are grateful for and then continue to do so on a regular basis. The world can be such a negative place these days, so I think it is important to take a step back and find something positive to focus on for a moment, if not for our own sanity. Looking around my home office I am grateful my laptop that gives me the opportunity to work remotely and for my sticky notes that keep me on track each day. It can be so easy to find something to be grateful for if we just take the time to do so.

In the coming year, make a habit of finding one or two things to be grateful for and repeat this process every day. Do something that holds you accountable, like writing it in a journal or in a note on your phone. You don’t have to share it on social media like others do, but be intentional and start the day on a positive note. A little positivity and gratitude can go a long way and isn’t that what we all need after the last two years?

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Things Money Can’t Buy

Posted on November 19, 2021November 19, 2021 by Jimmy J. Williams, CPA/PFS, CFP®

Typically, this column focuses on the wealth creation, tax savings strategies and estate transition planning. At this time of year, it is critical that we take a different perspective in providing you guidance as to the definition of “true wealth”. We work hard all year focusing our efforts generating income and support for our families, communities and charitable organizations. What actually is your net worth based on “true wealth”?

To define “true wealth” one must understand what is most valuable to her and focus on increasing the value of the item through commitment of mental and physical energy. For example, relationships that are important in your life (i.e., children, parents, grandparents, friends, etc.) require investment of time to truly yield the greatest return. I am not implying that you should expect any return from your input of respect, consideration and friendship but it is a typical response by someone who receives these “investments” to return the contribution in similar form.

Another asset of “true wealth” is charitable giving. How does this process help grow your wealth? By giving of yourself, you will receive an internal increase in your self-esteem. This process of giving was instilled in me by my parents. When I was a very young boy, my dad asked me to go with him to a pie supper. I did not know what a pie supper was but the word “pie” had my interest! My father, responding to my rapid-fire questions such as “Will they have a chocolate pie? How about a pumpkin pie? Coconut cream? Finally, as if I were badgering a witness on the stand in a courtroom, my dad relented and simply told me to get in the truck to see for myself.

Upon arrival at the high school gymnasium in a small Oklahoma town, I was shocked as to the number of people who liked to eat pie. I observed the gymnasium floor covered with tables that were filled with pies and a small stack of paper in front of each one. My dad walked over to a pie and wrote on a piece of paper. He then walked to another, and another until he had written on several pieces of paper. Now, I am really confused. He wrote on pages for pies that I don’t even like to eat!

After what seemed like four hours (but was really about one hour), a man started picking up the pages in front of each pie. This man, with a boisterous, deep voice, started yelling out names and amounts. Intrigued, I asked my dad why did he call your name and say $50.00? My dad explained that he bought the pie for $50.00 and our family would be taking it home to enjoy. I was only 7 years of age but I knew the value of a dollar in 1972 and told him mom would be upset that we spent so much money on a stinking, apple pie. He just smiled and told me to listen as other names and amounts were called.

After all the names had been called, I quickly added up the total of the amounts called after my dad’s name and it was $200. Oh my goodness! This was time in our country when $100 of groceries would fill a pickup bed and new Converse Chuck basketball shoes cost $16. We just spent $200 on pies?!?!

Once we loaded all the pies in the truck, my dad explained to me the purpose for the pie supper. A family friend in our little town had lost their home, furnishings, clothing, everything in a house fire. The proceeds of the pie supper will help the family with needed items to continue to survive. My dad told me that he had not “spent” any money today but rather “invested” it in his friend and community to help others.

My eyes were opened that day to charitable service. This Thanksgiving Season many families will not be as fortunate as you. Consider giving in a manner that aids those in need to experience the passion and compassion of our community.

To me, “true wealth” is all about family, friends and charitable investments. Trust you will enjoy the best of the Thanksgiving Season and help others to do the same.

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IRA Planning for 2021

Posted on November 11, 2021 by Jimmy J. Williams, CPA/PFS, CFP®

The pandemic of the past two years has brought a tremendous amount of pain to many lives but there is a positive aspect in that dark cloud of gloom. One of the best attitudes, when performing tax and financial planning for your family, is to seize opportunities that are given you. In other words, capitalize on the negatives that impact your life and make the proverbial “lemonade from lemons.”

Many businesses are suffering net operating losses during 2021. If you are an owner of the business and the operation is conducted as a sole-proprietorship, partnership or S-Corporation, you may have a valuable tax saving asset in your future. The net operating losses of these entities are claimed on the tax returns of the owners. For example, if you were a fifty percent (50%) partner in a partnership that lost $100,000 in ordinary income for 2021, you would receive the benefit of $50,000 loss to be reported on your personal return.

With your personal return reporting a loss, or much lower income than you otherwise typically report, your Traditional IRA is holding a great value in it beyond its balance. Consider the conversion of your Traditional IRA, in whole or in part, to a Roth IRA prior to the end of 2021. A taxable event will be triggered when the conversion is performed but your tax computation is based on your taxable income which, when claiming your share of the net operating loss, may be lower than your typical year sheltering the income from the conversion from taxation.

