“Real World” Personal Strategy Blog

When The Stuff Hits The Fan

“Riches do not consist in the possession of treasures, but in the use made of them.”

- Napoleon Bonaparte

Egypt. Libya. Bahrain. The Mideast is boiling right now.

Mass protests in Madison, WI. Fear of inflation. Fear of deflation. Rising public debt. Worst of all for some: the NFL season for 2011 is in jeopardy!

I don’t mean to make light of all this turmoil by that last example. But what I do want to point out is that fear has become a regular part of the national diet. It truly is frightening many people into all kinds of “worst case scenarios.”

One of the simple tonics for your fear is to take actual action against it. For many, this is a mindset issue: the “diet” for your brain may require some adjustment, i.e. what are you allowing to pollute your thoughts these days?

But an even better action step is to take steps of preparation, so that you are ready for whatever comes. So, in response to some conversations I’ve had with clients during the course of this (very) busy tax season, I thought I’d take a time out to lay out for you six basic steps for financial preparedness in this week’s Note.

Roger Menden’s

“Real World” Personal Strategy

How To Prepare Your Finances For Emergencies

It’s my firm belief that how you choose to think about your circumstances has a subtle, yet profound, impact on how you handle storms. I’ve written often on this subject, so I won’t belabor it here.

Instead, this week, I thought I’d give you a short run-down on specific, financial steps to put in place so you can be ready for whatever kind of situation you might find yourself in.

1) Put $1,000 aside. It doesn’t amount to a real emergency fund, but it will do until you get your finances in order. You can accumulate the $1,000 by allocating $10 a day for just over three months. Most people go into debt because they live hand to mouth, spending 100% of their take-home pay. Then life happens. Having a mini-emergency fund can help you get out of debt and stay out of debt.

2) Remove yourself from credit card debt–forever. I suggest paying off your credit card by starting with the smallest balance in order to achieve small successes and then working to snowball your payments as you tackle the larger balances. These first two steps, having $1,000 and paying off debt, simply prevent you from facing a financial emergency by starting out wounded and bleeding.

3) Improve your ability to handle fluctuating monthly expenses. If you can, set up a monthly budget so your day-to-day expenses are less than 65% of your take-home pay. The difference between those growing rich and those remaining poor is not the salary they make. It is the salary they keep. Relative to their income, the rich are frugal. They save and invest. They spend less than 65% of their take-home pay on day-to-day expenses. They save at least 10% in their retirement accounts and another 5% in taxable savings. They direct another 10% toward unknown big purchases. And they even live frugally enough to give another generous 10% to charities.

4) Automate your cash flow to promote saving and investing. Every month, have 10% transferred into your retirement account before you receive your paycheck. Then automate the transfer of 25% of your take-home pay into an investment account a day or two after your paycheck is deposited. Automating your savings makes savings a high priority and ensures that you pay yourself first. This investment account will grow over time, and you can use it to pay for big emergencies and charitable gifts.

5) Set up an asset allocation for your investments that’s diversified for safety while being invested for growth. If you make it to this step, you’re well ahead of the game…but the game ain’t over yet! Diversification works, and it’s never more obvious than in times of market turmoil. Without diversification, portfolios can have a zero return over a decade. After being well diversified, the likelihood of no return over a decade drops significantly.

6) (If necessary) Mobilizing during an actual emergency. Having the discipline to budget for small financial emergencies will help you be prepared when you encounter larger financial crises. When some unknown spending need strikes, take the money to cover the expense from your growing emergency fund. Then, determine if you have been budgeting for this level of unknown expenses adequately.

Usually emergencies don’t happen. So the money you have socked away makes more money. Keep an emergency fund for several years and it should double in value, giving you an additional emergency fund. Whether you need it or not, being prepared for a financial emergency means peace of mind, knowing that your lifestyle is frugal, so you won’t be in trouble.

With gratitude for your trust!

A Friendly Tip (Not About Taxes)

“It is well to give when asked, but it is better to give unasked.”

- Kahlil Gibran

Last Monday, there was a certain holiday to attend to,

and it’s pretty easy to let things sort of slide on by after

that point. But here’s my advice for you:

Don’t stop there.

Yes, yes — the old canard: EVERY day is Valentine’s Day!

And I’m very aware that you may have had a budget

for your expressions of love, so I’m taking a different approach.

These are some non-budget-busting ways to go “above and beyond” –

when it matters. Sure, wives may scoff at this list, and be gratified

when their husbands successfully surpass it. And husbands, well,

I know some are skilled at romance; and others …

well, here’s some help!

You see, how nice would it be to have “come through” last week

(or, well, not, as the case may be), but then follow up with

something more?

And again, I know that many families on my list have a certain

amount of means at their disposal, and others don’t. Which

makes this list even more helpful. Because *whatever* your budget,

the simple gesture of coming back around AFTER Valentine’s Day

is how real magic happens.

So, yes — today’s Note is not about taxes, per se … but as part of my

continuing quest to serve you “above and beyond”, I thought I’d offer

you a friendly reminder.

