“Real World” Personal Strategy Blog
Failure To Plan
May 30, 2011 by Roger Menden, Shakopee Tax Professional
You have to see opportunity before you can seize it.
- Greg Hickman
Through the burger-soaked haze of my morning, I’m sitting down to write to you about something important.
But before I get there and speaking of burgers, how WAS your weekend? I sure hope it was restful. We business owners don’t enjoy the government-mandated holidays, but at the same time, sometimes the best policy really is: "If you can’t beat ‘em, join ‘em"! [So, we took Monday off too:)]
There’s a couple beautiful things about Memorial Day, in my humble opinion:
1) Summer is here.
The pools open, the shorts become a permanent staple and even the flip flops begin to make an appearance. For us, around here, we spend a lot of time in our summers sitting down with families to conduct careful analyses of their tax situation — BEFORE the winter strikes, and our moves become much more limited. This is called "tax planning", and it’s an essential move, if you want to get the maximum tax savings possible.
2) Memorial Day reminds us that our current struggles have been overcome.
With all of the chaos in our current events (tornadoes, Mideast turmoil, government debt, etc.), it’s important to remember that even just one or two generations ago, our nation faced much worse–and prevailed. The "sacrifices" we may be forced to make in the midst of a bad economy are nothing compared to the rationing and privation of the WWII generation. And the young men and women who have served overseas in the past decade or so could also give us a good lesson in what REAL need looks like.
It’s right that we honor their triumph, and for many thousands of families — their deep sacrifice.
As I’ve already written a long-ish note today, I want to honor your inbox time — and make my Weekly Note short and sweet, as we start our summer together…
Roger Menden’s
"Real World" Personal Strategy
How Planning Can Save You $1000+
Too many clients (almost all of them) wait until the winter before they look at their tax obligations. Even worse, they wait until that season before they speak with their professional in any kind of proactive way.
That’s a problem, and it could be costing you some serious savings.
Here’s an example:
Let’s say that you were considering taking money out of a pension (401k) to finance the down payment on a house. It’s quite a common maneuver. But let’s say next that you do this withOUT discussing it ahead of time with a professional. That could be a four (or five) figure mistake.
If you were to come into our offices before such a move, I would ask you a few easy, but very important questions, and then (depending on the answer) likely advise you to first roll the money ($10,000) into a Traditional IRA. You could then withdraw the money at a savings of $1,000.00. This is because money used for a first home, up to $10,000, is penalty-free when taken from an IRA, but NOT a 401K.
Would you be pleased by that move? I’d guess "yes", especially if you knew about other clients I know of who failed to plan. This couple just learned of the $41,000.00 penalty they had to pay for doing the same thing, but from their 401k.
Ouch.
There is no guarantee that you will save by speaking to us in advance. But this I CAN guarantee: If you don’t speak with us, we won’t be able to save you a dime.
We’re a phone call away: 952-445-8753
To You and Your Family’s Peace of Mind!
Putting Your Money Where Your Heart Is
May 23, 2011 by Roger Menden, Shakopee Tax Professional
"Where your treasure is, there your heart will be also."
- Luke 12:34
I’m in a bit of a contemplative mood as I write, this morning. After a restful weekend with friends and family … being out and about, listening to the radio and watching some TV, I’m struck by this question — why is it that so many people who live with significant means are simply … unhappy?
Having worked with families across a wide spectrum of income and asset levels, I don’t find this to be a general rule, but what I do find is that neither is it uncommon. Some "rich" people are terrible grumps — but so are many who are struggling through poverty.
And, of course, some of the most beautiful people I know also happen to be wealthy … and a few are very poor.
So, a common temptation is to judge our well-being not by what *we* have — but by how much we have compared to others. However, families at today’s poverty level live as well as the upper middle class did a few decades ago! Yet, they still feel deprived. I’ve found that even big luxuries ultimately disappoint us as we steadily become accustomed to a higher standard of living. An indulgent purchase loses its luster, and the satisfaction it brings is fleeting.
So how can you fix this?
I believe it starts by re-aligning our hearts a bit. And that’s what I’m writing to you about today.
[By the way, it may seem unusual for a tax professional to write about this sort of thing — but I’ve found that money is often the truest expression of our passions. And, as such, it’s worth protecting fiercely.
Roger Menden’s
"Real World" Personal Strategy
Putting Your Money Where Your Heart Is
It’s a cliche, but it’s oh-so-true: Money doesn’t buy happiness. Families earning $50,000 a year overspend trying to keep up with those making $100,000 — who, in turn, attempt to live like those making $200,000. For many families, the lure of consumerism wins out over qualities like foresight and the patience which saving requires.
