2006 Tax Rates and Brackets

I received my Federal income tax forms last week. The 2006 tax rates have a 3.1% inflation adjustment versus the 2005 tax rates. For reference, here are the tax rates and brackets for 2006.

2006 Tax Rates and Brackets

For single taxpayers
If taxable income is over--	But not over--	The tax is:
$0	$7,550	10% of the amount over $0
$7,550	$30,650	$755 plus 15% of the amount over $7,550
$30,650	$74,200	$4,220 plus 25% of the amount over $30,650
$74,200	$154,800	$15,107.50 plus 28% of the amount over $74,200
$154,800	$336,550	$37,675.50 plus 33% of the amount over $154,800
$336,550	no limit	$97,653 plus 35% of the amount over $336,550
For married couples filing jointly*
If taxable income is over --	But not over--	The tax is:
$0	$15,100	10% of the amount over $0
$15,100	$61,300	$1,510 plus 15% of the amount over $15,100
$61,300	$123,700	$8,440 plus 25% of the amount over $61,300
$123,700	$188,450	$24,040 plus 28% of the amount over $123,700
$188,450	$336,550	$42,170 plus 33% of the amount over $188,450
$336,550	no limit	$91,043 plus 35% of the amount over $336,550
* Or qualifying widow(er)
For married couples filing separately
If taxable income is over --	But not over --	The tax is:
$0	$7,550	10% of the amount over $0
$7,550	$30,650	$755 plus 15% of the amount over $7,550
$30,650	$61,850	$4,220 plus 25% of the amount over $30,650
$61,850	$94,225	$12,020 plus 28% of the amount over $61,850
$94,225	$168,275	$21,085 plus 33% of the amount over $94,225
$168,275	no limit	$45,521.50 plus 35% of the amount over $168,275
For heads of households
If taxable income is over --	But not over--	The tax is:
$0	$10,750	10% of the amount over $0
$10,750	$41,050	$1,075 plus 15% of the amount over $10,750
$41,050	$106,000	$5,620 plus 25% of the amount over $41,050
$106,000	$171,650	$21,857.50 plus 28% of the amount over $106,000
$171,650	$336,550	$40,239.50 plus 33% of the amount over $171,650
$336,550	no limit	$94,656.50 plus 35% of the amount over $336,550

This is not financial or tax advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

2007 Wealth Building Plans

“He who fails to plan, plans to fail.” - Proverb quote

I have three financial goals for 2007:

1. Keep investment income to salary ratio >0.8.
2. Increase savings to salary ratio by 1.5.
3. Decrease debt to salary ratio by 0.1.

Here is my plan for 2007, broken down by month.

January	Send payment to pay down 4% of mortgage principal. Make maximum 2007 IRA contribution. Make maximum 529 plan contribution for college. Meet with Financial Advisor to review investments status. Consolidate tax records by end of month for April 15th filing. Get preliminary estimate of capital gains from stock investments. Adjust automatic savings deposits to be 20% of salary. Review stock selection model and invest in picks. Allocate a portion of 401K to international funds. Executor work - complete transfer of assets to trust.
February	Do first draft of 2006 tax return. Make full year contribution to Church via appreciated stock. Executor work - complete getting basis for 2005 and 2006 returns.
March	Final draft of 2006 tax return. Review Company retirement plan results. Calculate Q1 Wealth Ratios.
April	File 2006 tax returns. Meet with Financial Advisor to review investments status. Review stock selection model and adjust holdings.
May	Revise withholding to minimize tax refunds based on 2006 tax return.
June	Review Company retirement plan results. Calculate Q2 Wealth Ratios. Review 529 plan investments and make changes if needed.
July	Meet with Financial Advisor to review status and make mid-year changes. Review stock selection model and adjust holdings.
August	Make charitable contribution of goods to church festival.
September	Review Company retirement plan results. Calculate Q3 Wealth Ratios.
October	Review investment portfolio for stocks to sell at a loss to offset gains. Review stock selection model and adjust holdings. Meet with Financial Advisor to review status and make changes. Make charitable contribution to United Way via appreciated stock. Make charitable contribution of goods to the Salvation Army.
November	Pay additional mortgage principal if possible. Buy or sell stocks to avoid the wash sale rule.
December	Review Company retirement plan results. Calculate Q4 Wealth Ratios. Sell any additional losses to offset gains. Make final charitable contribution of goods to Salvation Army.

