Making 2013 The Year You Finally Get It Done

I’m fully aware that just a couple weeks ago, I wrote you about my simple “one word resolution”. So this isn’t about making another new year’s resolution.

This is about finally becoming a saver, instead of a spender. It’s about much more than retirement, but let me scare you with this: for every seven years you delay saving and investing for the future, you will likely cut in half the income you would enjoy at the end of your life.

Ouch. So, let’s make this year the year that we get this thing moving, shall we, Glen?

Here are some ways to get off your hind end and get it done…

1) Set goals you’ll actually keep. First, ask the right questions about what you are wanting to do with your resources and stay the course until you’ve found the answers. Then share what you are doing with someone you trust (I’m happy to be this person for you!) — because goals that are shared are ten times more likely to be acted on. Don’t wait until you have everything set up to seek out accountability.

2) Write down your goals, and make them tangible. Set your savings goals as a specific annual percentage of your adjusted gross income (AGI). It’s a great starting point to save at least 10% of your AGI in tax-free retirement accounts and another 5% toward retirement in taxable investments. If you are behind on your savings, you may want to save even more in order to catch up.

3) Come up with an actual financial strategy besides “save more”. Look at retirement vehicles, such as annuities, tax-savings plans, etc. Start by investing just enough to get the entire match from a company’s 401(k) plan (if you have one) and then fund your Roth IRA accounts next. After these two, make certain you have enough non-retirement savings.

4) Set it and forget it. I bold this one, because it’s huge. Automating putting money in an employer-defined contribution plan is easy. Automating a taxable savings plan is just as painless. Most banks or brokers offer an automatic money link between an investment account and a checking account. They should also offer a monthly automatic transfer between the two accounts.

Going into further detail would actually entail sitting down and creating a true, full financial plan–which is impossible over email!

But I will say one last thing: the most critical component of wealth management in the new year will be tax minimization. With the potential for inflation rates to fluctuate even more than the stock market in 2013, and for the many different ways creeping at us by which the government will seek to add “revenue” (some of which are hidden even from avid watchers like myself), it’s never been more important to monitor what “Uncle Sam” is seeking to take from your wallet!

To your family’s financial and emotional peace, Glen…

Hicks Tax Co. Xenia Accountant

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A Holiday Financial House Cleaning

So, all of this “fiscal cliff” talk is just about ready to make me a little crazy. Every year, there’s some new crisis which Congress has to avert — and usually (with all respect to our legislators), they let us down.

This year … well, the White House and Republican leaders remain far apart (as of this writing) on whether to raise taxes for the “rich”, bringing talks aimed at avoiding the dreaded cliff to a halt. And, while preparing to watch football, I saw that both sides used the Sunday political shows to accuse the other of refusing to compromise on taxes. “We’re nowhere,” said House Speaker John Boehner.

And everyone, everywhere, is warning of the consequences if things don’t change this month. And they wouldn’t be wrong. Regardless, do NOT allow yourself to walk into 2013 without a tax-reduction plan. And, of course, that’s somewhat self-serving … but it doesn’t mean it’s untrue.

And here’s a great place for you to start …

A Holiday Financial House Cleaning

If you’re like most people, I bet that when you get your homeowner’s insurance renewal notice, you quickly glance at the price — and renew it.  You renew it simply because you don’t have the time to search around for better prices.

In my experience, working with family finances for YEARS, I’ve learned that most people have a good sense of what needs to be done to improve their finances but they simply cannot find the time.

So here’s my proposed solution for you:  Take a day off work before the jingle bells stop ringing, and get some financial stuff
done (finally).

In fact, many financial tasks simply cannot be completed in the evening or on the weekend.  By taking a day off work, you can contact people who may only be available at regular business hours.

On top of the true bottom-line impact a day like this could create, there is, of course, the “mental health” aspect of it all. HR professionals often recommend taking a mental health day, from time to time — well, call this your “Fiscal Health” Day.

