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    Banking Services
    Budgeting for the Coming Year
    Trends to watch out for next year for small business owners
    Trends to help you plan for 2014
    By Barbara Weltman

    October 2013

    This fall is a great time to start projecting your budget for 2014. While there are many uncertainties that could impact your projections, such as events abroad and sequestration decisions in Congress, some key factors are already known.
    Inflation continues to be modest (under 2 percent thus far in 2013 and projected to be 2.25 percent in 2014), so you may only need to increase your current expenditures for many items by a small amount. Still, the cost of some items in your budget may need to be changed at a greater rate.

    Average pay hikes for 2014 are expected to run about 3.1 percent according to a WorldatWork survey. This is slightly ahead of the rate of inflation. Of course, you can choose to raise the compensation to your employees at a greater or lesser rate.

    Payroll taxes will also rise. The Social Security wage base for FICA likely will increase to about $115,500 (up from the current $113,700 level), or about $112 per employee at this wage base, according to early projections from the government. Refine your budget when the exact wage base for next year is announced by the Social Security Administration in mid-October.

    Key provisions of the Affordable Care Act (Obamacare), other than the employer mandate for large employers, will begin on January 1, 2014. While this law is intended to eventually bring down the cost of coverage, the current reality is a continuing rise in premiums. Health insurance costs for employers will rise about 7 percent according to Medical Marketing and Media, even higher for smaller employers. (However, this is less than in prior years when double-digit increases were the norm.) Shop now for coverage for next year and, in trying to keep premium increases to a minimum, look for plans with higher deductibles or consider health savings accounts (HSAs).
    Workers' compensation costs should be about the same, but check with your state. In contrast, unemployment insurance rates for employers in some states could rise because of the drain on the system over the past several years. (In 2012, 19 credit states still owed money to the federal government; they are called "credit reduction states" because employers have a reduced state credit as an offset to federal unemployment tax.) Check with your state to learn about any rate increase for your business.

    Energy costs
    Energy costs may not change much in 2014 from current costs, according to the U.S. Energy Information Administration. The rise of gasoline prices at the pump may be slightly higher, but natural gas and electricity costs probably won't be too different from what you're paying now. Of course, ongoing tensions in the Middle East make projections about energy costs a wild card.

    Other costs
    Be sure to go line-by-line in your budget to adjust all of the costs that apply to you, including:

    • Borrowing. Interest rates are probably going to be higher in 2014, but the amount of the increase is unclear at this time. If you have a line of credit, expect to be paying more for borrowing next year.
    • Travel and entertainment costs. Some items are expected to rise more than the rate of inflation, other items may not. Carlson Wagonlit Travel projects the following increases for 2014:

      • Car rental rates: just over 1 percent
      • Airfares: less than 2 percent
      • Hotel rooms: about 5 percent
    • Technology. Computers, tablets, and smartphones likely will be less costly next year, with new gadgets poised to debut.
    • Rents. It all depends on where you are. Overall, prime space could increase slightly (about 4 percent, according to However, in many locations there is still a lot of unrented space, giving tenants considerable bargaining power.
    • Shipping and mailing. Projections for 2014 costs may not be available until later this year. However, given the ongoing fiscal problems of the U.S. Postal Service, it is reasonable to anticipate rate increases. When this happens, rates usually rise at private delivery services, such as FedEx and UPS.

    While you're crafting your budget for 2014, don't forget to give equal attention to your own pricing. As your costs rise, you may need to adjust prices accordingly.

    Barbara Weltman is the author of more than a dozen business books, including JK Lasser's Small Business Taxes. She publishes a monthly newsletter, Big Ideas for Small Business® and hosts Wealth Building Hour radio. She can be reached at

    © 2013 Citigroup Inc. Citibank, N.A. Member FDIC.