While I have given myself the whole year to complete the goals, I like to get a good jump on them early in the year. Therefore, I have front loaded completion of some of my 2007 action steps (e.g. mortgage principal payment, IRA and College Savings Plan contributions) into January.

New items will be added (in green) as needed. Also, as items are completed, I will signify with a strikeout. I will also include the month completed, if it is different from the original plan.

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Looking For Some New Cheese

Life if full of challenges. Our journey is to chip away at these challenges and then face new challenges. Always be ready for the cheese to move. (For the relevance of this comment, see Has Your Cheese Moved?)

While a relatively small change, it appears that I will soon be "required" to transfer My Wealth Builder to the New Blogger. I have been putting this off since I received the message in mid December. Having just learned how to use Blogger since August, I was not looking forward to a conversion and learning new software again.

While this is not a drastic as major changes (e.g. required job change), I thought it could be a good example of one way to deal with change (moving cheese:-). First, I am not looking forward to this change since several bloggers have had difficult transitions, resulting in their blog being inaccessible for a period of time. In addition, the support from Google appears to be insufficient for some with issues. However, rather than avoid the change, I took steps to "go back into the maze" and learn how to manage the change.

Here's how I am approaching this change:

Learn from the experience of others. I read through blogger help forums to understand the issues. It seems some of the issues may be caused by user error. One blog, Beta Blogger for Dummies , had particularly useful advice on backing up content, templates and making the transition.

Backup important information and content. Based on what I read, my plan was to:

1. Backup post content. I did this by copying the source coding from each web page to a notepad file. I backed up each archive month.
   
2. Backup templates. I copied the most recent Blogger templates to a notepad file.
   

Run a preliminary test. I created a New Blogger account and created a new blog in which I could experiment. I was able to confirm that my old Blogger templates would transfer if I maintained the "classic" template. In addition, I began to experiment with New Blogger. Using information from Beta Blogger for Dummies, I was able to create a three column format on New Blogger that almost replicated my current design.

I still need to some of my HTML code in Blogger to be completely compatible with XHTML of New Blogger. I have already confirmed that some of my text link ads are not compatible with XHTML. However, the text link ads did transfer under the "classic" template.

Wait for New Blogger to work out bugs. I will wait for a final notice before making the change. Hopefully, every day means that a few more bugs will be solved. New software is one area where waiting a bit longer to change can be a positive:-)

Photo Credit: morgueFile.com, Derek Lilly

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Creating A Safety Net For Job Loss

I Make $6.50 An Hour, Am I Poor? is an MSN.com article is about how, Karen Datko, a 52 year old woman lost her job and slipped from middle class into near poverty. The article has a positive spin, Karen has avoided borrowing from her retirement savings, cut back living costs and taken multiple jobs in order to meeting financial commitments. While she has "no illusions" about returning to her former job, Karen has a positive can-do attitude about finding solutions to help deal with her situation.

The article has caused me to reflect about how dependent our financial security is on a regular paycheck. And how the loss of one's job can put oneself at significant financial risk. Losing a job could happen to anybody, including me.

Here are some strategies on protecting myself and my family for this risk:

Build a Bigger Emergency Fund. While most experts recommend 3 to 6 months of emergency funds, I think this level may not be sufficient for people who are married and with children. For example, a single person in their 20's has fewer fixed financial responsibilities (e.g. no mortgage) and can use many options to get a new job or reduce expenses, including move to a new location or moving back with parents (however undesirable this may be:-) On the other hand, a person who is married, with children and a large mortgage may have less degrees of freedom. Therefore, it may more difficult to reduce expenses or find a new job, and require a longer use of an emergency fund.

For my own personal situation, an emergency fund of of one year's gross salary is the the level I have chosen. To be clear, these funds serve a dual purpose. While the funds are available for emergency use, they also count in our retirement savings should we not need to use them. These funds are very liquid and accessible, being invested in short term bonds or money markets.