Possible tasks to consider accomplishing on your day off:

1. Dump your savings account with a puny interest rate and open a high-yield savings account. If you’re older, look into an annuity.
2. Get quotes for cheaper insurance: health, life, auto, house, and any other insurance. And you can even do a little calculation to determine how much you could save by changing your deductible.
3. Complete the most important (but not as obviously-pressing) financial tasks like making a will. Like your taxes, this is best done with a professional, by the way.
4. If you’re carrying credit card debt, call the companies and ask them to reduce your credit card interest rates. Believe it or not–they’ll often say yes! Take time to develop and formulate a good plan to get out of credit card debt.  Find or prepare a debt reduction plan.
5. Get more organized with your finances by shopping around for and using a good personal finance software program.
6. Review your budget, get caught up on your budget, or learn how to budget.
7. Shop around for the best online broker.  Be sure you’re getting the best price for your stock trades.
8. Make energy-efficient changes to your home and lifestyle.
9. Find a good second-hand store to shop at instead of the local department store.
10. Set up automatic payments for your bills to be sure you avoid late payments.
11. Google It.  Use the phrase “how to save money”, and then fill in the blank “on groceries”, “on gasoline”, “on kitchen expenses”, “on babies” …
12. Sell stuff on Ebay or Craigslist. Look for junk lying around the house and list it on one of these sites.

Undoubtedly, there are more things which can go on this list, if you’re industrious about it. But simply put, I’m hoping to give you “permission” to see your financial health in a similar light as you see your mental health.

Thanks, again, for your time in reading my thoughts. And we thrive based on your referrals, and are truly grateful for them. We love to hear from our clients.  Feel free to call us or send us a note, or make an appointment at our Xenia Accounting Office

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So, What Can You Expect In 2013?

Well, here we are after the election, with the status quo being upheld. Billions were spent (probably making some “consultants” do quite well in the process), and we were all very distracted … but not much has changed. Many are happy about it, an ever-so-slight number less aren’t happy — but to all I will say this:

Over the next four years, what you do will have a larger impact on your income, wealth and happiness than what any president does.

And yes — there will be many things for us to help you navigate, because come 2013, there WILL be some significant changes.

With the election behind us, we can expect some traction on the debt limit negotiations, and further discussion of the “fiscal cliff”.  Taxes WILL go up next year … whether it’s directly on your income, or in other more-hidden ways. So my primary quick-and-dirty tax planning maneuver for you is this: take as much income THIS YEAR as possible, and defer tax-deductible expenses until after December 31, whenever possible.

Getting a Real Checkup

Generally speaking, many wise adults see a doctor when they hit 50. And the great thing about (most) doctors, is that they’re not financially incentivized to advise you towards a specific course of action.

Would that were true about all financial investment advisers.

So, I thought I would take the time this week to give you an objective, “incentive-free” look at what your finances should look like when you hit the half-century mark. If you are close to that mark, I thought it might be useful for me to lay out the “perfect” scenario.

And look–if you’re not perfect, at least let it be a benchmark…

We should have been saving and investing 15% of our income regularly. Even if we don’t want to retire until age 70, by 50 we should be well on our way toward securing our retirement. We have managed to save about eight times our annual lifestyle spending. With a $100,000 per year lifestyle, that means we should have saved about $800,000 toward our retirement.

We are probably at the point where our children are in college or have recently graduated. When college funding is complete, it’s time to reevaluate and perhaps drop term life insurance coverage depending on our individual circumstances. We purchased the insurance to make sure our children would have enough money to complete their education. When term premiums rise and college accounts are fully funded, we should probably drop our coverage.

Our estate plan should be in place and fully implemented. And, of course, various assets are handled differently. This is the time to make a complete review of how our plan is put together, to ensure that EVERY asset (not just the tangible ones) are still handled properly.

And, for you “imperfect” savers, we have one last chance after children and before retirement to catch up. Age 50 is the first year we are allowed to take advantage of increased savings and catch-up provisions. In 2012, maximum savings in a 401(k) or 403(b) account increases from $17,000 to $22,500 at age 50. Roth contributions also increase from $5,500 a year to $6,500 with these “catch-up” provisions. If we don’t have eight times our lifestyle spending saved, now is the time to press these limits.

Of course, saving well is half the battle; investing well is the other half.

That’s a subject for another day, and which we can discuss more via phone, if you’d like: (937) 372 – 7775 or contact me through Hicks Tax Co website.

