Between turkey and holiday cookies, don't forget the most important type of planning you should do this year, financial planning. M&I, a part of BMO Financial Group, offers these four aspects of your finances everyone should review before 2012 arrives.
Budgets: Review your monthly budget and track your spending. Keeping track of where your money is being spent will highlight unnecessary expenses. Begin saving today. A savings account can help when life throws an unexpected curve ball. Ideally, build an emergency fund that could pay your necessary expenses for six months.
Creating budgets with your children is also a great way to teach kids about money and the difference between a need and a want. Our Helpful Steps for Parents tool provides parents with tips, games, and strategies to help teach children financial literacy. Visit www.bmoharris.com/parents to learn more.
"The Helpful Steps program starts with kids as young as five years old," said Jim Sathre, senior vice president, retail banking for M&I. "Giving kids a financial education will prepare them for every stage of life, from saving for college to buying a house."
Retirement: Examine how much you've been putting in your retirement account this year. If possible, plan to contribute the maximum allowable amount to your 401(K) and take advantage of your workplace retirement plan to gain matching contributions. If your workplace does not have a matching program consider a Roth IRA.
College: College planning is essential for every family whether you are just starting out or are planning to support a grandchild's education. If you have not started preparing for future college expenses, start now. College savings plans can offer considerable tax benefits. Each state offers residents a 529 college savings plan that provides tax benefits or other perks to help parents and students prepare for college bills.
Investments: Invest wisely. Investigate investment options to determine which is best to meet your financial needs. A few options include money market accounts, CDs and government bonds, and IRAs. Solid investments may reap dividends in the future.
We all know how important it is to save money and prepare for the future and reviewing your budget and investments will ensure you're meeting your financial goals.
Tuesday, December 20, 2011
Tuesday, December 13, 2011
Top 12 Financial Planning Strategies for 2012
December 6, 2011 (Business Wire) — The Financial Planning Association (FPA) of San Francisco announced today the top 12 financial planning strategies for individuals to consider for 2012.
Ranging from developing a comprehensive financial plan, putting in place a disciplined savings program to diversifying portfolios and benefitting from the latest tax changes, these comprehensive tips and advice will help investors start 2012 on the right financial footing.
#1. Get Started Today
If you spent much of 2011 in denial or ignoring what you know you needed to do financially, don't be embarrassed; you had plenty of company. The best way to come to grips with your financial future is to review your financial plan. If you don't already have one, make a plan. You'll want to analyze your asset base, your earning potential, and your spending. Most importantly, you'll want to review your goals. Are they still attainable, or even reasonable? You can do it yourself, but a professional financial planner has the knowledge and the tools to calculate what it will take to reach your goals while helping you manage your finances along the way to help you get there.
#2. Spend Less. Save More.
The best way to provide -- or recoup -- the money you will need in the future is to save more now. Here's a good way to start -- pay yourself first through payroll deductions into your 401(k) or savings account. Another place to look is at your credit cards. Instead of paying high credit card rates, you'll be earning market-beating 9, 12, 18, or an even higher percent. That's your return on every dollar you don't have to pay to a credit card company.
#3. Got lemons? Make Lemonade.
There is a positive side to stock market losses. Take advantage of the down market this year to harvest tax losses. Any losses not used to offset capital gains can reduce ordinary income by up to $3K in 2011, and the excess is carried forward into future tax years.
#4. Keep on Contributing to Your 401k
Continue putting away as much as possible into your employer retirement plan. If the contributions are on autopilot, you're less likely to come to a sudden stop when current events are discouraging. Also, dollars are invested throughout the year, so in a market that is up one month and down the next, you won't buy all your shares at high points and you'll get more shares at low points.
#5. Keep an Eye on a ReFi
With interest rates at all-time lows, it's a good time to explore if refinancing makes sense. You may find it preferable to refinance from a 30- year loan to a 15-year loan, as some institutions are offering 15-year loans at less than 4%. Run the numbers. You may find that the payment on a new 15-year mortgage is similar to an existing 30-year mortgage and would significantly reduce the amount of interest paid over the life of the loan.
#6. Assess a Reassessment
With the continuing decline in home values in many locations, homeowners should consider applying for a reassessment of their home value for property tax purposes. This is a relatively easy process that might save significant money, especially for those in expensive areas. The county assessor's office can provide you with the forms and process for requesting a reassessment.
#7. Update Your Estate Plan
Take a fresh look at your estate planning documents. The annual gift limit remains at $13,000 per donor per person in 2012, but the lifetime exemption of $5,000,000 in 2011 has been adjusted for inflation and will be $5,120,000 in 2012.Your financial planner and your estate attorney will know what these changes mean for your specific situation.
#8. Give a Gift or Make a Loan
Want to help out a family member who may be in dire straights, but don't feel comfortable making an outright gift? Loans to family members must use government-approved rates, or they will be taxed as gifts. It's called the Applicable Federal Rate, or AFR, and our low interest rate environment could make 2012 an excellent time to make loans. The current long-term AFR for loans more than nine years is 2.80% (compounded annually), and the short-term AFR for loans less than three years is only 0.2%
#9. Resolve to Review Beneficiaries
Use the start of the New Year to review all beneficiary statements for 401k plans, IRAs, and life insurance policies. Remember that retirement account assets pass by beneficiary statement and not by will; the same is true for life insurance policies. Every financial planner has stories of clients who divorce and never revise their beneficiary statements; the client dies and a life insurance policy or 401k is paid to the ex-spouse, leaving a current spouse or children with nothing.
#10. Keep Up with Contribution Limits
Take advantage of 2012 increases in retirement account contributions. The maximum 401k, 403b, 457 contributions increase to $17,000. Catch-up contribution for the over-50 set is an additional $5,500
#11. Keep Your Cool
Listening to the financial news wasn't easy in 2011 and we may face the same cacophony of doomsayers in 2012. Selling stocks when prices are down is not a successful long-term investment strategy. And remember -- when media headlines proclaim, "investors are dumping stocks," someone else is buying them.
#12. See a Financial Planner
Financial planners can help you navigate your way through these perilous economic times. No one knows what the future will bring, but a good planner can provide the kind of experience and objectivity that can bring clarity to difficult financial decisions.
If you have a financial planner, and you haven't updated your plan in light of recent economic realities, it makes sense to check if you're still on track, or if there are course-corrections you could make to improve the situation.
Ranging from developing a comprehensive financial plan, putting in place a disciplined savings program to diversifying portfolios and benefitting from the latest tax changes, these comprehensive tips and advice will help investors start 2012 on the right financial footing.
#1. Get Started Today
If you spent much of 2011 in denial or ignoring what you know you needed to do financially, don't be embarrassed; you had plenty of company. The best way to come to grips with your financial future is to review your financial plan. If you don't already have one, make a plan. You'll want to analyze your asset base, your earning potential, and your spending. Most importantly, you'll want to review your goals. Are they still attainable, or even reasonable? You can do it yourself, but a professional financial planner has the knowledge and the tools to calculate what it will take to reach your goals while helping you manage your finances along the way to help you get there.
#2. Spend Less. Save More.
