PBMares Accounting Blog

Planning a Future to Look Forward To

Posted by Louise Clayton-Kastenholz on Dec 5, 2017 4:06:11 PM

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Back in the spring, I wrote about ways to look forward to tax filing by making positive changes in our planning and small adjustments to our behavior. Those strategies can really help our mindset when we think about our financial and tax planning each year. Applied to the longer term, they can make a big difference in the way that we look toward our futures.

When we consider the tax consequences of our actions, we need to evaluate them within the larger picture of our financial and personal goals. Effective tax planning can provide some good leverage, but may not be compatible with what we are trying to achieve.  Evaluating the monetary and personal effects of our tax planning is at least as important and looking at the tax effects of our personal and monetary choices.

Be true to yourself. You won't get far trying to do something that makes you uncomfortable.  Whether it's financial or personal, your goals will be impossible to meet if they are contrary to your personality.  Investment risk is one side of this; some people's risk aversion will dictate every decision they make.  If that describes you, then learn to work within this framework by identifying positive opportunities that don't strike fear into your heart.  Personal preferences are another side of this.  I understand the advantages of some opportunities that limit liquidity, but freedom is very important to me, so I don't want my funds tied down.  Our plans have to fit ourselves.

Consider the long term goals. Before you decide to pursue an opportunity, consider how this will affect the big picture.  For an individual, that includes retirement and family time.  For a business, it includes business succession and major operating decisions.  For the small business owner, the big picture includes an even larger range of considerations. Keeping the longer term in view helps to bring the shorter term into perspective. 

Do some dreaming. It is amazing how our dreams can come to fruition with a little planning added to the hard work and perseverance that we're told to put in.  If there is a personal bucket list in your world, work out what is required to make the dreams on that list happen.  Do you want to retire to someplace warmer, or more exciting, or with a certain kind of environment?  Look into it now, to see where you want to settle, and explore options for how to get there.  Having the roadmap in front of you makes it much easier to get to your destination.

Do your tax planning along the way. Consider the tax consequences of each action in real time, not after the fact.  Look at the tax picture on more than a year to year basis, but over the long haul.  Don't just defer taxes if the tax bill will be worse later.  If there is a large transaction on the horizon, talk to your tax advisor first to see if there is a more tax-advantageous way of structuring the deal, or a better way to time it.  Make use of the tax leverage that is available to help to bring about your goals.

Don’t lose sight of your goals. If you’re like most people just muddling through from year to year and have only vague goals, now is a great time to start some real long-range planning. 

When the seed catalogs start arriving to get you dreaming about next year's spring garden, think about the other seeds you'd like to sow in the years to come.  It’s never too late to start putting a plan into motion, and you may be surprised how those dreams can start turning into reality.

Topics: Tax Planning, Estate Planning

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Louise Clayton-Kastenholz, CPA

Louise is a tax manager in the Williamsburg office of PBMares, LLP.  She heads the estate and trust segment of the firm’s practice.

For more information, please contact the author at lkastenholz@pbmares.com or visit: www.pbmares.com.

 

 

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