Of course life is too short to ignore meaning at any age. But for many people 50 is a milestone that reminds us to stop and reevaluate. There is still time for a whole new life of significance.

Financial independence can open exciting possibilities that were otherwise out of the question. If we don’t need the money, we are free to do anything with our lives. People of purpose usually don’t choose 28 years of recreation. Not when we finally have the time and the wisdom to make a difference in the world.

And counting retirement as a new career is a perspective I’d encourage. When you reach the point in your life where you can celebrate the freedom to work instead of the freedom from work, that’s success. If just a fraction of people in the second half of life turn their experience, time and talent to our nation’s most pressing challenges, imagine the progress we could make.

Although you can have that attitude at any age, it is especially powerful when redefining the second half of your life!

All of these issues are things we routinely assist with on behalf of our clients. If you haven’t yet set any of these items into place, call us right away at (937) 372 – 7775 and we’ll either help you, or connect you with someone who can.

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Xenia Accounting Firm Offers Advice To Pay Less In Taxes

Xenia Accounting Firm Offers Advice For Paying Less In Taxes

Income taxes may be the single largest expense that a small-business owner will encounter. This amount is often larger than their home or the cost of getting their kids throughcollege. It is apparent to me that one can never build any real wealth without first getting their income taxes under control.
I am often amazed at the number of business owners looking for ways to reduce
expenses. I have seen time and time again many small business owners spending hours
fighting over a $200 charge by their credit card company. Yet, they will spend little or
no time learning how to reduce their tax burden. In many cases, the amount could be
thousands of dollars. So, which amount do you feel is a better investment of your time to
There was a CPA study reported in Business 2000 magazine last year that stated that
American small businesses overpaid their income taxes by over $2 billion dollars. The
overpayments were made because the businesses failed to take the tax deductions they
were legally entitled to take. Many of these businesses are still unaware of their errors.
In talking with many small business owners over the years, I don’t ever remember a
single business owner telling me that they got a call from the IRS because they missed
taking a deduction. The IRS is not going to help these businesses by telling them about a
tax deduction that they didn’t claim. That’s up to them/you!!
I was recently reading a book by Dr. Stanley titled “The Millionaire Next Door.” This guy
did extensive research on millionaires and he concluded that most people who became
millionaires didn’t win a lottery, inherit a lot of money, or make a big stock market gain.
They were, for the most part, average folks who saved a little bit each year, probably
from the taxes saved with good planning, and invested the money in an average
investment for 30 or more years.
At first I didn’t believe this so I calculated it for myself. If you were to invest $4,000 for
40 years at an average of 9% return per year, your investment would be worth a
whopping $1.6 Million at the end. This means that the small business owner who saves
money through good tax planning and invests the savings in a retirement account or
other investment can become a millionaire. Tax knowledge is lucrative.
You probably know that tax laws are constantly changing. What makes sense today may
not make sense tomorrow. If you have a CPA or accountant helping you with this role,
they better keep up with the trends! From my experience, many tax and accounting
professionals don’t proactively help their clients with tax saving strategies and prefer
taking a “back seat” approach. That does not help the small business owner.
For example, when I talk to many new business owners, they are not taking advantage of
many important tax reduction strategies like the home office deduction. Many don’t hire
their children to work in their business and hence, miss out on being able to shift
income from a higher tax bracket to a lower tax bracket. Many have not set up Roth
IRA’s for their children. Others are not sure if they are set up with the best legal
structure and overpay the government because it’s been years since their accountant last
reviewed their legal structure. Yet others operate with several owners/members and
either don’t have a buy-sell agreement in place, or have an agreement that is outdated
because it has been years since it was last reviewed.
It is important to sit down with your CPA several times through the course of the year to
review your business’s income tax trends. By meeting with a knowledgeable CPA, your
business will be able to maximize income tax deductions. Your CPA should act
proactively to consider what steps to take in the next quarter, and properly advise you to
help reduce your overall tax liability. If your CPA is not currently working with you in
this manner, it could be costing you, and your business, thousands of dollars per year.

Dayton and Xenia Accounting Firm

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Xenia Business Accountant Offers Advice To Business Owners

Xenia Accountant, John Hicks, offers advice to business owners.

Xenia Accountant Website

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