Six Steps To Debt Recovery By Ann Hartz

Six Steps To Debt Recovery By Ann Hartz

Our hearts are with the Carolinas, and with the cleanup process that is just beginning over there. With all of the the flooding that is hampering efforts to get in and even evaluate the damage, we know this will be a long road to recovery.

The slow onset of these hurricanes is a mixed bag, isn’t it? We prepare for doom, but doom doesn’t strike at every point … and then there is the inevitable frustration with media and public officials who didn’t get it exactly right or aren’t doing enough or should be handling things differently.

It’s very understandable, but I think we could all benefit from extending grace to everyone involved. Hurricanes are hard to deal with, full stop. So let’s all do what we can to help, and avoid pointing fingers.

And last week I wrote about preparing to deal with potential disasters in your future, on the financial front. I realized after the fact that I didn’t spend enough time on the earlier portion of the note, which went into the steps I recommend for climbing out of a hole — “cleaning up from a financial disaster”, if you will.

So this week I thought I’d dig a little deeper into how I’d suggest you go about doing that.

Six Steps To Debt Recovery By Ann Hartz

“It’s not whether you get knocked down. It’s whether you get up.” – Vince Lombardi

As I sat down to write this article, it made me think about some Des Moines clients that I’ve walked with over the years who fought their way — successfully — out of debt that would have crushed other families.

How did they do that? Today I’ll tell you.

Here’s something they did NOT do: Borrow money to pay off more borrowed money (and call it savings).

That only works for Uncle Sam, apparently.

In general, with these issues, I’m a big fan of automation — but not in all instances.

[For example, do NOT “automate” your tax preparation process with off-the-shelf software. Especially of the “free” variety. We have to clean up so many mistakes made by these products (and their users!), that I cannot, in good conscience, recommend them.

Yes, I’m obviously biased. But the facts are the facts. Take a gander at this, for just one small example: http://www.customerservicescoreboard.com/TurboTax]

Anyway, moving on from that.

To answer some of the questions we occasionally get from Des Moines clients facing tough times, I’ve put together a step-by-step debt recovery process which we often help people work through.

1. First, pay more than the minimums

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. Create an automated system

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.

In fact, I recommend that you automate a payment ABOVE the minimum monthly payment, just to be certain that you start getting ahead of the game. Those minimum payments are rigged against you, and the only way to get ahead is to … get ahead. I have some more thoughts on automation in a moment.

3. Yes, you can negotiate

No, you do not need to be an attorney or other professional to negotiate with your credit card company (negotiating with the IRS, on the other hand, is a very different story!). 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 often willing to make deals.

4. Proactively contact your creditors — in writing

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 will make you feel better about yourself as well.

5. Develop a simple tracking system

If you are not able to pay the full amount of your credit each month, you should still pay something to stay on top of it. You should work off of 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. Do NOT be intimidated

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.

Give us a call today, for help.

Until next week,

Ann Hartz

(515) 259-7779

Ann M. Hartz, CPA

A Family Budget Plan By Ann Hartz

A Family Budget Plan By Ann Hartz

Last week I wrote to you about a few financial conversations worth having within a marriage, or any close partnership.

As we turn the page into the end of summer, there are a swath of newlyweds out there, and this (and the previous note) might be something useful to send their way.

But before I get there, a word about a different sort of exercise, one which I commend to you.

Take the last two weeks of summer and give yourself a politics cleanse.

Because of the work we do around here in Des Moines, we have to pay attention to the news media, at least as it revolves around tax policy and financial markets, etc. But that doesn’t mean we have to like it.

The nation seems to be simmering in a frying pan of collective angst. Whether your politics are left or right, there are so many sources online and on television whose sole purpose is to gin up frustration, anger and chaos. In the ever-increasing arms race for clicks and eyeballs, the media and prominent social media voices have discovered (some time ago) that chaos and anger sell.

But you would be amazed and gratified to discover that taking even just a couple weeks — say the rest of the month of August — away from ANY political news, that not much will have changed in your absence. The only thing that is certain to have shifted would be your peace of mind and your mindset.

So, as one friend to another … consider unsubscribing from the political emails, NOT clicking on that article your friend posted in order to stir up frustration or to rally the believing troops, and perhaps even taking a full break from any of the major news sites or 24-7 “news” channels.

Try it for two weeks. See what happens. Let us pay attention to the important financial news, and keep your head clear from the rest. Your soul might thank you.