[But, on that note: Have you contacted us yet to get your taxes

in order? Because our schedule is rapidly filling up. Oh, and we

do generously reward for referrals, so send your friends our way! Just

have them let us know you sent them, and we'll give them a special

deal -- just from you.]

Roger Menden’s

“Real World” Personal Strategy

Making Your Love Gestures Stick

It’s no secret that our economy is in tough shape. And whatever your particular financial situation, wouldn’t it be great to create romance “magic” without spending an arm and two legs? So, perhaps you’ve done the old “flowers, candy and chocolate” routine already last week. Well,  here are a few modest and occasionally tongue-in-cheek suggestions for a sizzling follow-through … that won’t torch your wallet!

Be Green – Save Money and the Environment at the Same Time!

With the economy taking its toll on virtually every industry, even the high-rollers are looking for ways to spend their cash more effectively. One Hollywood studio saved $40,000 on cards and postage by doing e-Cards and videos for all of their clients and friends.

Seem cheap?  Spin it this way – you’re being green by not using snail mail – that’s so 20th century anyway. You’re keeping with the times, utilizing powerful technology and reducing your “footprint” at the same time! What environmentally-conscious woman could resist?!

Make a Video.

You can use the video setting on your digital camera, and create a heartfelt message of love for your sweetie. Then, you can post it to YouTube, or another online video-sharing site and send it on! Um, just be sure to adjust that YouTube setting to “private” unless you want to share with the world your dying love for your honey (hopefully with clothes on!).

Learn a Romantic Song and Sing it to Your Sweetheart.

Well, I’m no singer, so I can’t say I’ve tried this … but I hear it works well. Even better, if you can’t sing, your more-than-a-valentine will give you kudos for the effort! You could step it up by writing an original song and then sing it. Or, for the slightly-less courageous, you could pull a page out of John Cusack’s book in Say Anything and hold a boombox (or iPod) above your head and blare Peter Gabriel’s “In Your Eyes”. That seemed to work.

Not a singer? More of a writer? Or artist? For the artistically and/or musically inclined:

- You could pen a poem on nice paper

- or even paint it

- You can paint a picture of your honey. Just be sure it looks good.

The “Mix Tape” (or Playlist)

This is an old standby of high school kids everywhere. Except these days, the “tape” part is a bit less convenient. Instead, make a CD or mp3 playlist of Sweet Love Songs and make a cover list/ liner notes on the memories of you and your honey from the songs. And you can make a Personalized Photo Album using a service like Apple’s iBook service and iPhoto.

Romantic Picnic

Surprise your love with a ‘picnic’ in the park, at the beach, or any other outdoor nature spot. If the weather isn’t ideal for outdoors, you could bring the outdoors inside -find a fake palm tree, flowers, sand, beach umbrella, radio, towels. Nothing says “I love you” like fake palm trees!

Write a Message To Be “Stumbled Upon”

Well, perhaps not *literally* stumbled upon, but try a nice outdoor surprise. If you do have snow outside, you could stomp out the message and fill in the letters with spray paint or flower pedals or rocks.  If there’s no snow, you can use sidewalk chalk to write a message to your sweetie.

You see, anybody can go out and “buy something” – but it takes effort and thoughtfulness to make it personal … and it doesn’t require a lot of money!

Just remember … follow-through is everything!

‘They’re All The Same’, And Other Untruths

“If you do not tell the truth about yourself you cannot tell it about other people.”

- Virginia Woolf

So the really important question: How’d you do on Valentine’s Day?

Many people say it’s a “Hallmark Holiday”, but well–some spouses and significant others think otherwise, right? Well, if you blew it, I’ve heard that it’s NEVER too late. Make this week count, my friend.

In fact, I briefly considered writing a treatise on love for you this week, but, well — I figure I should stick to my area of most expertise. And this week’s Note is about a marriage of a different sort.

There’s a news story floating around this week about politicians having to prepare their own taxes. (Here’s what I’m referring to, btw: http://www.nytimes.com/2011/02/13/business/yourtaxes/13essay.html) Apparently, the proposal gets a few laughs from those who hear about it, because, really — it’s becoming mind-numbingly complex, even for many professionals.

You think I’m kidding on that one? Well, you should see some of the returns we review for people who have had them prepared elsewhere … yikes.

So, just as the choice to file taxes via robotic software fails the test, selecting the wrong professional to file your returns can be a big, big mistake.

Here’s what I mean.

Roger Menden’s

“Real World” Personal Strategy

Is There Really Any Difference?

Unfortunately, with the way that most tax professionals and CPA’s present themselves to the world, it seems like we’re all the same. We all seem to offer the same services, for pretty similar fees. If I weren’t working every day in this industry, I’m pretty sure I would think that all accountants and CPA’s were the same. Nothing could be further from the truth.

You see, each tax professional does have certain qualifications. Some might be experts at this sort of tax law, or in working with farmers or with getting money back through IRS representation, or a whole variety of different things…but are they really providing what you, the consumer, wants?