Build A Portfolio of Guaranteed Investment Income. In 2006, our investment income was equal to 1.29 times my gross salary. While that was an excellent investment return, only 19% of the investment income (or 25% of my gross salary) is guaranteed on a yearly basis. That part is invested in municipal bonds, CDs and money markets. That balance of the gain was due to growth in stock prices for both taxable and retirement portfolios.

It would be great if our savings could be guaranteed to generate about 30-50% of my gross salary on a yearly basis. This amount of guaranteed income would provide a good buffer should I ever need it as an emergency fund. This will be one of the items on which I will be working this year.

For more reflections on personal finance, check back every Saturday for the Reflections and Musings segment.

Photo Credit: morgueFile.com, Clara Natoli

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Retire From Your Job, Not Life.

I have been talking to some people about the inevitable end to a career, retirement. Here are some of the key insights. There is more to life than your current job. Invest your new found time in your life.

Do more of your interests. Many people take vacations and do more leisure activities. Others spend more time on their hobbies, or change them into businesses. More time for family, especially grandchildren. Enjoy what the world offers. And as a friend told me, it's a good time to stop and smell the roses.

Learning something new. Try something you always wanted to do. Learn to play an instrument, buy the newest electronics, try the latest social networking site are among the hundreds, perhaps thousands, of things that are possible. Doing so will keep one's mind active and fresh.

Contribute differently. After my father-in-law retired from the Air Force, he began consulting for a R&D company on applying for government contracts. He later became the COO of the company. After retiring from there, he became a adjunct professor at a local university. I'm sure he will start another career after being a professor.

Many of my colleagues, who have retired, have gone on to different jobs (e.g. financial industry, small businesses) or volunteer work (e.g. tutoring). Not because they have to financially. All of them do not need the addtional money. It's because they want to continue to be contibuting and productive members of their community.

In today's world, there is more opportunity to do more after retirement. Especially, if one has planned well financially. Perhaps the mantra should be retire early and often:-)

For more articles on retirement, come back every Friday for our Reaping the Rewards segment.

Photo Credit: morgueFile.com, Carmem L Vilanova

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Trusts, Wills and Other Estate Matters

We didn't seriously consider getting all our estate planning papers in place until we were transferred on an international assignment. At the time, we were DINKS and weren't worried about how our estate was distributed.

However, as we prepared for the transfer, our Company's accounting firm recommended that we get legal affairs in order since other countries sometimes have different intestate laws (i.e. inheritance without a will) than the US. Without other guidance, their legal system will follow their laws. However, if the proper legal documentation is in place, they will honor the documents.

Here are the instruments we created:

Revocable Living Trusts. While our estate did not exceed the maximum tax free estate transfer amounts, we still chose this option. In addition to providing a tax free transfer of our estate, a revocable living trust provides additional benefits of having provisions should one be incapacitated and the proceedings on death remain private. The proceedings from probate of a will become public record.

Pour Over Will. Once a revocable living trust is created, the assets should be retitled into the trust. The pour over will cover assets that are not titled in the trust - e.g personal property and automobiles, which are typically titled to an individual.

Durable Power of Attorney. While the trust does have provisions should the grantor (i.e. beneficiary) be incapacitated, we also executed Durable Powers of Attorney. This gives my spouse the right to handle all my affairs should I be unable to do so.

Living Wills. This authorizes the medical caretakers to not take extraordinary means to keep one alive. My spouse signed one, but I did not. Personally, I still trust the judgment of my spouse over a document:-)

When we created these legal documents, we did not have any children. However, in anticipation of future children, the situation was written into the documents. So we did not need to revise our trusts when we adopted our daughter.

Disclaimer: I am not a financial advisor or attorney. Please consult your financial advisor and attorney before executing any of the above instruments.

For more My Wealth Builder financial approaches with previous or future generations, come back every Thursday for the segment on Crossing Generations.

Photo Credit: morgueFile.com, Anita Patterson Peppers

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Make IRA and College Fund Contributions In January

I try to make our current year contributions to IRA and College Saving accounts as early in the year as possible, preferably in January. I would also do it for my 401K but the plan requires contributions be equally distributed over the remaining months in the year.