But back to the topic at hand. I don’t pretend to be a marriage guru, but we have lots of couples stream through our doors, and there are certain commonalities among those whose partnership reflects a strength within their financial house.

A Family Budget Plan By Ann Hartz
“Don’t just count your years, make your years count.” – Ernest Meyers

In my previous note, I wrote about some “big picture” exercises to have with your partner, or for your own financial reconfiguration.

Those were: 1) Writing Your Money Story and 2) Imagining Your Ideal Financial Scenario. Both of these exercises were to lay the foundation for getting practical — because the practical outworking that comes from these exercises is where steady foundations are built, or becomes the place at which change actually occurs.

So, this is a small bit of practical advice, building upon those first exercises…

Create Your Family Budget Plan Now
As a couple, begin with the assumption that you will pool your money.

Couples enjoy an economic bonus because two can live more cheaply than both could alone. However, do not expect to achieve financial peace without a plan!

I highly recommend that you plan to live on one salary for the first several years. This is a challenge that too few couples in Des Moines accept. If you max your lifestyle to pay for a mortgage, car payments, gym memberships, and the like, you will have no flexibility to adjust when children come. Your first years of marriage offer a great opportunity to save for an emergency fund and a down payment on your first house.

Start by tracking your current expenses to give you a starting point for creating your own budget. Budgeting is like healthy eating. You need to maintain balance and avoid excessive indulgences.

Going through this exercise will likely reveal who has the greater interest in paying the bills. Even when only one of you will be paying the bills, you can only build trust if you decide together how your money will be spent.

Don’t forget to allocate some savings. After all, as I’ve written, wealth is not what you spend but what you save and invest.

Now you can build a financial fortress that re-writes your story, and which takes you to the place of your greatest hopes.

And remember: we are in your corner.

Until next week,

Ann Hartz
 (515) 707-0884
 Ann M. Hartz, CPA 

Ann Hartz’s Two Financial Exercises To Strengthen Your Family Finances

Ann Hartz’s Two Financial Exercises To Strengthen Your Family Finances

All of the tax media outlets (and even some non-tax ones) were shouting about a new Government Accountability Office (GAO) report that showed that (gasp) millions of taxpayers are underwithholding, and that they will face a tax bill come 2019. Apparently, there was an increase of 3% of those who will owe the IRS due to not adjusting withholding per the new tax law.

Fortunately, the IRS does have a handy calculator, updated with all of the new tables, that can give you a general sense for what you should be withholding.

But, as usual, there is a side to this story that most people in Des Moines aren’t noticing. The actual percentage of people who are underwithholding is 21% (up from 18%). But the number of people who are OVERwithholding is 73%.

THAT is the story, in my opinion: almost three-quarters of taxpayers are loaning the government their money throughout the year, simply because they haven’t taken the time to run the numbers. Or maybe it’s because they like the feeling of getting a refund, come tax time.

But as I’ve nagged said to you before, getting a refund just means that you didn’t project properly. You’re giving a multi-trillion dollar organization (the federal government) a loan from YOUR accounts, instead of having use of that money throughout the year.

If that’s fine with you, so be it.

Only 6% of the population are striking that golden mean of withholding just the right amount.

But either way, let’s not make this decision simply by default, and not planning ahead!

That’s why it’s helpful to have someone in your corner who can help you get the numbers right. If you haven’t had a tax planning meeting with us this summer, there’s still plenty of time to do so before the end of the year. Don’t miss out on the opportunities available to you to save lots of your hard-earned income from the grasping hands of the IRS.

If you are married, these are the sort of things that you should decide together with your spouse, or at least have clarity about how these decisions should be made, if one partner is tasked with these kinds of choices.

And as we are turning the corner into the end of summer, the wedding season is winding down, and I thought I would offer some unsolicited advice for the newlyweds among us, as well as those who have been “seasoned” a bit in their marital journey.

And I also think that even for those who are single, there are some things in here you should think through…

Ann Hartz’s Two Financial Exercises To Strengthen Your Family Finances
“If one does not know to which port one is sailing, no wind is favorable.” – Lucius Annaeus Seneca

Wedding season is almost over. For many of my clients in Des Moines, that ship has sailed … but this is a great opportunity to pass on something smart to your children. Or, perhaps you need a refresher for your existing marriage.

Either way, your marriage is sure to have many challenges, and mastering money is a big one. Expect a few good money fights. “You bought ___ !?” is often the first sign that the dam is breaking and a torrent is about to flow.

Couples who fail to prepare for a shared money maturing process will likely experience longer and sharper growing pains. Because the fact is that most people bring in emotional baggage from their childhood years that can complicate the matter.

