Halftime Adjustments

You have six months of financial info to use for some quick math about your year as a whole, and to prepare for a pleasant upcoming tax season.

To begin, all you have to do is take your cash flow for the first half of the year, and multiply by two. Add up your wages, dividends, interest, and any other income, and then–if this represents approximately what you’re expecting for the second half of the year–double the sum.

Once you have your estimated 2011 income, give us a call (or send me an email), and we’ll help you determine the appropriate tax rate and deductions to apply. Because once you’re armed with this info, we can help you determine the amount of taxes you might expect to owe for 2011.

By then comparing this against your projected withholding, you can adjust the withholding on your paycheck in advance as needed, and ensure a happy visit to our office in the early winter.

This can also be a good time to organize your financial records and/or get started with some financial software. (Quicken, Microsoft Money, or the free online utility www.Mint.com are some popularly available options for this.) Getting organized now can make gathering a report of all those deductions a breeze come tax time!

Posted on September 1, 2011 Read More

When The Rich Act Like They’re Poor

Now, as I do so, I also run into people’s attitudes about their wealth.

I’ve made a close study, over the years, of how money “works”, and just what it is that propels certain individuals and families into great quantities of resources … and what also brings them down.

You see, sometimes the very wealthy begin to act like they’re poor.

It’s the beginning of a bad problem. And, it’s also something to watch out for in your children — because it will give you a clear picture about what might happen should you bequest your resources to them without a clear estate plan, for example. I’ve compiled a group of behaviors characterizing the financially-strapped.

You may have resources NOW … but are you:

* Spending money on things you really don’t need: I’m sure we’ve all got one of those friends who just loves to spend money, and buy things just to say they have them. The newest iPhone just came out? They buy it even though they already have an older version. A new TV came out with a higher refresh rate than their current one? They buy one so they can say they have the newest and latest technology.

That may be fine for a certain amount of time, but there is something deeper happening in the heart, there, which if left unchecked, can signal a decline in wealth. Because it starts with the iPhones … but where does it end?

* Ignorant about where your money is going: Far too often people who are broke find themselves short because they’ve never tracked their monthly cash flow and their small expenses are adding up to consume everything they bring in. They really need to track their expenses for a month or two so that they can set up a plan.

But the wealthy sometimes begin to believe that they’re immune to such proletarian concerns, and allow the same bad habit to encroach into their portfolio. Don’t let up — but, of course, don’t fall into obsession (e.g., are you checking your accounts every day? That’s also a problem!).

* Blaming your problems on outside forces: People don’t like to see themselves as the source of their problems. While people certainly have problems that aren’t caused by something they’ve done, far too often they will also try to shift blame when they should be looking at themselves. They blame their friends, family and the government. They believe that “the little guy just can’t get ahead”.

Posted on August 1, 2011 Read More

Warren Buffett’s Financial Wisdom

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 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.

Posted on July 1, 2011 Read More

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