Had I known then what I know now…

“There are two lasting bequests we can give our children. One is roots, the other is wings.”

- Hodding Carter, Jr.

Wow–I suppose I struck a nerve.

Last week, I wrote about protecting kids from financial hardship, and I got so many emails and calls about it from clients and friends that it’s clear to me that it was forwarded all over the place and shared.

When I set out to blog, I didn’t quite understand how much people wanted an accounting professional who cut through the tax gobbledy-gook and spoke to the heart (*and* the wallet)!

Well, I got the message. So, I’m going to return this week to the subject of children, but this time, about the older variety. This one is for those of you who have children just starting college–or are well underway, but need a little financial “kick in the pants”.

Let me know your thoughts!

“Real World” Personal Strategy

What I Wish I’d Known About Finances In College

When I started university, I was a little nervous about what was about to transpire. Honestly, I thought I might be biting off more than I could chew. I should have known that I had little to worry about. But there are a few things I wish I had known — or at least thought about — before entering college…

Who is paying for college? Many have their undergraduate education paid for by parents, scholarships, and/or loans in their name [or their parents']. Be careful not to fail any courses. If you fail a class required for your degree, you will have to take that class again, paying for it twice. It’s not worth it, particularly since it’s usually difficult to outright fail a class. Paying for college yourself supposedly gives you ownership of your academic decisions while in school, but if you’re in a situation where you don’t have to worry about affording your own tuition, then consider yourself lucky.

Work shouldn’t interfere with studies. I am quite grateful I didn’t have to pay for all of my undergraduate education. It allowed me to focus on my education and extracurricular resume-building activities in my field rather than focusing on earning income to afford tuition. I did find a few jobs, however. I stayed on campus for winter and summer sessions to take more classes, but with a lighter load during these in-between semesters, I held various part-time jobs, and these jobs provided me with a little extra cash. I probably spent it just as fast as I was earning it, however.

Open a Roth IRA. These retirement accounts were brought into existence about 16 years ago. If I had had a way that I could put money away for retirement in a tax-advantaged account while I was in such a low tax bracket, I might have taken advantage of the opportunity. Then again, I might not have. It’s hard to imagine retirement before you’ve officially begun a career, but it’s harder to argue with long-term investing in the stock market–even in these times of economic uncertainty.

Like many, I played the “stock market game” in elementary school. By the time I entered college, I probably knew only a little more about investing, but my interests lay elsewhere so I did not particularly think about having a secure financial future. I’m not going to go on and on about the power of compound interest here, but suffice to say–it’s incredible when you start in college.

Avoid credit cards. The credit card companies are (still) vultures on college campuses. The companies set tables outside the dorms with applications and free tee-shirts, enticing sub-fashionable freshmen (like myself, at the time) to sign up. Although I escaped relatively unscathed, having a credit card without a job is asking for trouble.

One particularly sneaky aspect of college-geared credit cards is the introductory offer. Even with the recently-passed CARD Act, the fine print on these deals are heavily weighted AGAINST the college student, and (of course) in favor of the banks.

Further, here are some other goodies from Forbes for the financially-savvy student:

* Use credit cards sparingly

* Pay all credit card balances in full

* Get the best deal on a checking account

* Start saving

* Keep track of your spending

* Set a limit on entertainment

* Shop at second-hand stores

* Keep an eye out for free money

* Get a part-time job with tips

* Walk or ride a bike — don’t drive

* Avoid the tax on stupidity

* Look for student discounts

* Don’t eat out all the time

Had I known what I know now about compounding interest and the tendency for the stock market to increase over time, not just theoretically but from experience, I’d be in an even better financial position right now.

And it’s not about having more money, it’s about having more options for doing the things we like to do.

I’m personally dedicated to the success of your family–and to your finances! Can other tax professionals say that?

Let the kids be kids!

“The path to our destination is not always a straight one. We go down the wrong road, we get lost, we turn back. Maybe it doesn’t matter which road we embark on. Maybe what matters is that we embark.”

- Barbara Hall

It’s getting close to “back to school” time for most of my clients, is already here for others(!); and families everywhere are breathing collective sighs of relief (though, that isn’t at all to say that kids are a burden! Just…tiring for some, right?). The summer is wrapping up, and everybody’s schedule is about to fill up with all of those teacher meetings, etc.

Summer’s end means the end of a time of innocence of sorts for school kids. And, as we work with our family clients, we’re keenly aware that the economy’s impact on families can trickle into the hearts of our children, unless you’re quite careful about it.

So, as I’m watching this school season kick into gear, I had some thoughts for families which I thought might be useful–especially for those families who are walking through tough times.

Let me know your thoughts!

“Real World” Personal Strategy

Protecting Children From Financial Hardship

When a close friend or family member loses their home, or their job (or both), it can be frightening on several levels. You begin to wonder if the same could happen to you. And, as you’re probably aware, this fear of economic uncertainty causes anxiety in many children, too.

While it is impossible to shield kids from all that goes on around them, I happen to believe money worries are one of those things we shouldn’t share with kids. There are a number of ways to do that — some very specific, and some more subtle.

Don’t Argue About Money in Front of Kids

This one seems the most obvious. When it comes to transferring anxiety over money to your children, there is no faster way than to fight over it with your partner. Asking couples not to argue over money at all is a little unrealistic, so when differences arise, at least try to do it in private and out of earshot of your kids.

Spenders and savers are bound to clash, but when they fight in front of kids they give kids something to worry about beyond Mom and Dad fighting. Will we run out of money? Is Dad losing his job? Will we have to move? Will we have money for food? Even if parents are unsure about the answers themselves, they owe it to their kids to exude confidence when it comes to money. If things really do get bad, emphasize that no matter what, you’ll all be together and that home is where you make it — wherever that may be.

Avoid These Phrases: “We Can’t Afford That” or “We’re Poor”

When kids ask to buy things, and money is tight, try to rationalize with them instead of simply saying, “we can’t afford it.” Tell kids that instead of spending money on toys this week, you need to focus on buying some basic things like food and gasoline for the car. Ask them to come along to the grocery store to help pick out a few favorites. If you simply say you can’t afford something, kids will begin to wonder what else you can’t afford, and that’s a psychological slippery slope for young minds.

In fact, I’d go so far as to say this: Don’t allow anyone in your house to use the word “poor” when describing your economic situation — even when times are pretty lean in the household. Families might be broke– but that doesn’t mean they’re poor! It’s more than semantics. The word “poor” seems to connote inferiority, or having some unfortunate circumstance. We don’t have to accept that paradigm. Sometimes, families simply spend more money than they earned and have to live on far less to turn things around. They may have been foolish, but they don’t have to be poor!

Now, let’s shift away from things not to do around kids, and focus on some positive things to teach kids to help them with their own financial futures.

Teaching Kids About Money

When I was growing up, money was taboo. Parents would no more talk about money with their children than their love life. While this is still true to an extent, I think most of us have recognized that kids need to be more aware about the potential financial pitfalls out there than we were.

Start giving kids an allowance to budget their savings, spending and giving. Help them open a savings account and begin to teach the mechanics of a bank account — completing deposit slips, balancing a checkbook and explaining how compound interest works. As kids get older, introduce them to increasingly more complicated topics like investing, borrowing money, insurance, etc. By the time they are teenagers they should have a good grasp on Personal Finance 101 topics to better prepare them for life.

Encourage Saving Over Spending

As adults, we know it is prudent to put back a sizable emergency fund of several months (I actually recommend a full year) of basic, household expenses. Because kids are not responsible for everyday expenses, it can be hard to get this message across to them. Instead of focusing on saving money for emergencies, teach kids to save money for opportunities.

Foster Entrepreneurialism in Your Kids

My parents and grandparents were probably a lot like yours — they worked 40-50 hours a week, punched a clock and recharged over the weekends. After doing this for several decades they were given a cheap retirement gift, maybe a small pension, and a retirement send-off.

Well, times have changed.

The recession has underscored the importance of developing an entrepreneurial streak at a young age. Chances are very slim that your child will graduate college, pick one job and stay there for 40 years. More likely, there will be many jobs with many employers, and many periods of being “between jobs” in their lifetime. Wouldn’t it be great if they developed a “side hustle” to get them through those periods of unemployment, or to supplement their full-time income all along?

Perhaps you enjoy building things and have turned your one-time hobby into a side hustle building decks and fences on the weekends. Get your kids involved in the process as they grow older, and perhaps you can pass along a valuable trade. Even if they become accountants or fire fighters, having the knowledge and experience of a trade to fall back on could be incredibly valuable to them over a lifetime.

The point is not to stifle your kids’ ideas by forcing them into some ideal career path you have selected for them. Allow them to cultivate their own ideas. Over the next few decades, personal branding, and the branding of individual ideas will likely be hotter than any particular industry. Think about it — iPhone apps may be the next lemonade stand!

In a way, social media, and new media, have greatly expanded the opportunities for kids to create new products, explore new ideas and push new content into the mainstream. There’s never been a better time to have an entrepreneurial mindset, and fostering that in your children at an early age is invaluable.

I’m personally dedicated to the success of your family–and to your finances! Can other tax professionals say that?

Make these moves now

The world of achievement has always belonged to the optimist.

- Harold Wilkins

Some weeks are harder than others.

That’s why I make it a point every week to sit down and write to you–to lift your eyes, to remind you of what’s possible…and, in the doing, it does wonders for *my* state of mind.

Yes, even I can fall prey to the Daily / Weekly Blues.

But when I remember the families we get to walk with–through hard times, and good–I get a shot of energy. When I think about the businesses we guide through the morass of this economy…well, it makes every week worthwhile.

Tax time blues are all-too-common as well. But getting a “surprise” in March or April is 100% avoidable. Half of that task is complete when you work with the right professional [check!]; but the second half is to ensure you move NOW, when you still have time to set things up right.

A few good moves to make, right now, are below.

“Real World” Personal Strategy

End-of-Summer Moves To Make

The tax cuts we’ve all been enjoying for almost a decade are set to expire at the end of the year. That’s the bad news.

Worse: Although some of the provisions, such as the 10 percent tax bracket and the $1,000 child tax credit, have a good chance of living beyond 2010, some of my clients will likely owe Uncle Sam more money next year–unless they do something about it. This is particularly true if you’re in the highest tax bracket, scheduled to go from 35 percent to 39.6 percent. Also slated to increase are the tax rates on capital gains, currently at 15 percent for most investors.

Move #1: If you fall into this category, accelerate income into this year so you’ll owe taxes on the money at today’s lower tax rates. Talk to your employer about moving any bonuses or commissions into 2010. It’s also an ideal time to cash in some long-term winners in your portfolio so you can take advantage of today’s lower capital gains tax rates.

Next, anyone, regardless of income, can convert a traditional IRA to a Roth. Even better, the government is encouraging us to convert by allowing us to pay the tax on this money over two years — 2011 and 2012 . But if you decide to postpone any tax bill, remember the likelihood of higher rates in 2011 and beyond. Another impending tax, the Medicare tax on high earners, also has created more incentive to convert to a Roth. This tax is part of the health care reform law and will apply to investment income of higher earners starting in 2013.

Move #2: Sit down with us, and let’s explore whether moving to a Roth is right for you. We’ll run the numbers to determine whether you should pay all your Roth conversion taxes this year at lower rates–or sit tight. This could make a big difference, depending on the rates.

I like tax credits over deductions for my clients. That’s why the next move for you should be in your home. Because: Good ol’ Uncle Sam wants to help, if your upgrades are energy-efficient.

It’s part of the “stimulus bill”, and it won’t always be the case; right now, common energy upgrades such as installing storm windows and doors, adding insulation, and buying a new energy-efficient air conditioner or heat pump, could get you a $1,500 credit when you file your tax return.

Move #3: Pull the trigger on those long-put-off improvements. You do have a few months, as this tax break is good for improvements made through the end of the year. Be careful, however, if you claimed the maximum credit on last year’s return; this tax break is limited to a total $1,500 claim, not that amount every year.

There are more moves to make–but they depend on your particular situation. It would delight me and my team to no end to have the chance to set you up for paying the least amount of taxes possible for 2010…so, let’s do something about this, shall we? Give us a call now to set up your appointment!

I’m personally dedicated to the success of your family–and to your finances! Can other tax professionals say that?

How to thrive now

It is hard to fail, but it is worse never to have tried to succeed.

-Theodore Roosevelt

It really is the “dog days” of summer these days–temperatures pretty sweltering all over the place! We have clients spread around the country, so we keep getting reports of intense heat all over.

Well, this economy is pretty “hot” too.

Unfortunately, though, not quite in a good way. It’s “hot” for families and businesses which are facing a sudden change of circumstance, whether it’s through job loss or revenue decrease. Those are the simple facts on the ground for many people.

But even with these realities, you can make things much worse for yourself  if you’re not careful about your most precious possession: your state of mind.

So, for these dog days, I thought I’d pull out one of my most popular emails from a while back–because it’s just as pertinent now, as it was then (if not more pertinent).

Let me know what you think–and do act on it.

“Real World” Personal Strategy

Your Mindset Is Everything In This Economy

How can you maintain your sense of personal peace in this environment…while NOT simply “ignoring” everything? I’ve got four suggestions for you.

1) Firstly, DO be very selective about (even, yes, choosing to ignore) certain media elements that have an agenda of spreading fear. 24-7 news would make no money if it stopped preying on people’s fear. (You realize the news networks are not a public service, right? They are in the business of getting ratings to sell advertising. Period.)

Have you ever noticed your feelings after watching just 20 minutes of CNN Headline News? Everything is going to pot. You’ll find negative stories on the environment, war, disease, crime, and of course… the economy. It’s laughable what they’ll come up with just to broadcast some bad news. A few weeks ago I spotted this “headline” story on the tube along with some sad-faced puppies: “PETS: Feeling the Foreclosure Boom!”

Everyone is selling crisis! This is true, from the media to the politicians. So stop watching CNN all day, refuse to participate in this circus, and instead start planning your first (or next) million. Seriously.

2) Look for the good news. Now, I’m very careful here, because I’m aware that some of my clients and friends really are feeling the pinch, but let’s ALSO look at the bigger picture, especially in comparison to the 30′s.

This was the topic of last week’s email, and, again, I can send to you if you missed it. Short version: We’re NOT in the Great Depression (by the numbers).

You can always find doom and gloom if you want to. So turn off your TV and focus on other activity. It will significantly help your inner peace!

3) Get out and do something profitable. That may mean actually starting that exercise regime you’ve been putting off. Take up a new hobby. ANYTHING to get your mind in a more “profitable” mode! Go do it.

These steps will NOT solve the problems in your wallet, and in the economy. However, how you choose to respond will affect your peace, and, actually…this WILL impact how you spend your money. Please, for your sake, tune OUT the fear, and tune IN to smart preparation.

4) Stave off fear by knowing actual numbers. A bit self-serving? Sure, but also grounded in reality. The great problems many businesses and families face when money’s “tight” is SIGNIFICANTLY compounded by not knowing. Any number of pessimistic scenarios play out in your head.

So here’s how to fix that. Sit down with an advisor, get the real facts-and if they’re bad, you can still come up with a plan. You’ll find that laying out action steps with somebody competent changes everything. Call our office to schedule an appointment to lay out these steps with us.

I’m personally dedicated to the success of your family–and to your finances! Can other tax professionals say that?

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