The best way to provide -- or recoup -- the money you will need in the future is to save more now. Here's a good way to start -- pay yourself first through payroll deductions into your 401(k) or savings account. Another place to look is at your credit cards. Instead of paying high credit card rates, you'll be earning market-beating 9, 12, 18, or an even higher percent. That's your return on every dollar you don't have to pay to a credit card company.
#3. Got lemons? Make Lemonade.
There is a positive side to stock market losses. Take advantage of the down market this year to harvest tax losses. Any losses not used to offset capital gains can reduce ordinary income by up to $3K in 2011, and the excess is carried forward into future tax years.
#4. Keep on Contributing to Your 401k
Continue putting away as much as possible into your employer retirement plan. If the contributions are on autopilot, you're less likely to come to a sudden stop when current events are discouraging. Also, dollars are invested throughout the year, so in a market that is up one month and down the next, you won't buy all your shares at high points and you'll get more shares at low points.
#5. Keep an Eye on a ReFi
With interest rates at all-time lows, it's a good time to explore if refinancing makes sense. You may find it preferable to refinance from a 30- year loan to a 15-year loan, as some institutions are offering 15-year loans at less than 4%. Run the numbers. You may find that the payment on a new 15-year mortgage is similar to an existing 30-year mortgage and would significantly reduce the amount of interest paid over the life of the loan.
#6. Assess a Reassessment
With the continuing decline in home values in many locations, homeowners should consider applying for a reassessment of their home value for property tax purposes. This is a relatively easy process that might save significant money, especially for those in expensive areas. The county assessor's office can provide you with the forms and process for requesting a reassessment.
#7. Update Your Estate Plan
Take a fresh look at your estate planning documents. The annual gift limit remains at $13,000 per donor per person in 2012, but the lifetime exemption of $5,000,000 in 2011 has been adjusted for inflation and will be $5,120,000 in 2012.Your financial planner and your estate attorney will know what these changes mean for your specific situation.
#8. Give a Gift or Make a Loan
Want to help out a family member who may be in dire straights, but don't feel comfortable making an outright gift? Loans to family members must use government-approved rates, or they will be taxed as gifts. It's called the Applicable Federal Rate, or AFR, and our low interest rate environment could make 2012 an excellent time to make loans. The current long-term AFR for loans more than nine years is 2.80% (compounded annually), and the short-term AFR for loans less than three years is only 0.2%
#9. Resolve to Review Beneficiaries
Use the start of the New Year to review all beneficiary statements for 401k plans, IRAs, and life insurance policies. Remember that retirement account assets pass by beneficiary statement and not by will; the same is true for life insurance policies. Every financial planner has stories of clients who divorce and never revise their beneficiary statements; the client dies and a life insurance policy or 401k is paid to the ex-spouse, leaving a current spouse or children with nothing.
#10. Keep Up with Contribution Limits
Take advantage of 2012 increases in retirement account contributions. The maximum 401k, 403b, 457 contributions increase to $17,000. Catch-up contribution for the over-50 set is an additional $5,500
#11. Keep Your Cool
Listening to the financial news wasn't easy in 2011 and we may face the same cacophony of doomsayers in 2012. Selling stocks when prices are down is not a successful long-term investment strategy. And remember -- when media headlines proclaim, "investors are dumping stocks," someone else is buying them.
#12. See a Financial Planner
Financial planners can help you navigate your way through these perilous economic times. No one knows what the future will bring, but a good planner can provide the kind of experience and objectivity that can bring clarity to difficult financial decisions.
If you have a financial planner, and you haven't updated your plan in light of recent economic realities, it makes sense to check if you're still on track, or if there are course-corrections you could make to improve the situation.
Tuesday, November 22, 2011
The Benefits of Working Longer .
When it comes to saving for retirement, many Americans are playing catch-up. If you—or a relative—are among them, here is some good news: The belt-tightening required may not be as painful as you might think, provided you are willing to delay retirement for a few years.
According to a new study by the Center for Retirement Research at Boston College, a 45-year-old with no savings who earns $43,000 a year—the nation's average wage—would have to set aside about 18% of pay annually to maintain his or her current standard of living in retirement. (The math assumes a 4% return on savings.)
Such a target isn't much higher than the 12% to 15% annual savings rate many financial advisers recommend for clients in their 20s.
There is a catch, though: In order to maintain his or her standard of living in retirement, the 45-year-old must continue to work until age 70. In contrast, a 25-year-old who consistently saves 15% per year is likely to be able to afford to retire by age 65.
Part of the explanation has to do with Social Security. By putting off retirement until age 70, an individual would receive a benefit that is 75% higher than what he or she could claim at age 62, the earliest date of eligibility. Postponing retirement also gives 401(k)s and other retirement savings accounts additional years to grow. And it shortens the amount of time a nest egg must last.
To make it easier to meet your target savings rate, take advantage of any matching contributions your employer offers in a 401(k) or other workplace retirement plan.
And beware of shortcuts. In a bid to boost retirement savings, some may be inclined to ramp up exposure to equities, in the hope of earning a higher return over time. But such a move will expose them to greater downside risk—without delivering much additional retirement security should stocks fare well.
According to Boston College, a 35-year-old who sets aside 18% of his or her pay and earns a 4% rate of return will be able to retire at age 67; a 6% rate of return lowers the age to approximately 65.
According to a new study by the Center for Retirement Research at Boston College, a 45-year-old with no savings who earns $43,000 a year—the nation's average wage—would have to set aside about 18% of pay annually to maintain his or her current standard of living in retirement. (The math assumes a 4% return on savings.)
Such a target isn't much higher than the 12% to 15% annual savings rate many financial advisers recommend for clients in their 20s.
There is a catch, though: In order to maintain his or her standard of living in retirement, the 45-year-old must continue to work until age 70. In contrast, a 25-year-old who consistently saves 15% per year is likely to be able to afford to retire by age 65.
Part of the explanation has to do with Social Security. By putting off retirement until age 70, an individual would receive a benefit that is 75% higher than what he or she could claim at age 62, the earliest date of eligibility. Postponing retirement also gives 401(k)s and other retirement savings accounts additional years to grow. And it shortens the amount of time a nest egg must last.
To make it easier to meet your target savings rate, take advantage of any matching contributions your employer offers in a 401(k) or other workplace retirement plan.
And beware of shortcuts. In a bid to boost retirement savings, some may be inclined to ramp up exposure to equities, in the hope of earning a higher return over time. But such a move will expose them to greater downside risk—without delivering much additional retirement security should stocks fare well.
According to Boston College, a 35-year-old who sets aside 18% of his or her pay and earns a 4% rate of return will be able to retire at age 67; a 6% rate of return lowers the age to approximately 65.
Tuesday, November 15, 2011
12 Year-end Tax Planning Tips for Businesses and Individuals
Managing a tax burden has never been more difficult, whether you’re managing your individual tax rates, the rates on your investments, the taxes on your privately held or pass-through business, or the income of executives and shareholders at your company. Lawmakers have been aggressively using the tax code to try to get the economy back on track, and there are now more ways than ever to reduce your tax liability – however, all of them take planning.