The Beatles were right too: "Money can’t buy you love." You can’t pay someone a million dollars to love you more than a million dollars. Money can’t buy integrity or friendship either. You can often purchase a cheap imitation of these values but not the genuine article.
But money can be used to clarify and encourage the things already most important to you. It can be used to show your love for someone, keep your integrity or help a friend in need.
So, here is a simple exercise which can help you determine what you value most in life: Look at this list of 15 values:
Achievement
Adventure
Aesthetics and culture
Authority/Power
Financial security
Friendship/Love
Health
Independence
Integrity
Philanthropy
Recreation
Service
Spiritual growth
Wisdom
Work
Cross off 10, and keep the five most important to you. Then rank those five in order of importance. Look at your list and answer this question: Are you living your life and using your money in sync with your values? If you are married, ask your spouse to do the same exercise independently, and then compare your answers.
Now, take these values and give a hard look at where you are spending your money. Does it fit?
Surveys have found that people regret what they didn’t do more often than what they did.
Our lives can change course dramatically (and serendipitously) all because of some small decision on our part. How many times have we heard the story of how a happily married couple met, only to be surprised it almost didn’t happen?
And, often, these decisions are expressed through how we spend our money.
We each long to participate in something significant and realize our greater passions. But that doesn’t just "happen"! It requires foresight, planning and forgoing our momentary desires. The choices we make, every day, determine the ones we will have the opportunity to make in the future. Without those hesitant, often stumbling first steps, we can’t even begin the journey. And, of course, the first step is the hardest.
Voicing what we are passionate about can be scary. Beginning to act on our ideas can feel overwhelming. But courage isn’t a lack of fear; it’s action in spite of fear. And our fear may indicate we are on the quest of our lives.
So again — I refer you to your list of values, held up against how you are currently spending your money: Are there small changes you can make–which would translate into BIG, passionate goals? Going through this exercise may not result in a dramatic career change, but it will help you see ways to align your actions to your goals.
And that, my friend, WILL bring you true happiness.
To You and Your Family’s Peace of Mind!
Your Debt Limit
May 16, 2011 by Roger Menden, Shakopee Tax Professional
"Stand up to your obstacles and do something about them. You will find that they haven’t half the strength you think they have."
- Norman Vincent Peale
As I sit down to write this on Monday morning, we’ve all been greeted by the blaring headlines that the US Treasury has reached its legally-allowable debt limit.
But what’s a paltry $14.3 trillion among friends? Well, if investors stop purchasing our nation’s debt on the markets, we could really see some fallout. "Fortunately", the Treasury department employs a bunch of smart accountants who have figured out a way to move money around, and extend the "real" deadline into August.
How’s your debt situation? I’m here to help. And though I don’t work at the Treasury Department (thankfully), I’m pretty decent at (legal) accounting "tricks". That said, there are some basic first steps at which I’d encourage all of my clients and friends to take a good hard look, BEFORE we sit down to discuss other strategies.
So, here are my "Debt First Steps". Let me know what you think — and remember that we are truly here for you! After all, it can be a lonely task to manage your family’s finances … which is why we make it a point to keep in such close touch with you — and to help you know that you don’t have to walk out your financial life without help.
Roger Menden’s
"Real World" Personal Strategy
Menden’s Debt First Steps
Whether you’re dealing with a couple thousand dollars or a couple HUNDRED thousand dollars of debt, there are some important steps to take before you consult with further professional help. Taking these steps will not only help you handle things financially … but I’ve found that taking positive action — ANY positive action — can make an enormous difference to your state-of-mind.
Which, as you may know, is one of the greatest casualties that people experience in the midst of debt loads.
So, here are the things we advise our clients and friends to do first … I’m focusing on credit card debt here, as it’s the most common form, but the same principles apply with other creditors.
1. If you ever hope to pay off your credit card debt, pay more than the minimum payment each month.
If you only pay the minimum payment each month, your bill could continue to INCREASE, even if you completely stop using your card. This is called "negative amortization"–where you think you are paying on your debt but the additional fees and finance charges are more than the minimum payment. The bottom line is: Pay more than your minimum or you will eventually be in debt over your head.
2. Implement a regular *system* for credit card debt reduction.
With online banking and automatic payment options, there are GREAT tools for ensuring you don’t mess up because of administrative chaos. If you feel you can’t manage all your bills by pen and paper, there are several good software programs available for keeping track of your financial records.