The purpose for converting your Traditional IRA to a Roth IRA is to change the future taxability of the account. You will be taxed on distributions received from the Traditional IRA in the future. The Roth IRA does not mandate required minimum distributions to you at age 72 as a Traditional IRA. Also, you may use the benefits of the Roth IRA to accumulate tax-free income streams from a very young age.

If you believe tax rates are going down in the future, you may wish to contribute to a Traditional IRA to enjoy the current tax savings. However, if you think tax rates will be higher in the future, you may wish to forgo the tax deduction of today and contribute to a Roth IRA.

Both types of IRA may invest in many different types of investments – stocks, bonds, mutual funds, etc. The structure and taxation of the two IRA types are the distinguishing benefits each allows for a taxpayer. The IRS continues to close loopholes such as “back door” Roth IRA conversions and other planning opportunities.

To maximize your opportunities for most challenges in life, it is always an innovative idea to allocate your investments between qualified and nonqualified accounts. Qualified accounts such as IRAs and 401(k) plans are generally taxable upon distribution of the assets to the owner. However, nonqualified accounts such as transfer on death accounts and joint accounts pay taxes during the growth of the assets. When you wish to retire, the type of account may play heavily in your financial plan design.

IRAs are tremendous tools for tax planning. Don’t assume that you simply invest in the IRA every April to save taxes. There are so many other uses of IRAs for estate planning, gifting and lifetime income planning that are often overlooked. As retirement planning experts, we have witnessed a tremendous number of people who fail to maximize the benefits of IRAs.

Proper allocation of your assets is necessary to stage a retirement plan that will serve you well in life. Seek out the assistance of a CERTIFIED FINANCIAL PLANNER^TM professional to help you plan for the future that you wish to achieve. Remember, when you fail to plan, you plan to fail. Be the exception. Take a pragmatic approach to your lifetime of income and enjoy the best of life on your terms. See you on the walking trail!

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U.S. Proposed Tax Policy Review

Posted on November 5, 2021November 5, 2021 by Jimmy J. Williams, CPA/PFS, CFP®

No other area of life, for United States citizens, causes as much anxiety and grief as the income tax. The cost of our republic is not cheap; however, we could do a better job in developing our revenue system and dispensing the funds in a more appropriate manner according to the fiscal experts found at the coffee shops across our country.

Recently, a proposal is being considered, for purposes of raising the revenue in our country, to tax individuals earning above a certain limit on the increase in the value of their assets (i.e., investments, real estate, etc.). This is a “value-added” tax approach that stems from European countries who, by the way, discontinued the system because it created a precipitous decline in investment, loss of overall national revenue and its citizens left the country for a better way of life. The premise is that your investment portfolio would be taxed based on the growth you have experienced in the tax year regardless of selling any assets and recognizing a gain. For example, let’s assume Charlie invested his savings of $1,000 in a stock that rose in value to $2,000. Under the proposed tax law change to tax the growth, Charlie would owe tax on the $1,000 growth but he has no cash to pay the tax. This is the dilemma created by this type of tax policy. In a nation that seeks fairness and opportunity to all citizens, this is an example of bad policy.

Another area of policy posed by Congress seeks out those that are not paying their fair share (well, according to certain members of Congress). A tax policy that seeks to segregate and apply to only certain individuals (i.e., billionaires) would be unfair, not because the billionaires can’t afford it, but rather that the Internal Revenue Code should not seek out a certain group of the population to punish but rather seek to be applied fairly to all of citizens. It would not be good policy to start building a revenue-generating tax system that punishes achievers and rewards those that lack ambition or adventure to risk it all for the sake of growth.

One last area we will explore today is the desire of the U.S. Congress to become more entangled in the lives of our citizens. Recently, a proposal was offered to require your local bank to report all transactions, of $600 or more, in your bank accounts to the IRS for examination and scrutiny. Some exceptions apply such as your SSA Benefits and U.S. Government Pension payments. The purpose of this proposal is to ferret out tax cheats and increase the amount of revenue from unreported, or underreported, income. A bigger issue is at stake in this type of proposal. What about the privacy of our citizens? Sure, I want everyone to pay their fair share of tax but what about the liberties of those that already pay their fair share? Let’s assume you receive a gift from Aunt Betty for $15,000 for graduating college or a birthday? The IRS would require your explanation, and proof, that such item was not taxable. The burden of proof would lie with the taxpayer in this case.

There are better methods of closing the tax reporting gap than to invade the personal bank accounts of our citizens, many of which are law-abiding citizens.

Our system of taxation is one based on honor and honesty. It is important that our tax code be constructed with the same traits. I do not deny that many citizens fail to honestly pay their fair share of taxes. However, punishing all citizens for the actions of a few does not merit the loss of individual rights and freedoms.

Taxation is a valid means for funding many of the necessary programs that support our citizens. It is truly a fact that one can rely on only two things to occur in life – death and taxation.

If you think you are paying too much in taxes, seek out assistance from a CPA or contact a CERTIFIED FINANCIAL PLANNER^TM professional to help you gain control of your financial life.