Fortunately, there’s still plenty of time to put last-minute planning techniques into play. But remember to consider your individual circumstances and consult a tax adviser. With that in mind, Grant Thornton offers the following 12 last-minute tax planning tips for individuals and businesses owners:
Accelerate deductions and defer income.
Why pay tax now when you can pay tomorrow? Deferring tax is a cornerstone of tax planning. Generally this means you want to accelerate deductions into the current year and defer income into next year. There are plenty of income items and expenses you may be able to control, and business owners and self-employed taxpayers often have the best opportunities. Consider deferring bonuses, consulting income or self-employment income. On the deduction side, you may be able to accelerate state and local income taxes, interest payments and real estate taxes. But beware of the alternative minimum tax, which can affect timing strategies.
Bunch itemized deductions.
Many expenses can be deducted only if they exceed a certain percentage of your adjusted gross income (AGI). Bunching itemized deductible expenses into one year can help you get over these AGI floors. Consider scheduling your non-urgent medical procedures all in one year to clear the 7.5 percent AGI floor for medical expenses. To overcome the 2 percent AGI floor for miscellaneous expenses, bunch your pass-through business’s professional fees such as legal advice and tax planning, plus any unreimbursed business expenses such as travel and vehicle costs.
Maximize “above-the-line” deductions.
Above-the-line deductions are especially valuable because they reduce your AGI, and AGI is used to test whether you’re eligible for many tax benefits. Common above-the-line deductions include traditional Individual Retirement Account (IRA) and Health Savings Account (HSA) contributions, moving expenses, self-employed health insurance costs, alimony payments and any bank penalties you may have had to pay for early account withdrawals.
Consider charitable contributions carefully.
Think about giving appreciated property to charity so you can deduct the full value without paying capital gains taxes. But don’t donate depreciated property. Sell it first and give the proceeds to charity so you can take the capital loss and a charitable deduction. If you’re 70½ or older, consider making charitable donations directly from any traditional IRA distributions so the gift/distribution will not be included in your AGI. This provision is scheduled to expire at the end of this year. As always, double-check the limits and substantiation rules before making any contributions.
Leverage retirement account tax savings.
It’s not too late to maximize contributions to a retirement account. Traditional retirement accounts like 401(k)s and IRAs still offer some of the best tax savings in the tax code. Contributions reduce taxable income at the time you make them, and you don’t pay taxes until you take the money out at retirement. The 2011 contribution limits are $16,500 for a 401(k) and $5,000 for an IRA (not including catch-up contributions for those 50 and older). Remember that 2011 contributions to your IRA can be made as late as April 15, 2012.
Roll over into a Roth account.
“Roth” versions of traditional retirement accounts, such as 401(k)s and IRAs, also provide a great savings opportunity. You don’t get a tax break when you put money into a Roth account, but the money grows tax-free and is never taxed again if distributions are made properly. Rolling over into a Roth account now may make sense. Tax rates are low, and the value of many accounts has been artificially depressed by the economic downturn. Paying tax on the rollover now could save you if tax rates go up and your account recovers. The $100,000 AGI limit on these rollovers was recently lifted, so even high-income taxpayers can convert. Understand that you will be required to pay tax on the converted amount and plan accordingly.
Expense business investments
Business owners have been given a great opportunity to save on taxes while investing in their businesses this year. Legislation enacted in 2010 doubles a bonus depreciation tax benefit for property a business places in service before the end of the year. Under this provision, you can fully deduct the cost of eligible equipment on this year’s return if you place the equipment in service by Dec. 31. To qualify for bonus depreciation, the property you place in service must be new and generally have a useful life of 20 years or less under the modified accelerated cost recovery system (MACRS).
Consider your salary as corporate employee-shareholder
If you own a corporation and work in the business, you need to think carefully about your salary structure. Your tax treatment will vary depending on whether you’re organized as a traditional C corporation or an S corporation (in which corporation income is “passed through” and taxed at the individual level). Distributions of corporate income are generally not subject to Medicare tax. That means if your business is an S corporation, you will pay Medicare tax only on business income received as salary, not income received as a distribution. C corporation distributions also escape Medicare tax, but are subject to a 15 percent dividend tax rate. So many C corporation owners will pay less overall tax on income received as salary (which is deducible at the corporate level), while S corporation owners will do better with more income received as dividends. But remember to tread carefully. You must take a reasonable salary to avoid potential back taxes and penalties, and the IRS is cracking down on misclassification of corporate payments to shareholder-employees.
Make up a tax shortfall with increased withholding.
Don’t forget that taxes are due throughout the year. Check your withholding and estimated tax payments now while you have time to fix a problem. If you’re in danger of an underpayment penalty, try to make up the shortfall through increased withholding on your salary or bonuses. A bigger estimated tax payment can still leave you exposed to penalties for previous quarters, while withholding is considered to have been paid ratably throughout the year. To avoid any penalties, the best action plan is to make sure you pay estimated taxes equal to 110 percent of your estimated tax liability.
Don’t forget to use annual gift tax exclusion.
If you may have to pay estate taxes eventually, consider establishing a gifting program for your children and grandchildren to take advantage of the annual gift tax exclusion. Gifts of up to $13,000 per donee ($26,000 for married couples) are generally excluded from gift tax in 2011 and will be removed from your estate, with no limit on the number of donees. In addition, tuition payments to an educational institution for the benefit of your children or grandchildren are excluded from gift tax.
Watch out for the “kiddie tax.”
The “kiddie tax,” which requires a portion of a child’s unearned income to be taxed at the parents’ marginal rate, has been expanded to apply to full-time students under the age of 24 whose earned income does not represent at least one-half of their support. Be careful transferring income-producing assets to your kids.
Perform an overall financial checkup.
The end of the year is always a good time to assess your current financial situation and your plans for yourself and your business. You should think about cash flow, health care, retirement, investment and estate planning. Check wills, powers of attorney and health care proxies for changes that may have occurred during the year. Use the open enrollment period to reconsider employer-sponsored programs that could reduce next year’s taxable income. HSAs and flexible spending accounts for dependent care or medical expenses allow you to use pre-tax dollars. Remember, it’s never too early or too late to start planning for the future!
Keep in mind that these tax tips are general tax advice and may not be applicable to your particular circumstances. Make sure that you consult with your personal tax adviser before implementing any changes or additions to your tax planning strategy.
Fortunately, there’s still plenty of time to put last-minute planning techniques into play. But remember to consider your individual circumstances and consult a tax adviser. With that in mind, Grant Thornton offers the following 12 last-minute tax planning tips for individuals and businesses owners:
Accelerate deductions and defer income.
Why pay tax now when you can pay tomorrow? Deferring tax is a cornerstone of tax planning. Generally this means you want to accelerate deductions into the current year and defer income into next year. There are plenty of income items and expenses you may be able to control, and business owners and self-employed taxpayers often have the best opportunities. Consider deferring bonuses, consulting income or self-employment income. On the deduction side, you may be able to accelerate state and local income taxes, interest payments and real estate taxes. But beware of the alternative minimum tax, which can affect timing strategies.
Bunch itemized deductions.
Many expenses can be deducted only if they exceed a certain percentage of your adjusted gross income (AGI). Bunching itemized deductible expenses into one year can help you get over these AGI floors. Consider scheduling your non-urgent medical procedures all in one year to clear the 7.5 percent AGI floor for medical expenses. To overcome the 2 percent AGI floor for miscellaneous expenses, bunch your pass-through business’s professional fees such as legal advice and tax planning, plus any unreimbursed business expenses such as travel and vehicle costs.
Maximize “above-the-line” deductions.
Above-the-line deductions are especially valuable because they reduce your AGI, and AGI is used to test whether you’re eligible for many tax benefits. Common above-the-line deductions include traditional Individual Retirement Account (IRA) and Health Savings Account (HSA) contributions, moving expenses, self-employed health insurance costs, alimony payments and any bank penalties you may have had to pay for early account withdrawals.
Consider charitable contributions carefully.
Think about giving appreciated property to charity so you can deduct the full value without paying capital gains taxes. But don’t donate depreciated property. Sell it first and give the proceeds to charity so you can take the capital loss and a charitable deduction. If you’re 70½ or older, consider making charitable donations directly from any traditional IRA distributions so the gift/distribution will not be included in your AGI. This provision is scheduled to expire at the end of this year. As always, double-check the limits and substantiation rules before making any contributions.
Leverage retirement account tax savings.
It’s not too late to maximize contributions to a retirement account. Traditional retirement accounts like 401(k)s and IRAs still offer some of the best tax savings in the tax code. Contributions reduce taxable income at the time you make them, and you don’t pay taxes until you take the money out at retirement. The 2011 contribution limits are $16,500 for a 401(k) and $5,000 for an IRA (not including catch-up contributions for those 50 and older). Remember that 2011 contributions to your IRA can be made as late as April 15, 2012.
Roll over into a Roth account.
“Roth” versions of traditional retirement accounts, such as 401(k)s and IRAs, also provide a great savings opportunity. You don’t get a tax break when you put money into a Roth account, but the money grows tax-free and is never taxed again if distributions are made properly. Rolling over into a Roth account now may make sense. Tax rates are low, and the value of many accounts has been artificially depressed by the economic downturn. Paying tax on the rollover now could save you if tax rates go up and your account recovers. The $100,000 AGI limit on these rollovers was recently lifted, so even high-income taxpayers can convert. Understand that you will be required to pay tax on the converted amount and plan accordingly.
Expense business investments
Business owners have been given a great opportunity to save on taxes while investing in their businesses this year. Legislation enacted in 2010 doubles a bonus depreciation tax benefit for property a business places in service before the end of the year. Under this provision, you can fully deduct the cost of eligible equipment on this year’s return if you place the equipment in service by Dec. 31. To qualify for bonus depreciation, the property you place in service must be new and generally have a useful life of 20 years or less under the modified accelerated cost recovery system (MACRS).
Consider your salary as corporate employee-shareholder
If you own a corporation and work in the business, you need to think carefully about your salary structure. Your tax treatment will vary depending on whether you’re organized as a traditional C corporation or an S corporation (in which corporation income is “passed through” and taxed at the individual level). Distributions of corporate income are generally not subject to Medicare tax. That means if your business is an S corporation, you will pay Medicare tax only on business income received as salary, not income received as a distribution. C corporation distributions also escape Medicare tax, but are subject to a 15 percent dividend tax rate. So many C corporation owners will pay less overall tax on income received as salary (which is deducible at the corporate level), while S corporation owners will do better with more income received as dividends. But remember to tread carefully. You must take a reasonable salary to avoid potential back taxes and penalties, and the IRS is cracking down on misclassification of corporate payments to shareholder-employees.
Make up a tax shortfall with increased withholding.
Don’t forget that taxes are due throughout the year. Check your withholding and estimated tax payments now while you have time to fix a problem. If you’re in danger of an underpayment penalty, try to make up the shortfall through increased withholding on your salary or bonuses. A bigger estimated tax payment can still leave you exposed to penalties for previous quarters, while withholding is considered to have been paid ratably throughout the year. To avoid any penalties, the best action plan is to make sure you pay estimated taxes equal to 110 percent of your estimated tax liability.
Don’t forget to use annual gift tax exclusion.
If you may have to pay estate taxes eventually, consider establishing a gifting program for your children and grandchildren to take advantage of the annual gift tax exclusion. Gifts of up to $13,000 per donee ($26,000 for married couples) are generally excluded from gift tax in 2011 and will be removed from your estate, with no limit on the number of donees. In addition, tuition payments to an educational institution for the benefit of your children or grandchildren are excluded from gift tax.
Watch out for the “kiddie tax.”
The “kiddie tax,” which requires a portion of a child’s unearned income to be taxed at the parents’ marginal rate, has been expanded to apply to full-time students under the age of 24 whose earned income does not represent at least one-half of their support. Be careful transferring income-producing assets to your kids.
Perform an overall financial checkup.
The end of the year is always a good time to assess your current financial situation and your plans for yourself and your business. You should think about cash flow, health care, retirement, investment and estate planning. Check wills, powers of attorney and health care proxies for changes that may have occurred during the year. Use the open enrollment period to reconsider employer-sponsored programs that could reduce next year’s taxable income. HSAs and flexible spending accounts for dependent care or medical expenses allow you to use pre-tax dollars. Remember, it’s never too early or too late to start planning for the future!
Keep in mind that these tax tips are general tax advice and may not be applicable to your particular circumstances. Make sure that you consult with your personal tax adviser before implementing any changes or additions to your tax planning strategy.
Tuesday, November 8, 2011
Should Your Clients Have Children Pay for Stock in the Family Business?
Three strategies ensure how they can learn to earn and appreciate stock gifts.
Many parents who are business owners struggle not only with whether they want their children to take on ownership of the family business, but also with how to best transfer their ownership. The two obvious options are to gift or sell stock to the next generation.
This decision can be complicated further due to the circumstances leading up to the point when the next generation is ready to take on ownership. For instance, if the parents have been required to pay for their interest in the business, they may feel it should work the same way for their children. Another factor is the children themselves, who may be more or less interested in or capable of assuming ownership. Child A may have demonstrated strong potential and been even more successful than their parents in terms of operating the family business profitably, while Children B and C are less than fully engaged in the family business and thus have a lower probability of success.
I have even seen parents with multiple children who have started or bought additional businesses that are more in line with their children’s individual interests. In other cases, parents have established separate but equal leadership roles for their children within the family business to try to keep their children engaged in the parents’ dream of making them second-generation entrepreneurs. All of these variables can have an impact on whether parents decide to sell or gift ownership to children.
Some thoughts or emotions that may enter into having a daughter or son pay for interest in the family business include:
•They will value it more if they pay for it;
•We need our children to pay for the stock in order to fund our retirement needs;
•Siblings and co-workers may more fairly view the ownership transition if those receiving ownership have to pay for it.
In terms of gifting ownership, the overriding emotion is the pleasure that gift-giving provides to both the giver and the receiver. However, considering that many successful entrepreneurs provide a higher standard of living for their children than they personally experienced, gifting stock may exacerbate parental concerns about providing excessively for their children. Typical concerns along these lines include worries about creating a generation that is too materialistic; that continually expects bigger and better things; that has lost a sense of gratitude and may even have developed a sense of entitlement and boastfulness that is offensive to others and damaging to personal and business relationships.