What do you want from a tax preparer?

When I sit down and talk with regular consumers, here’s what I discover:

You want to be able to work with a caring professional…NOT one of those “cattle call” shops, where you’re squeezed in with a bunch of other people, and seen by harried, poorly-trained employees that just took a basic tax course.

You want an accurately filed tax return.  You want the whole thing broken down in terms that you understand, and in a way that you don’t need a translator to communicate. You want there to be processes in place to ensure that the most money is kept out of the grasping hands of Uncle Sam, and in your wallet (legally).

You want a “heads up” about future ways you can legally add deductions and make sure that you can get even more money back in the future. You want assurances everything your tax preparer is doing for you is valid and correct, so a guarantee(s) is essential to the process.

And of course, you want do it fast.  Look, I know this is a big deal for consumers…you don’t want your accountant pushing back at you all the time, saying “give me more time”, when you know it’s not because they’re working hard on your behalf, but that they’re so poorly organized that they’re not getting ANYBODY’S work done on time!

Oh, and if you ARE getting a refund, you want a tax firm who can get you the most money back the fastest … with the most electronic filing options available.

Here’s the bottom line:  You want professionalism … accuracy … you want clarity … you want to be aware of beneficial tax options … you want peace of mind … you want an efficient use of your time …. you want your refund money back in your hands fast …. And at the end of the day, you want to KNOW you got the most money back from Uncle Sam AND know that the IRS will stay off your back so you can sleep like a baby at night!

If the accountant or tax professional you are talking to can’t do these things, you need to call one that can.

To your family’s financial and emotional peace!

Well-Publicized Mistakes, And Going Alone

The important work of moving the world forward does not wait to be done by perfect men.

- George Eliot

This week after the Super Bowl is leaving football fans at a bit of a loss. But an interesting fact about the winning Green Bay Packers: They’re the only professional sports team operating as a non-profit organization. There are exactly 112,015 owners of the club. That’s why it was the team “President” receiving the trophy the other night, rather than the usual team owner.

Now for the awkward segue into what I want to tell you about — and warn you about: The Green Bay Packers ownership isn’t a “lonely” enterprise, but you know what is? Trying to prepare your taxes correctly on your own.

[Sorry for that. Sometimes I have to stretch events to fit the narrative:). But stay with me, as this is important -- especially for you or your friends & family who may choose to go this route.]

You see, I don’t like to crow about other people’s mistakes.

In fact, in our line of work, much of what we get to do is to *fix* or alleviate those mistakes, at least when it comes to their tax implications.

And many of the mistakes we see, every year, are when taxpayers decide to tame the tax code on their own, or with the “help” of off-the-shelf software. Do you remember last year when even the Treasury Secretary, Tim Geithner, testified about tax irregularities in his personal returns? Do you remember where he placed the blame?

Turbo Tax.

And he’s not alone. But there’s a good way to fix that problem…

Roger Menden’s

“Real World” Personal Strategy

Don’t File Your Taxes By Yourself

The “Free” Online Options

Did you know that we accountants like to joke to one another about how good these online software programs (TaxCut, TurboTax, etc.) are for our business? Firstly, they are not as “easy to use” as claimed, and secondly…they cost you an arm and a leg.

You might think they’re cheap. And on the surface, you might be right (though, last year, a $1 Billion class action lawsuit was filed in the federal court in Philadelphia alleging gross misstatement of fees and deceptive standards of the federal “FreeFile” program … so even on the surface, it wasn’t always cheap). But I’m not even talking about the money for the service itself.

Using those programs can end up leaving hundreds, or even thousands of your dollars in the coffers of Uncle Sam … even if you follow all of their instructions to a tee. I see it all the time–frustrated clients bringing in their prior year’s tax return, astonished at all the “hidden money” my staff and I are able to find for them!

Even worse…

Choosing the wrong method, or forms, in filing your taxes can place you directly in the crosshairs for an audit.

Even if I don’t owe a ton of back taxes, I still don’t want my record to show some IRS agent that there has been some discrepancy in the past so that red flags start to fly, and more bureaucratic people begin looking through all my past tax filings and current income holdings … basically taking my social security number and poking around in my private life.

(If you think they won’t do this, read a little online about the increased “enforcement” measures the IRS is taking this year.)

They can do a lot of things you won’t want them to do. However, if you keep a clean slate (no IRS correspondence with you related to filing your taxes correctly), the opportunities for them to mess with your personal stuff will be limited.

Here’s another reason why this is so important … now more than ever. New government regulations in 2010, delays in Congressional action, and issues with refund “loans” from the big chains are creating a mess in the tax industry… and the “Big Brand Names” (you know who I’m talking about) do NOT want you to know about it. In fact, they’re doing all they can this year to hold on to their business, and trust me — it is not good for you.

Yes, it can be seductive to “go it alone”…to trust a piece of software to point out possible deductions. To trust your work to poorly-trained preparers in a big box office.

But it can be a big trap.

Just ask Tim Geithner.

To your family’s financial and emotional peace!