3. You can negotiate with your credit card company.
No, you do not need to be an attorney or other professional to negotiate with your credit card company (you will need patience and persistency though). The rising amount of consumer debt in this country has made creditors realize that they need to be more understanding of their customers — if they hope to get any money back. If you file bankruptcy they are only going to get pennies on the dollar, so they are willing to make deals.
4. Write letters to each of your creditors acknowledging your debt and the situation, and tell each one when you can begin repayment.
Open communication always helps. Usually credit card companies get ignored and end up sending delinquent files to a collections agency. So they’ll actually appreciate your openness in contacting them and may be more understanding of your situation. Proactively dealing with your debt problem rather than hiding will not only help your financial problem but make you feel better about yourself.
5. Keep track of what you are able to pay each creditor every month.
If you are not able to pay the full amount of your credit each month, you still should still pay something to stay on top of it. You should work off a written budget so you know exactly where you stand. Some experts suggest that you divide your monthly debt budget by the percentage each bill makes of the total and pay that amount.
Here’s an example: If you owe a total of $1,000, and one credit card is $800 and the other is $200, and you only have $100 available to pay for that month… You should pay $80 on the $800 balance, and $20 on the $200 balance. This way you are reducing each debt by the same percentage.
6. Don’t fall prey to intimidation tactics
No matter how forthcoming and honest you are, some creditors have been taught to be mean and downright nasty. Hang in there and don’t let this tactic intimidate you.
We’re a phone call away: 952-445-8753
To You and Your Family’s Peace of Mind!
Shakopee Tax Professional Answers, “How Warren Buffett Did It”
May 9, 2011 by Roger Menden, Shakopee Tax Professional
“Fortune favors the bold.”
- Virgil
Ah, sweet May. I love it. The birds are chirping and the flowers are blooming. Once the weather begins to get warmer, you see people start thinking about summer and, of course, they want to lose weight to look good in their bathing suits.
Why do so many wait until it gets warmer until they start thinking ahead?
I’d like to help you make some shifts in your thinking today. I’ve been reading up, recently, about Warren Buffett — and what it took for him to create the kind of financial empire he now enjoys. I’ve gathered some lessons, which I’d like to pass on to you today, as inspiration for what can truly be possible.
Financial well-being is earned by paying close attention to how you are THINKING about that well-being, and what it takes to get there. So, if you’ll indulge me, allow me to give you a few short lessons from Mr. Buffett about how to create financial success — in any economic season.
I’d love your thoughts.
(And don’t miss the opportunity for your friends to enjoy the peace-of-mind found from having a competent expert review their 2010 returns, at the end of my Note. They’ll thank you…)
Roger Menden’s
“Real World” Personal Strategy
Warren Buffett’s Financial Wisdom
Billionaires aren’t hatched overnight.
But there will be another generation of such men and women in the next few decades — and chances are, they will tread the same path as those who have come before.
So let’s look at Warren Buffett’s path as an example, shall we?
1) Start with a meat and potatoes small business — and be your own boss.
Buffett made his fortune by doing things his way, not by following the crowd. In high school, Buffett and a pal bought a pinball machine to put inside a barbershop. With the money they earned, they bought more machines until they had eight different shops running their machines. When they sold the venture, Buffett used the proceeds to buy stock and start another small business. By age 26, he’d become his own boss and amassed $174,000 — or $1.4 million in today’s money.
LESSON: Don’t fall for the temptations of a huge, immediate windfall business. Cut your teeth on the side, with something basic, reliable and small.
2) Mind the foxes who steal from the vineyard: small expenses.
In the famous book, The Millionaire Next Door, authors Stanley and Danko report that millionaires live well below their means. They budget, plan investments, and allocate their time, energy, and money into building wealth instead of displaying high social status.
Warren Buffett’s companies are known for watching out for small expenses. Exercising vigilance over every expense can make your profits and your paycheck go much further.
LESSON: The next time you spot a sale or online deal, check in with yourself to see if that $50 is better saved or invested than spent. It might seem like you’re spending a relatively small amount of money, but it all adds up.
3) Debt kills.
Warren Buffett advises his people to limit what they borrow. Living on credit cards and loans won’t make you rich. Buffett never borrowed a significant amount of money, not even for investments or mortgages.
The Millionaire Next Door reports that millionaires’ parents did not provide “economic outpatient care”, and their own adult children are economically self-sufficient as well.