I make early contributions for the following reasons:

The funds will earn money tax free for a longer period. If a contribution to an IRA is likely, making one's 2007 contribution in January, 2007, instead of April, 2008 will provide an additional 15 months of tax free earnings.

No need to worry about looming deadlines. I always have enough other things to worry about at year end (Christmas holidays) or in April (with taxes due).

Psychologically, I feed good about being "ahead." I get to check off a New Year's Resolution right away:-) Making contributions in January clearly demonstrates my commitment to pay myself first. And it takes away any temptation to use the funds for something else.

For additional financial habits and practices that I have found useful, check back every Wednesday for The Practice of Personal Finance segment.

Photo Credit: morgueFile.com, Michael Connors

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Carnivals To Kick Off the New Year

Here are the Carnivals that I will be reading this week:

The Carnival of Personal Finance #81 is hosted by Mighty Bargain Hunter.	There were many excellent posts, causing the selection of two Carnival picks. My first Carnival choice is Living without a budget by Living Almost Large. Like the author, I do not use a detailed budget, but still manage my money well every month. (The secret is paying oneself first.) My second Carnival pick is Money, Matter, and More Musings' Gasoline Prices: Why the third decimal place?. This touched off a huge discussion at Digg.com, with a number of historical, marketing, mathematical, and psychological explanations.
Festival of Frugality #55 is hosted at Binary Dollar.	This was also a Festival with lots of great posts. I have two Festival picks this week. My first Festival pick is Simple Tips for Purchase Negotiations via Getting Green, which teaches the art of getting a better price. My second Festival pick is Our 2007 Finances – Moving to a Single Income Family via Money Smart Life. Going to a single income family was a great move for us in 1999.
The Carnival of Investing is hosted at Adventure Money.	My Carnival choice is TJP presents 101 Ways to Invest money - Complete Series posted at Investor Trip. If you are stuck on how to invest your savings, check out this list for potential options.
The inaugural edition of the Carnival of Wheels is posted at The Garage	My Carnival pick is Hybrid Help Sought by Toyota Top Management by Don't Mess with Taxes, which discusses the reduction of tax credits for Toyota's hybrid on April 1, 2007.

I hope you enjoy reading these Carnivals and finding tips you can use. Check back every Tuesday for the Ideas You Can Use segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Developing a Personal Mission

Having financial goals is important. I believe it is also important put financial objectives and goals in context of an overall personal mission or life purpose (used interchangeably in this article). The Wall Street Journal's article Touchy-Feely Finances - How to Find Out What You Really Want From Your Money provides more details on this concept.

My personal mission statement is still a work in progress. Even though I feel that it already captures the essence, I expect to finalize the wording over the next 6-12 months. Thus, there may be changes to the statement during this time. Here is my initial draft of personal mission:

It would be great if we (spouse and children included) are highly productive and contributing members of society and have fulfilling lives.

For reference, society includes the elements of faith, family, work and community.

From this life purpose, several goals can be developed for the different parts of faith, family, work and community. Since this is a personal finance blog, I will focus only on the financial problem definition and goals. Specifically, the financial elements primarily impact the family and work aspects.

For family, I have the financial challenge of:

How might we create a level of financial security that enables us to achieve our personal mission?

Regular readers of My Wealth Builder have seen numerous posts on what I am doing to meet this challenge. My overall goal is to create a stream of income in retirement equal to my current salary. The recent post on 2006 Results and 2007 Goals provides a good summary of the current status.

For work, I have the financial challenge of:

How might I create sufficient income in a career that substantially contributes to society and is fulfilling?

To date, I have only had one post on this challenge, Making College Part of a Wealth Building Plan, which discusses how college can be used to access higher paying jobs. From my experience, achieving higher incomes is the result of conscious choices and tradeoffs. And having a overall personal mission can be helpful when making these choices. I will provide more details on this topic in future posts.

For more details on these and other Strategies and Plans, check back every Monday for the next segment.

Photo Credit: morgueFile.com, Carmem L Vilanova

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Happy New Year

To the readers of My Wealth Builder,

May 2007 be a happy, healthy and prosperous year for you and your family.

Happy New Year,

Super Saver

Photo Credit: morgueFile.com, Kenny Knickers

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC