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Refunds & UN-Automating Your Life
Success is not measured by what you accomplish but by the opposition you have encountered, and the courage with which you have maintained the struggle against overwhelming odds.
- Orison Swett Marden
1) Your Refund Status: Make sure you have a copy of your tax return on hand or know your "filing status", SSN and the exact dollar amount of the anticipated refund.
* Online: Go to IRS.gov and click on "Where’s My Refund". (http://www.irs.gov/individuals/article/0,,id=96596,00.html?portlet=4)
* Automated Phone: Call 1-800-829-4477 24 hours a day, 7 days a week for automated refund information.
* In-Person Phone: Call 1-800-829-1954 during the hours shown in your IRS form instructions.
2) "Do I need to keep a copy of my return?"
Yes, for a *minimum* of three years. There’s all kinds of contexts where it’s useful. We do keep one on file, on your behalf, but it’s just smart and safe for you to keep one in a secure place at home. (I’ll soon have a Note about Amended Returns, and you will need a copy for that process, as well.)
As for the supporting documents from your return, anything that relates to a home purchase or sale, stock transactions, retirement, business or rental property, should be kept much longer than the three years.
Now … I have a suggestion for you this week, and as always, I’d love your thoughts!
John Curtin’s
"Real World" Personal Strategy
The Benefits of De-Automating Your Personal Finances
Small business owners know what it is to write checks for quarterly taxes, and, I believe, they have deeper sense for what they are paying, as a result.
In fact, I think our country would be a different place if everyone had to write a personal check and send in their taxes like this. When people really see what they pay (or don’t pay) I think they would feel differently about their tax burden!
This is a common refrain among certain political observers — but it has me thinking about what it might mean for your family …
In fact, this is part of the genius of financial guru Dave Ramsey’s "envelope system" for family budgeting (whereby you place cash into specified envelopes, and pay only as much cash as remains in the envelope for different budget categories). "Automating away" our obligations can lull us into financial slumber.
Which is why I now propose that you REMOVE automation from certain checks that you write each month. (This is aside from automated savings .)
[But a word of caution: The only danger to this approach is that you run the risk of focusing too much on scrimping pennies. I certainly advocate wise budgeting, but it's important to remember that thinking over much about saving money can constrict your mind away from important risks, which can often be worth taking -- like starting that business, making a new investment, etc. Don't let this technique keep you from expanding your financial mindset!]
So, a few suggestions for what you might DE-automate:
1) Just once, receive your paycheck in cash (instead of ACH’d), or cash the full amount when you receive it. Because, have you ever HELD one paycheck’s worth of money before? It’s really hard to fully comprehend how much you’re bringing in until you physically feel those stacks of $20s in your hand. I can guarantee you it’s a lot harder to spend it when you’re seeing it in person rather than online. And it hurts frittering it away more, too.
2) Paying your mortgage manually. Feel the burn of this large check, every time you write it. It will trickle into how you think about the other bills which you pay such that even if this is the only bill you take off of "auto-pay", you’ll be wiser with your remaining funds each month.
3) Only purchase vehicles for cash. If you had to pay outright, wouldn’t you end up with a cheaper car? Probably. Just because many are used to setting up loans and payments for vehicles, does NOT mean it’s wise — in fact, this is one of the primary markers for the quiet millionaires (those who are getting ahead financially, even on relatively smaller salaries). Yes, your pride might suffer when you’re not rolling around in a 2011 Lexus … but considering the real cost of that pride-booster does wonders for ameliorating your egotistic tendencies.
In short, paying in cash (or with a manual check) helps you to consider the following questions:
* Is this ____ still WORTH it?
* Is there a way I can cut it down a bit?
* What’s the best way to pay for it right now? (c/c, check, cash?)
Again, some of this could literally take seconds, but the point of it all is that you STOP to do it. With automation, you don’t get the ping every month because it’s already doing the thinking for you. You’ll learn a LOT more about the financial you this way than you would otherwise, I’m certain. It’s really about paying closer attention.
Not much of a slow down around here yet, but still hopefull.
To You and Your Family’s Peace of Mind!
A Simple Tweak, Which Can Really Help
You have to see opportunity before you can seize it.
- Greg Hickman
I think this week’s Note can really help every one of my clients and contacts. I’m excited for you to read it.
But as I write, it’s tax day (Monday, April 18th), and we are pushing hard during this final stretch! Procrastinators are streaming through our doors (after all, we welcome them here), the phone is ringing off the hook, and my email inbox is overflowing.
Another year, another tax day.
So, here’s my confession: I didn’t write the below article this morning. I hope you’ll forgive my lack of timeliness. But I *did* prepare it earlier, because I KNEW that today wouldn’t allow me to. However, I’m a pretty decent planner, so I had this one all set up and ready.
That said… I’m quite proud of this one, and I think you’re going to really enjoy it. It’s admittedly a little on the technical side–but I really believe it’s worth your time to read and consider. Would love your thoughts on it!
John Curtin’s
"Real World" Personal Strategy
Automatic Investing As The Basis For Real Wealth
Yes, it may be a cliche, but the greatest engine to generate real wealth is saving and investing. And the best way to ensure that your default is saving & investing is to automate the process. Pay yourself first, and your savings will grow exponentially.
Effective money management is based on the idea that very small changes can yield enormous gains in your family’s finances. This process, both easy and simple, is worth millions. Unfortunately, only a tiny percentage of American families take advantage of the tools available to implement this automated technique.
So here’s how you pull this off: Have all income flow into a joint taxable investment account. Make saving and investing your default. Putting all of your money in this account helps ensure that you move only the money intended for some other purpose into a different account.
For working families, this means an automatic deposit of paychecks into their joint account. Banks will try to entice you into setting up automatic payroll deposit into their checking account. They will offer you additional interest if you do so. Resist. The additional interest is not worth the failure to not only save but to save and invest. Your taxable investment account should be the default.
For retired families, this means an automatic deposit of Social Security checks. It also means their required minimum distributions (RMDs) from their individual retirement accounts (IRAs) should be deposited first into this account.
From this account you can then withdraw what you need for daily expenses. Do this by setting up a regular transfer of funds from your joint investment account to your checking account. Make sure the transfer matches the amount you have allocated in your budget, ideally 65% or less of what you need to support your lifestyle. The other 35% should remain in your joint taxable account, much of it to be invested.
Part of what remains is the 10% you have designated for "unknown unknowns". In the ideal world, this money will not be needed, but few families can anticipate every possible expense. Each stage of life presents new challenges. Having the financial margin to absorb some of life’s shocks is simple wisdom and offers financial peace of mind.
Because the time horizon for this emergency money is unknown, invest it in a balanced portfolio. If unused, your emergency money will double in 7 to 10 years and provide a greater safety net for your family. If you have to dip into this fund, keep track of the amount. If it approaches the full 10% every year, you are using your emergency money to extend your budget, not simply for unanticipated expenses.
The less you use this account, the more quickly you will reach financial independence. These funds are mixed with your other taxable investment savings and continue to grow your net worth. If you are meeting all of your expenses without any major surprises, these funds can be used to purchase a home, start a business or for additional charitable giving.
Another portion of what remains in your taxable investment account will be the 5% you are specifically designating as taxable savings. Because this 5% gets mixed in with charitable giving that is being invested and your unknown expenses, the entire portfolio should be balanced. If an emergency arises, any portion of the portfolio could be sold to furnish the needed funds. Similarly, when you want to gift appreciated stock, any portion of the portfolio could be gifted.
The last portion might be the 10% for funding your retirement accounts each year. Many people put this money directly into a retirement account as part of the payroll process through a pretax deduction. If that is the situation, you don’t need to flow anything through your taxable investment account. But you may want or need to fund your retirement outside of a payroll deduction. One example is funding your Roth IRA each year. In this case you may want to collect the money in your taxable investment account and then transfer it to a Roth account.
If you want to fund a Roth IRA account for the maximum $5,000 (in TY2011), you could transfer the entire amount once during the year or set up a monthly transfer of $416.66. The money from your paycheck would provide the cash, either letting it build up throughout the year or supply the funds for each month’s transfer.
Busy people forget to make the necessary transfers each year. That’s why a monthly transfer is preferable. Saving and investing should be automated so it occurs regularly without any additional effort. Whatever is in your checking account you are likely to spend. Whatever is in your investments you are less likely to spend.
Automating the process of saving and investing is like damming a river to form a reservoir. The alternative is the manual process of hauling buckets of water from your stream to a water tower. You will never grow rich by hauling buckets, and it’s much harder work.
No matter what income you have, you probably already have enough to grow rich! Saving and investing just $10 a day builds a million dollars over your working career at average market returns. You build wealth by what you save and invest, not by what you spend. Automating the process of saving and investing grows your wealth while you sleep.
Sending you our affection, through a haze of tax forms!
Thoughts During Our Final Week
The ability to concentrate and to use your time well is everything if you want to succeed in business–or almost anywhere else for that matter.
- Lee Iacocca
I’m writing this on Monday morning, the 11th, and our offices are buzzing!
Next Monday will be no different — it’s the federal deadline, after all, and we always get panicked phone calls from people on that day. There is still time for us to do an excellent job for you or for your friends, as of this writing, but the window is closing rapidly.
So, I have a solution for you in this week’s Note … but before I get to that, a couple quick points:
1) The averted government shutdown means that refunds will NOT be delayed — more than normal, that is. If you’re curious about the status of yours, go here:
http://www.irs.gov/individuals/article/0,,id=96596,00.html
2) Tomorrow (Tuesday) is "Tax Freedom Day", which is calculated each year by the non-partisan Tax Foundation (if the government *had* shut down, it would be even later!). Here’s that information, if you’re interested: http://www.taxfoundation.org/taxfreedomday/. One of the fun little facts:
Americans will pay more in taxes in 2011 than they will spend on groceries, clothing and shelter combined.
Which, of course, is why I and my staff are here: keeping your tax bill as low as legally and ethically possible.
And, of course, we can always do this …
John Curtin’s
"Real World" Personal Strategy
Extensions, Explained
Let’s clear some things up with some facts about getting an "extension".
As you know, this upcoming Monday, April 18, is the filing deadline for a federal tax return. If you need more time to get your paperwork complete, you need to file (or have us file on your behalf) this form…
http://www.irs.gov/pub/irs-pdf/f4868.pdf
…with the IRS by the end of the day on the 18th. This gives you an automatic six-month (until October 17, 2011) extension of time to file.
Here’s the deal: An "Extension of Time to File" is not an "Extension of Time to Pay", unfortunately. The Extension simply gives you an automatic six months of additional time to get your paperwork together and file that return. But, if you owe more than what you paid with your estimate, you’ll be accumulating penalties and interest on the difference–so PLEASE don’t take the entire six months to do this!
So, when filing your "Extension of Time to File", you’ll need to estimate what you think you owe to the IRS. This should not be pulling numbers out of thin air (or other various body parts)! You’ll still need to go through your receipts and tax documents and get them "somewhat" organized.
From here, you can estimate both your income and your expenses, and then approximate what you owe Uncle Sam. Keep in mind that this is an ESTIMATE. And, you’ll have to pay what you estimate you owe at the time we file for the extension.
You can do this all electronically through our office, you can mail in the form WITH estimated payment (must be postmarked by the 18th), or you can call a specialized provider and pay by credit card. We can provide you with the appropriate number to call.
But it’s NOT TOO LATE! Come by right away!
To You and Your Family’s Financial Peace!
I’ll Get To It Sometime
The future depends on what we do in the present.
- Mahatma Gandhi
No, I’m not talking about your tax return! (Certain clients who’ve met with us in the past few weeks may have had a stab of panic over that subject line.)
But come on — haven’t we all uttered that magical phrase, capable of assuaging all our fears, and brilliantly putting off tomorrow what could have been put off today?
I’m talking to you, Mr. [or Mrs.] Procrastinator.
Yet do not fear! I’m not here to browbeat, I’m not here to scold … instead, I’m here to offer hope.
And, for those of you who have NOT procrastinated, I’m here to offer you the chance to help your friends by having them come see us ASAP! Even at this late hour, we gladly receive friends of our existing clients — we make a special point to accommodate clients’ friends, because we’ve discovered that our great clients have very good taste in friends!
And, a few words for the possibly-panicked procrastinators in our midst this week…(and again–see the end of the email for a little boost!)
John Curtin’s
"Real World" Personal Strategy
Good Procrastination
Right now, there are an infinite number of things you could be doing. No matter what you work on, you’re not working on everything else. So the question is not how to avoid procrastination, but how to procrastinate well.
In my view, there are three kinds of procrastination. Depending on what you do instead of working on something, you could work on:
(a) nothing,
(b) something less important, or
(c) something more important.
That last type, I’d say, is good procrastination.
This is the "absent-minded professor" who forgets to shave, or eat, or even perhaps look where he’s going while he’s thinking about some interesting question. His mind is absent from the everyday world because it’s hard at work in another.
That’s the sense in which the most impressive people I know are all procrastinators. They’re type-C procrastinators: they put off working on small stuff to work on big stuff.
What’s "small stuff?" Roughly, work that has zero chance of being mentioned in your obituary. It’s hard to say at the time what will turn out to be your best work (will it be your thesis for your PhD, or that detective thriller you worked on at night?), but there’s a whole class of tasks you can safely rule out: shaving, doing your laundry, cleaning the house, writing thank-you notes-anything that might be called an errand.
Good procrastination is avoiding errands to do real work.
Good in a sense, at least. The people who want you to do the errands won’t think it’s good. But you probably have to annoy them if you want to get any real work done. The mildest seeming people, if they want to do real work, all have a certain degree of ruthlessness when it comes to avoiding errands.
Some errands, like replying to emails, go away if you ignore them (perhaps taking friends with them). Others, like mowing the lawn, or filing your tax returns, only get worse if you put them off. In principle, it shouldn’t work to put off the second kind of errand. You’re going to have to do whatever it is eventually. Why not (as past-due notices are always saying) do it now?
The reason it pays to put off even those errands is that real work needs two things errands don’t: big chunks of time, and the right mood. If you get inspired by some project, it can be a net win to blow off everything you were supposed to do for the next few days to work on it. Yes, those errands may cost you more time when you finally get around to them. But if you get a lot done during those few days, you will be net more productive.
So here’s where we come in.
Consider us "The Ultimate Procrastination Solution".
Allow us to take the pain away from these second-level tasks (like getting your return filed) — and you go back to writing that killer novel.
To You and Your Family’s Peace of Mind!