LESSON: If you do give your teenager a credit card, make sure to set firm limits and specify use ahead of time. If they abuse the privilege, they lose the card. Do the same for yourself.
4) Leap forward.
Very often those who supply the affluent become wealthy themselves. In fact, one of the best ways to make money is to sell products or services to those who already have money. Many people don’t see these opportunities because they’re far too busy seeking money and security in the short term only.
Well, when Buffett began managing money in 1956 with $100,000 cobbled together from a handful of investors, he was dubbed an oddball. But he didn’t allow others’ opinions to keep him from leaping into a profitable venture. Over and above, I might add, others with greater private means.
Lastly, I will suggest this: Get professional advice on new ventures and ideas. We are here for far more than “just” tax planning. I and my team would love the opportunity to sit with you, and help you evaluate the direction of your financial life … and point you in a new direction, should it be necessary.
We’re a phone call away: 952-445-8753
To You and Your Family’s Peace of Mind!
Could There Be a Mistake? We Can Fix It.
May 2, 2011 by Roger Menden, Shakopee Tax Professional
"If you don’t like the road you’re walking, start paving another one."
- Dolly Parton
As I write this on Monday morning, we’re all pretty distracted by the news of the capture and death of Osama bin Laden. It’s a bipartisan moment of gratification — even if it does mean celebrating the death of another human being. In this case, the world may actually be a better place right now.
All that aside, I wanted you to know that we’re starting to pick the pace up around here, after the intensity of the end of our busy season. This is the time of year when we reach out to non-clients and business owners, who are looking for real assistance in managing their tax burdens and finances.
It is, after all, what we do best.
Yes, shutting those doors at the end of the day two weeks ago (the 18th) was sweet. My staff and I could look back on months of hard work, and take real satisfaction in hard work and a bunch of new client relationships which we’re excited to see last for years.
"But…what now?"
That’s a good question–and it takes me back to our offseason preparation. Sure, we’ve taken some well-deserved rest around here … but we NEVER "shut the door" on our relationship with YOU!
That’s why we’ll continue to be here for you for all of your tax and financial needs. If you’re new to us this year…you’ll soon find out that we make a big deal around here of keeping in touch, and offering you hope and wisdom about the current state of the economy–and YOUR wallet!
So this week’s Strategy Note, in fact, deals with a topic which most taxpayers have no idea about.
Roger Menden’s
"Real World" Personal Strategy
Yes, You Can Still Find Deductions
As a client of mine, you’ve already got the peace-of-mind that you were able to claim every possible deduction legally allowed in the tax code for 2010. We put each return through an extensive review process to ensure to ensure you keep as much of your hard-earned income as the IRS allows.
But what about your friends?
Well, since it’s now AFTER April 18th, they might think that the proverbial "fat lady" has sung on their 2010 returns. Not so.
Did you know that according to a report issued by the General Accounting Office, taxpayers overpay the IRS almost $950 million every year, which equates to an average overpayment of $400 per taxpayer. That’s a somewhat dated report…and the current numbers are certain to be higher.
What’s worse is that folks who prepared their own taxes (with a software, or on their own) are the most vulnerable. But did you also know that taxpayers who used one of the "big chain" preparers are almost as bad off?
An excerpt from a more RECENT report from the GAO: In a Limited Study, Chain Preparers Made Serious Errors
In GAO (United States Government Accountability Office) visits to chain preparers, paid preparers often prepared returns that were incorrect, with tax consequences that were sometimes significant. Some of the most serious problems involved these preparers…
1. Not reporting business income in 10 of 19 cases;
2. Failing to take the most advantageous postsecondary education tax benefit in 3 out of the 9 applicable cases; and
3. Failing to itemize deductions at all or failing to claim all available deductions in 7 out of the 9 applicable cases.
More clippings from the report:
* The 19 paid preparers we visited arrived at the correct refund amount only twice. On 5 returns, all for the plumber, they understated our refund amount by a total of $3,465.
* All 19 of our visits to tax return preparers affiliated with chains showed problems. Nearly all of the returns prepared for us were incorrect to some degree, and several of the preparers gave us very bad tax advice, particularly when it came to reporting non-W-2 business income. Only 2 of 19 tax returns showed the correct refund amount, and in both of those visits the paid preparer made mistakes that did not affect the final refund amount.
So what can your friends do about this? Simple: file an "Amended" Return.
Many tax businesses don’t provide this service, but even though we’ve completed our clients’ returns, we WILL review any of your friends’ returns–at no charge.
To You and Your Family’s Peace of Mind!
