Tax Talk, Trash Talk: Facts About the Top Taxpayers

As the Presidential election heats up, it is important to separate the facts from the fiction. Not all top taxpayers are employers or billionaires. Both political parties are guilty of skewing the facts.

By definition, the top 2% of U.S. taxpayers are individuals with taxable income of more than $200,000 a year and married couples with taxable income of more than $250,000 a year.

According to Bloomberg News, the top 2% of taxpayers are:

• Two-earner professional couples living on the East and West Coasts.
• Doctors, lawyers, engineers and Wall Street executives.
• Most are not employers.

According to 2005 income tax data:

• Engineers, architects and information technology workers make up 9.6% of the top 5% of taxpayers.
• Over 75% of the high-income households were dual-income households with both spouses working.

A 2011 Treasury Department analysis found that, depending on the definition of small business:

• Only about one-third of small business income is subject to the top two income tax rates.
• Among taxpayers subject to the top two income tax rates, only 25% are small business owners and employers.

As always, learn the facts before you cast your vote.

About Bruce J. Berno, CFP^®
Bruce J. Berno, CFP^® is the founder of Berno Financial Management, Inc. a fee-only comprehensive personal financial planning and investment advisory firm headquartered in Cincinnati, Ohio. Since 1993, Berno Financial Management has been helping individuals and families achieve financial peace of mind. For more information about Berno Financial Management, visit http://www.bernofinmgt.com.

Communicating Financial Values

Summer time, with family vacations and kids home from school, can provide a special opportunity to pass on financial values from generation to generation and encourage children to develop their own financial values and priorities.

Depending on your stage of life and the ages of your children or grandchildren, consider discussing the following with your family this summer:

• Your early childhood experiences and the role that money played in your family life
• Your experience when you started making your own saving and spending decisions
• Financial lessons you learned in your high school and college days
• Financial mistakes you made along the way and what you learned from them
• The role of education in preparing one for more than just a job

Remember that the most effective communication is not lecturing, but rather telling stories in a personal, meaningful way that is not condescending. We are all tired of hearing the "I grew up in the depression" stories (don't blame me for being born at the wrong time), but stories and lessons about simplicity and frugality are important to convey.

You should recognize that it is a different world today and that we live in the digital era where financial transactions are processed differently (young people write few, if any, checks by hand), but the principles of earning an income, spending wisely, making charitable gifts, and saving and investing for personal goals are important fundamental values that transcend generations.

Enjoy these final days of summer!

About Bruce J. Berno, CFP^®
Bruce J. Berno, CFP^® is the founder of Berno Financial Management, Inc. a fee-only comprehensive personal financial planning and investment advisory firm headquartered in Cincinnati, Ohio. Since 1993, Berno Financial Management has been helping individuals and families achieve financial peace of mind. For more information about Berno Financial Management, visit http://www.bernofinmgt.com.

Personal vs. Web-Based Financial Advice

Technology is a wonderful thing. It has dramatically improved our access to information. But is it a double-edged sword?

Is information the same as advice? Can the web be a substitute for, or a supplement to, personal advice?

Ask yourself the following:

• Would you see a doctor for medical advice or do a web search?
• Would you consult an architect to design your house or pick a blueprint from a website?
• Would you consult an accountant for a tax question or rely on the IRS website?

While you could rely on the web for any of the above, should you?

We live in a complicated world, but we are fortunate to have experienced, knowledgeable professionals in many specialties. The web can supplement, but not replace, personalized professional financial advice.

At Berno Financial Management, our goal is to give you the advice that you need, tailored to your specific situation, or to refer you to a specialist when needed and then coordinate implementation of that advice.

Personal, professional advice should always put your interests first. Can you trust the web for that?

About Bruce J. Berno, CFP^®
Bruce J. Berno, CFP^® is the founder of Berno Financial Management, Inc. a fee-only comprehensive personal financial planning and investment advisory firm headquartered in Cincinnati, Ohio. Since 1993, Berno Financial Management has been helping individuals and families achieve financial peace of mind. For more information about Berno Financial Management, visit http://www.bernofinmgt.com.

Inflation: What Difference Does a Few Pounds Make?

Inflation is a major threat to retirees and a risk to long-term investors of any age. What difference does inflation make?

• A 3% inflation rate will cause prices to double in 24 years or by the time a 65-year-old reaches age 89.
• A 4% inflation rate will cause prices to double in 18 years or by the time a 65-year-old reaches age 83.
  

Put another way, inflation will cut your standard in living in half over either of those time periods. Ouch!

On a more personal level, gaining three pounds a year may not seem like much, but 10 years later you are 30 pounds heavier. Has anyone read that America has an obesity problem?

Who hasn't had grandpa tell them that when he was growing up, movies were a quarter and a candy bar was a nickel? Who remembers buying a Volkswagen Beetle for $3,000?

Since 1913, inflation has averaged just over 3%. At its ugliest, it ranged from 10% to 13% a year in 1979, 1980 and 1981.

Understand and remember the importance of inflation. It is significant in the long run. Like 30 pounds ago!

About Bruce J. Berno, CFP^®
Bruce J. Berno, CFP^®is the founder of Berno Financial Management, Inc. a fee-only comprehensive personal financial planning and investment advisory firm headquartered in Cincinnati, Ohio. Since 1993, Berno Financial Management has been helping individuals and families achieve financial peace of mind. For more information about Berno Financial Management, visit http://www.bernofinmgt.com.