What’re the Best Tax and Economic Approach to Stock Transition?
The short answer is that gifting is hands down the best approach to transferring ownership to the next generation. In fact, this option became even more attractive for gifts in 2011 and 2012, as a result of changes made by the 2010 Tax Relief Act. For these particular years, individuals with substantial wealth can take advantage of the $5 million gift-tax exclusion and the generation-skipping tax exemption in passing stock along to children. With the value of many companies depressed as a result of the economic recession we have experienced, the $5 million exclusion goes a long way.
A quick example may help demonstrate why selling stock to family members is not a good economic decision. Suppose you decide to sell your business to a child for $2 million. The selling price is subject to a federal capital gains tax of 15 percent plus state-income tax (let’s assume that the state income tax at five percent and that you have little or no stock basis). Your child has to earn approximately $3.3 million (assuming they are in a 40 percent tax bracket) to have $2 million to pay for the stock. Additionally, at your death, your estate will need to pay approximately $0.934 million in estate tax. The math on this transaction is reflected below to clarify what your client, the parent, really gets from the sale:
Gross sales proceeds $2,000,000
Less: Capital gains tax (1) (400,000)
Less: Estate tax (2) (700,000)
Net Proceeds $900,000
1.Note that the top marginal federal rate on stock sales is scheduled to increase to 20 percent beginning January 1, 2013, which will increase this amount in the future
2.Note that the above example uses a marginal federal estate tax rate of 35 percent that applies for 2011 and 2012, however the rate is scheduled to revert to 55 percent in 2013
When coupled with the $1.2 million dollars of tax the child will pay to get the $2 million of gross proceeds paid to the parent(s), it’s clear that this is an all-around losing proposition. Not only are your client and their children out the dollars paid in taxes, but they will both have lost the time value of money on the tax dollars.
How to Ensure Children Appreciate Stock Gifts?
A key ingredient seems to be developing successor leaders that have a solid understanding of what it takes to be successful in business as well as having them bring some valuable experience to the business. Possible ways to have them “earn” their equity and not officially pay for it include:
•Requiring them to work outside the family business before they can officially enter (after completing their college degree in a field relevant to the family business.)
•Setting milestones of commitment and achievement through an individual development plan designed to guide their career and growth as leaders in the business over an extended period of time.
•Easing children into greater ownership over time, such as awarding them non-voting shares so they can learn how to handle the privileges and responsibilities of ownership.
Conclusion
Having a well-conceived succession plan will address both the financial and leadership development aspects of the business for all generations of the family. With solid planning, the shares the parent gifts will feel a lot more like shares that their children have “earned”.
Since not all family businesses are interested or able to pass on ownership to children, in an upcoming issue I will divulge how an employee stock ownership plan can be used as an
employee- and tax- favored vehicle to facilitate succession.
Many parents who are business owners struggle not only with whether they want their children to take on ownership of the family business, but also with how to best transfer their ownership. The two obvious options are to gift or sell stock to the next generation.
This decision can be complicated further due to the circumstances leading up to the point when the next generation is ready to take on ownership. For instance, if the parents have been required to pay for their interest in the business, they may feel it should work the same way for their children. Another factor is the children themselves, who may be more or less interested in or capable of assuming ownership. Child A may have demonstrated strong potential and been even more successful than their parents in terms of operating the family business profitably, while Children B and C are less than fully engaged in the family business and thus have a lower probability of success.
I have even seen parents with multiple children who have started or bought additional businesses that are more in line with their children’s individual interests. In other cases, parents have established separate but equal leadership roles for their children within the family business to try to keep their children engaged in the parents’ dream of making them second-generation entrepreneurs. All of these variables can have an impact on whether parents decide to sell or gift ownership to children.
Some thoughts or emotions that may enter into having a daughter or son pay for interest in the family business include:
•They will value it more if they pay for it;
•We need our children to pay for the stock in order to fund our retirement needs;
•Siblings and co-workers may more fairly view the ownership transition if those receiving ownership have to pay for it.
In terms of gifting ownership, the overriding emotion is the pleasure that gift-giving provides to both the giver and the receiver. However, considering that many successful entrepreneurs provide a higher standard of living for their children than they personally experienced, gifting stock may exacerbate parental concerns about providing excessively for their children. Typical concerns along these lines include worries about creating a generation that is too materialistic; that continually expects bigger and better things; that has lost a sense of gratitude and may even have developed a sense of entitlement and boastfulness that is offensive to others and damaging to personal and business relationships.
What’re the Best Tax and Economic Approach to Stock Transition?
The short answer is that gifting is hands down the best approach to transferring ownership to the next generation. In fact, this option became even more attractive for gifts in 2011 and 2012, as a result of changes made by the 2010 Tax Relief Act. For these particular years, individuals with substantial wealth can take advantage of the $5 million gift-tax exclusion and the generation-skipping tax exemption in passing stock along to children. With the value of many companies depressed as a result of the economic recession we have experienced, the $5 million exclusion goes a long way.
A quick example may help demonstrate why selling stock to family members is not a good economic decision. Suppose you decide to sell your business to a child for $2 million. The selling price is subject to a federal capital gains tax of 15 percent plus state-income tax (let’s assume that the state income tax at five percent and that you have little or no stock basis). Your child has to earn approximately $3.3 million (assuming they are in a 40 percent tax bracket) to have $2 million to pay for the stock. Additionally, at your death, your estate will need to pay approximately $0.934 million in estate tax. The math on this transaction is reflected below to clarify what your client, the parent, really gets from the sale:
Gross sales proceeds $2,000,000
Less: Capital gains tax (1) (400,000)
Less: Estate tax (2) (700,000)
Net Proceeds $900,000
1.Note that the top marginal federal rate on stock sales is scheduled to increase to 20 percent beginning January 1, 2013, which will increase this amount in the future
2.Note that the above example uses a marginal federal estate tax rate of 35 percent that applies for 2011 and 2012, however the rate is scheduled to revert to 55 percent in 2013
When coupled with the $1.2 million dollars of tax the child will pay to get the $2 million of gross proceeds paid to the parent(s), it’s clear that this is an all-around losing proposition. Not only are your client and their children out the dollars paid in taxes, but they will both have lost the time value of money on the tax dollars.
How to Ensure Children Appreciate Stock Gifts?
A key ingredient seems to be developing successor leaders that have a solid understanding of what it takes to be successful in business as well as having them bring some valuable experience to the business. Possible ways to have them “earn” their equity and not officially pay for it include:
•Requiring them to work outside the family business before they can officially enter (after completing their college degree in a field relevant to the family business.)
•Setting milestones of commitment and achievement through an individual development plan designed to guide their career and growth as leaders in the business over an extended period of time.
•Easing children into greater ownership over time, such as awarding them non-voting shares so they can learn how to handle the privileges and responsibilities of ownership.
Conclusion
Having a well-conceived succession plan will address both the financial and leadership development aspects of the business for all generations of the family. With solid planning, the shares the parent gifts will feel a lot more like shares that their children have “earned”.
Since not all family businesses are interested or able to pass on ownership to children, in an upcoming issue I will divulge how an employee stock ownership plan can be used as an
employee- and tax- favored vehicle to facilitate succession.
Tuesday, October 18, 2011
Robert Half Releases 2012 Salary Guides
The newly released 2012 Salary Guides from Robert Half International show U.S. starting salaries will increase an average of 3.4 percent next year.
Technology positions are projected to see the largest gains among all fields researched, with an anticipated 4.5 percent increase in base compensation. Accounting and finance professionals can expect starting salaries to rise an average of 3.5 percent, according to the research.
"Businesses seek professionals who can help them enhance their technology and accounting infrastructures," said Max Messmer, chairman and CEO of Robert Half International. "For many firms, the question isn't whether to implement improvements but how quickly they can find the talent to do so."
Following is an overview of hiring trends in the fields covered by the Salary Guides:
Accounting and Finance
The 2012 research forecasts an average starting salary increase of 3.5 percent for accounting and finance positions. Companies are hiring professionals who can identify and support growth opportunities, such as financial analysts and business systems analysts. Tax accountants who can help firms navigate complex corporate tax laws also are in demand.
Technology
Overall, base compensation for information technology (IT) professionals is expected to increase 4.5 percent in the coming year. Systems and networking engineers are in particularly strong demand as businesses look to expand their capabilities and transition to cloud computing. Mobile applications developers also are seeing demand for their services, given the proliferation of mobile devices.
Creative and Marketing
Professionals in creative fields can expect average starting salary gains of 3.5 percent in 2012, the research suggests. Those with interactive skills, such as user experience (UX) designers, are especially sought after as firms look to improve their web presence and transition many of their marketing programs online.
Legal
In the legal field, starting salaries are anticipated to rise 1.9 percent, on average, in the coming year. Lawyers with four to nine years of experience in high-growth practice areas -- such as litigation, labor and employment, real estate, and corporate law -- are seeing greater demand, the research shows.
Administrative and Office Support
Overall starting salaries for administrative professionals are expected to rise 3.4 percent in 2012. Companies that had streamlined support staff are now adding experienced executive and administrative assistants who can increase efficiencies, support key company projects and provide excellent customer service. Growth in the healthcare industry also is fueling demand for administrative personnel with experience in this sector.
About the 2012 Salary Guides
The newly released Salary Guides include:
-- 2012 Salary Guide from Robert Half for accounting and finance (www.roberthalf.com/salarycenter)
-- Robert Half Technology 2012 Salary Guide (www.rht.com/salarycenter)
-- The Creative Group 2012 Salary Guide (www.creativegroup.com/salarycenter)
-- Robert Half Legal 2012 Salary Guide (www.roberthalflegal.com/salarycenter)
-- OfficeTeam 2012 Salary Guide (www.officeteam.com/salarycenter)
All of the guides can be accessed at http://www.rhi.com/SalaryGuides. Salary calculators that can be used to determine average starting salaries in hundreds of local markets also can be accessed via the links to the Salary Guides above.
Technology positions are projected to see the largest gains among all fields researched, with an anticipated 4.5 percent increase in base compensation. Accounting and finance professionals can expect starting salaries to rise an average of 3.5 percent, according to the research.
"Businesses seek professionals who can help them enhance their technology and accounting infrastructures," said Max Messmer, chairman and CEO of Robert Half International. "For many firms, the question isn't whether to implement improvements but how quickly they can find the talent to do so."
Following is an overview of hiring trends in the fields covered by the Salary Guides:
Accounting and Finance
The 2012 research forecasts an average starting salary increase of 3.5 percent for accounting and finance positions. Companies are hiring professionals who can identify and support growth opportunities, such as financial analysts and business systems analysts. Tax accountants who can help firms navigate complex corporate tax laws also are in demand.
Technology
Overall, base compensation for information technology (IT) professionals is expected to increase 4.5 percent in the coming year. Systems and networking engineers are in particularly strong demand as businesses look to expand their capabilities and transition to cloud computing. Mobile applications developers also are seeing demand for their services, given the proliferation of mobile devices.
Creative and Marketing
Professionals in creative fields can expect average starting salary gains of 3.5 percent in 2012, the research suggests. Those with interactive skills, such as user experience (UX) designers, are especially sought after as firms look to improve their web presence and transition many of their marketing programs online.
Legal
In the legal field, starting salaries are anticipated to rise 1.9 percent, on average, in the coming year. Lawyers with four to nine years of experience in high-growth practice areas -- such as litigation, labor and employment, real estate, and corporate law -- are seeing greater demand, the research shows.
Administrative and Office Support
Overall starting salaries for administrative professionals are expected to rise 3.4 percent in 2012. Companies that had streamlined support staff are now adding experienced executive and administrative assistants who can increase efficiencies, support key company projects and provide excellent customer service. Growth in the healthcare industry also is fueling demand for administrative personnel with experience in this sector.
About the 2012 Salary Guides
The newly released Salary Guides include:
-- 2012 Salary Guide from Robert Half for accounting and finance (www.roberthalf.com/salarycenter)
-- Robert Half Technology 2012 Salary Guide (www.rht.com/salarycenter)
-- The Creative Group 2012 Salary Guide (www.creativegroup.com/salarycenter)
-- Robert Half Legal 2012 Salary Guide (www.roberthalflegal.com/salarycenter)
-- OfficeTeam 2012 Salary Guide (www.officeteam.com/salarycenter)
All of the guides can be accessed at http://www.rhi.com/SalaryGuides. Salary calculators that can be used to determine average starting salaries in hundreds of local markets also can be accessed via the links to the Salary Guides above.
Tuesday, September 27, 2011
The Myth of Work/Life Balance
The Myth of Work/Life Balance
Seven Ways to Rethink Your Approach to the Daily Grind
If you've been killing yourself trying to achieve daily work/life balance, Jon Gordon warns that it may be a pipe dream. He offers up another (better) solution.
In a perfect world, “work” and “home” would balance out neatly. We’d work from 8 to 5 each day, take an hour-long lunch, and then come home and spend uninterrupted time with our families. But for those of us here in the wake of the Great Recession, firmly entrenched in an “always on” society, this notion seems hopelessly outdated. Most of us are working longer, more stressful hours, and work is spilling over into evenings and weekends. No wonder a recent survey of North American employees found that 87 percent of respondents say their work/life balance (or lack thereof) is negatively affecting their health!
With so many people suffering from this problem, you would think the natural solution would be to encourage businesses to help their stressed-out employees find more balance in their lives. Not so, says best-selling author Jon Gordon.
“Work/life balance, at least in the sense that most of us think about it, is a myth,” says Gordon, whose new book is The Seed: Finding Purpose and Happiness in Life and Work (Wiley, 2011). “It does not exist. For many people, it never has. Personally, I have never been able to balance the scales of work and life on a day-to-day basis. Rather, I’ve come to realize that the dance between work and life is more about rhythm than balance.”
Gordon compares the rhythms of work and life to the rhythms of nature. There’s a time and a season for everything.
“For me and for most people, there are seasons when hard work and extra hours are a necessity, and seasons when there is more time for rest,” he explains. “And guess what? It’s okay. When you love what you do—and I truly believe there is meaning and even joy to be found in every job—you’ll thrive during the busy seasons and fully appreciate the down time.”
Gordon’s latest book—a business fable in the same vein as his Wall Street Journal bestseller The Energy Bus—follows Josh, an up and comer in his company, who has lost his passion at work. Challenged by his boss to take two weeks and decide if he really wants to work there, Josh takes off for the country, where he meets a wise farmer who gives him a seed and a promise: find the right place to plant the seed, and his purpose will be revealed.
This sense of purpose, asserts Gordon, is the natural remedy for the crushing guilt that many working parents in particular experience. (You know the drill: when you’re working late, you feel guilty that you’re not home with the kids; when you’re at home, you feel guilty about all the work not getting done.)
“When you believe your job has no meaning, of course you’re going to feel guilty for spending so much time there,” he notes. “It’s the realization that you are making a difference in the lives of others that lets you let go of the guilt and truly immerse yourself in what you’re doing during both seasons.”
Read on for Gordon’s advice on rethinking the concept of work/life balance and finding passion and purpose in both arenas:
First, let go of the work/life balance notion. Instead, think “purpose and passion.” It’s true that work/life balance is a topic that seems to be on many minds, says Gordon, citing a recent NPR segment titled “In America, Too Much ‘All Work, No Play’?” But in many ways, he insists, a perfectly balanced life is a perfectly tepid life. How much balance do you think Bono has when U2 is on tour? What about an Olympic athlete preparing for a competition? Or the leadership team at Facebook? Probably not much, but their passion and purpose fuel them to work harder and longer with more joy and satisfaction in both work and life.
“When your goal is to achieve work/life balance, you’ll be constantly disappointed and so will your loved ones,” says Gordon. “But when you approach every day with passion and purpose, whether you’re working long hours to prepare an important presentation or staying up late with your daughter to work on her science project, you can find joy and happiness in whatever it is you’re pursuing at that moment.”
Look at your work/life blend over the past year. Consider it as a whole. Rather than thinking of your work and life day to day, think of it as a whole. How many times did you get away with your family last year? Were there particular weeks/months where you worked really, really long hours? Were there times you were less busy? You might find that, when viewed that way, you did have a balanced life. Or you might realize you need to make a change in the way you do things during the upcoming year.
“It is going to be virtually impossible to achieve complete balance every day of your life,” says Gordon. “There will simply be days and weeks when your work requires more time from you. There will also be days when your family requires more of your time. Instead of driving yourself crazy trying to achieve a work/life balance every day, look at your life on a weekly, monthly, and yearly basis. Schedule times to work hard, recharge, renew, play, and engage with your family and friends.”
Identify the “seasons” in your company’s work flow. In nature there’s a season for everything. Spring (planting season) and fall (harvest) are times of extreme work. But there’s a slow down in the summer when plants are growing, and, of course, winter is when farmers do other things (repair work on house and equipment, etc.).
Most industries/companies work this way, too. They have busy seasons (when they’re getting ready for major industry events or peak sales times, for instance) and not-so-busy seasons. It might be easy for you to plan your work/home life flow around these times. Not just in terms of when you plan vacations, but also in terms of daily work hours. During the slow time, it’s okay to leave a little earlier each day if you know you’re going to be working long hours once busy season arrives.
“For me, there is a time to be on the road and a time to be at home with my family,” notes Gordon. “My wife and I look at our year as a whole. We plan our schedule according to the seasons of our life knowing that I’ll be slammed in August, September, and October and slower in December and July. We plan for when I’ll be working and when I’ll be more engaged with the family. You can do the same. Everyone’s rhythm is a little different, but when you find the right one for you and your life, you’ll be able to achieve a lot more at work and at home.”
Keep in mind your family’s “seasons” too. Of course, you can’t base everything on work schedules. There are times your family needs you more than others: birth of a new baby, when a child starts school, or when an older parent is having a crisis and needs you to care for him/her.
“At times like these, you will want to put in the family time and make it up when you can at work,” says Gordon. “Just as with your work, you can plan for some of these seasons, but other busy seasons might pop up unexpectedly—such as a sick parent. You have to be ready to adjust to the season. You have to go where you are needed. If you are worried about work at those times, you can take comfort in knowing that there will be a period when you can apply more of yourself to the job.”
Build up a “hard work” bank account with your company. When the company needs you to really push, push hard. (And do it cheerfully.) This way, when you need to slow down the pace or take time off, they’ll be willing to work with you. Gordon suggests you think of it as making deposits into a bank account.
“By willingly and happily accepting the challenge of a difficult project or client or by working long hours to meet an important deadline, you make deposits in the company’s ‘hard work’ bank account,” he explains. When you need to make a withdrawal, whether it’s for a family emergency or just a much-needed break, you’ll have plenty of goodwill with the higher-ups in your account and they won’t begrudge you for taking the time off.”
When you’re at work, really engage. Fully commit to whatever you’re doing at work. Don’t complain—positivity goes a long way. And don’t feel guilty that you are not at home. Feeling guilty is a recipe for misery and poor performance on the job and unhappiness at home. Commit fully to your season of hard work while planning for your season of rest and recharging.
“When you commit to your season of work, you won’t be tempted to watch the clock, dreading each hour that will pass before you finally get to leave work for the day,” says Gordon. “You’ll be more successful at work and feel more fulfilled.”
When you’re at home, really BE at home. Throw yourself into those precious family relationships. Don’t spend family time thinking about work or zoning out in front of the TV or computer. It’s not about the amount of time we spend with our families, says Gordon. It’s about how engaged we are during the time we do have with them.
“When you focus on planning your life around the rhythms of work and home, you have to be fully committed to the demands of the specific season,” he says. “So when you’re in a family season, don’t constantly check your BlackBerry. Don’t take work calls during dinner. Devote as much of yourself as possible to your family. Use the time that you wouldn’t get to spend with them if you were in a work season to do something special. Read to your child each night. Take your family on a surprise weekend trip.
“When you live your non-work season to the fullest, you’ll be all the more motivated to give 110 percent when you’re at work,” he adds.
“What I’m really talking about is making the most of your time however you spend it—of making each and every moment really count,” says Gordon. “Understanding your rhythms and planning and committing to the seasons of your life may not help you achieve perfect work/life balance. But you will create a life that is more passionate, more productive, and happier in every way.”
Seven Ways to Rethink Your Approach to the Daily Grind
If you've been killing yourself trying to achieve daily work/life balance, Jon Gordon warns that it may be a pipe dream. He offers up another (better) solution.
In a perfect world, “work” and “home” would balance out neatly. We’d work from 8 to 5 each day, take an hour-long lunch, and then come home and spend uninterrupted time with our families. But for those of us here in the wake of the Great Recession, firmly entrenched in an “always on” society, this notion seems hopelessly outdated. Most of us are working longer, more stressful hours, and work is spilling over into evenings and weekends. No wonder a recent survey of North American employees found that 87 percent of respondents say their work/life balance (or lack thereof) is negatively affecting their health!
With so many people suffering from this problem, you would think the natural solution would be to encourage businesses to help their stressed-out employees find more balance in their lives. Not so, says best-selling author Jon Gordon.
“Work/life balance, at least in the sense that most of us think about it, is a myth,” says Gordon, whose new book is The Seed: Finding Purpose and Happiness in Life and Work (Wiley, 2011). “It does not exist. For many people, it never has. Personally, I have never been able to balance the scales of work and life on a day-to-day basis. Rather, I’ve come to realize that the dance between work and life is more about rhythm than balance.”
Gordon compares the rhythms of work and life to the rhythms of nature. There’s a time and a season for everything.
“For me and for most people, there are seasons when hard work and extra hours are a necessity, and seasons when there is more time for rest,” he explains. “And guess what? It’s okay. When you love what you do—and I truly believe there is meaning and even joy to be found in every job—you’ll thrive during the busy seasons and fully appreciate the down time.”
Gordon’s latest book—a business fable in the same vein as his Wall Street Journal bestseller The Energy Bus—follows Josh, an up and comer in his company, who has lost his passion at work. Challenged by his boss to take two weeks and decide if he really wants to work there, Josh takes off for the country, where he meets a wise farmer who gives him a seed and a promise: find the right place to plant the seed, and his purpose will be revealed.
This sense of purpose, asserts Gordon, is the natural remedy for the crushing guilt that many working parents in particular experience. (You know the drill: when you’re working late, you feel guilty that you’re not home with the kids; when you’re at home, you feel guilty about all the work not getting done.)
“When you believe your job has no meaning, of course you’re going to feel guilty for spending so much time there,” he notes. “It’s the realization that you are making a difference in the lives of others that lets you let go of the guilt and truly immerse yourself in what you’re doing during both seasons.”
Read on for Gordon’s advice on rethinking the concept of work/life balance and finding passion and purpose in both arenas:
First, let go of the work/life balance notion. Instead, think “purpose and passion.” It’s true that work/life balance is a topic that seems to be on many minds, says Gordon, citing a recent NPR segment titled “In America, Too Much ‘All Work, No Play’?” But in many ways, he insists, a perfectly balanced life is a perfectly tepid life. How much balance do you think Bono has when U2 is on tour? What about an Olympic athlete preparing for a competition? Or the leadership team at Facebook? Probably not much, but their passion and purpose fuel them to work harder and longer with more joy and satisfaction in both work and life.
“When your goal is to achieve work/life balance, you’ll be constantly disappointed and so will your loved ones,” says Gordon. “But when you approach every day with passion and purpose, whether you’re working long hours to prepare an important presentation or staying up late with your daughter to work on her science project, you can find joy and happiness in whatever it is you’re pursuing at that moment.”
Look at your work/life blend over the past year. Consider it as a whole. Rather than thinking of your work and life day to day, think of it as a whole. How many times did you get away with your family last year? Were there particular weeks/months where you worked really, really long hours? Were there times you were less busy? You might find that, when viewed that way, you did have a balanced life. Or you might realize you need to make a change in the way you do things during the upcoming year.
“It is going to be virtually impossible to achieve complete balance every day of your life,” says Gordon. “There will simply be days and weeks when your work requires more time from you. There will also be days when your family requires more of your time. Instead of driving yourself crazy trying to achieve a work/life balance every day, look at your life on a weekly, monthly, and yearly basis. Schedule times to work hard, recharge, renew, play, and engage with your family and friends.”
Identify the “seasons” in your company’s work flow. In nature there’s a season for everything. Spring (planting season) and fall (harvest) are times of extreme work. But there’s a slow down in the summer when plants are growing, and, of course, winter is when farmers do other things (repair work on house and equipment, etc.).
Most industries/companies work this way, too. They have busy seasons (when they’re getting ready for major industry events or peak sales times, for instance) and not-so-busy seasons. It might be easy for you to plan your work/home life flow around these times. Not just in terms of when you plan vacations, but also in terms of daily work hours. During the slow time, it’s okay to leave a little earlier each day if you know you’re going to be working long hours once busy season arrives.
“For me, there is a time to be on the road and a time to be at home with my family,” notes Gordon. “My wife and I look at our year as a whole. We plan our schedule according to the seasons of our life knowing that I’ll be slammed in August, September, and October and slower in December and July. We plan for when I’ll be working and when I’ll be more engaged with the family. You can do the same. Everyone’s rhythm is a little different, but when you find the right one for you and your life, you’ll be able to achieve a lot more at work and at home.”
Keep in mind your family’s “seasons” too. Of course, you can’t base everything on work schedules. There are times your family needs you more than others: birth of a new baby, when a child starts school, or when an older parent is having a crisis and needs you to care for him/her.
“At times like these, you will want to put in the family time and make it up when you can at work,” says Gordon. “Just as with your work, you can plan for some of these seasons, but other busy seasons might pop up unexpectedly—such as a sick parent. You have to be ready to adjust to the season. You have to go where you are needed. If you are worried about work at those times, you can take comfort in knowing that there will be a period when you can apply more of yourself to the job.”
Build up a “hard work” bank account with your company. When the company needs you to really push, push hard. (And do it cheerfully.) This way, when you need to slow down the pace or take time off, they’ll be willing to work with you. Gordon suggests you think of it as making deposits into a bank account.
“By willingly and happily accepting the challenge of a difficult project or client or by working long hours to meet an important deadline, you make deposits in the company’s ‘hard work’ bank account,” he explains. When you need to make a withdrawal, whether it’s for a family emergency or just a much-needed break, you’ll have plenty of goodwill with the higher-ups in your account and they won’t begrudge you for taking the time off.”
When you’re at work, really engage. Fully commit to whatever you’re doing at work. Don’t complain—positivity goes a long way. And don’t feel guilty that you are not at home. Feeling guilty is a recipe for misery and poor performance on the job and unhappiness at home. Commit fully to your season of hard work while planning for your season of rest and recharging.
“When you commit to your season of work, you won’t be tempted to watch the clock, dreading each hour that will pass before you finally get to leave work for the day,” says Gordon. “You’ll be more successful at work and feel more fulfilled.”
When you’re at home, really BE at home. Throw yourself into those precious family relationships. Don’t spend family time thinking about work or zoning out in front of the TV or computer. It’s not about the amount of time we spend with our families, says Gordon. It’s about how engaged we are during the time we do have with them.
“When you focus on planning your life around the rhythms of work and home, you have to be fully committed to the demands of the specific season,” he says. “So when you’re in a family season, don’t constantly check your BlackBerry. Don’t take work calls during dinner. Devote as much of yourself as possible to your family. Use the time that you wouldn’t get to spend with them if you were in a work season to do something special. Read to your child each night. Take your family on a surprise weekend trip.
“When you live your non-work season to the fullest, you’ll be all the more motivated to give 110 percent when you’re at work,” he adds.
“What I’m really talking about is making the most of your time however you spend it—of making each and every moment really count,” says Gordon. “Understanding your rhythms and planning and committing to the seasons of your life may not help you achieve perfect work/life balance. But you will create a life that is more passionate, more productive, and happier in every way.”
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