So that being the case, I’ve put together a series of exercises which are useful conversations for any engaged couple — or, even, those with some years under their marriage belt.

And because of the length of this, I’ll make it a two-parter, and be back with more of these money exercises next week.

Exercise 1: Start With Your Money Story
Begin by separately writing an autobiography that focuses on your relationship to the money you have acquired. The fact is, you’ve been shaped by experiences with money management, and you picked up most of them through implicit observation.

Now, if you are like me, you may want to just list bullet points, or you may prefer to compose several paragraphs. Some people end up writing a small book! What events have shaped your thinking?

What fears do you have about money? What voices remain inside your head? For example, “I don’t want to act like my Uncle Tommy who…” Some voices are helpful and others not so much; be sure to name them all.

This exercise can be most powerful when shared with other couples, both married and engaged. As you share these stories and ask questions to better understand each other more deeply, you are developing the kind of communication skills that big money questions will require of you.

Exercise 2: The Dream Scenario
Begin by reflecting on this question:

“Imagine you are fully financially secure, that you have enough money to take care of your needs now and in the future. How would you live your life?”

Would you change anything? Let yourself go. Don’t hold back on your dreams. Describe a life that is completely and richly yoursBecause here’s the truth: you can be sure that any unspoken goals will never be fulfilled.

This exercise is particularly helpful when you feel financially stuck. Naming our desires forces us to confront our associated fears. Speaking these goals brings them into the light. Your future (or current) spouse can respond and offer support or constructive criticism.

You can expect that this exercise might bring about a reprioritization of your time and money. You will find the work of life comes much easier when it is aligned with your passions and aptitudes. Perhaps, for example, you might be led to a downsizing of your lifestyle so you’re able to work for that nonprofit you’ve always had your eye on.

All of this may sound too fuzzy or creative, but nothing is more important in your financial management.

Why do I say that?

In all of my years of working with family finances, I’ve seen this truth: financial woes often don’t come from a lack of income … but from our failure to live according to our true values.

Get those right, and the rest begins to follow.

More to come next week.

I do hope this helps  … and no matter where you find yourself, there is “no shame in our game”. We are in your corner.

Until next week,

Ann Hartz
(515) 707-0884
Ann M. Hartz, CPA

 

Ann Hartz’s Five Key Long-Term Financial Goals

Ann Hartz’s Five Key Long-Term Financial Goals

It’s helpful to have long-term financial goals at which to aim. But the problem is that there is just SO MUCH financial advice to be had on ye olde World Wide Web that cutting through the noise and finding simple targets is difficult.

So, that’s what I’m here to provide today.

For those of my clients who are over age 50, this can be a guide to catching up … or, well, it might be the perfect thing to send along to a friend of yours who is in their 40s who might be interested in a great tax professional from Des Moines. 😉 [Referrals really are the lifeblood of our practice.]

And as the nation’s eyes are on the Northern California fires, let’s not forget that no matter where you might find yourself on the financial scale, there are ALWAYS things for which to be thankful. Recognizing this fact is the first step towards financial well-being, no matter your age.

Ann Hartz’s Five Key Long-Term Financial Goals
“Change might not be fast and it isn’t always easy. But with time and effort, almost any habit can be reshaped.” – Charles Duhigg

Finances should be viewed as dispassionately as possible, don’t you think?

Unfortunately, too many financial planners have their advice clouded by various financial incentives, and they often don’t take a holistic view of every part of the financial picture.

As a tax professional in Des Moines, I get unique insight into financial health because I see so many tax returns … and because I am not burdened with as many competing incentives.

So, that being the case, allow me to establish some landmarks for you on our map towards financial independence. It’s great to know where you should be headed … or, from what place you should be coming.

Here are five real-world financial targets to shoot for by age 50:

1) Your estate plan should be fully in place.

Of course, various assets are handled differently. This is the time to make a complete review of how your plan is put together, to ensure that EVERY asset (not just the tangible ones) are still handled properly.

Intangible assets can include such things as what you are passing down to your children in terms of “family ways” and values that you would like to see spreading down throughout your generations. This is an important step at midlife.

2) If college is paid for, consider dropping term insurance. 

At this stage of life, it becomes more costly to pay for this service. You are probably at the point where your children are nearing the completion of their education.

Remember that you purchased “peace of mind” (term insurance is not an investment) so that if anything were to happen to you, your home and your children’s education could be paid for. If those things are now moot, it may be time to reassess.

3) Evaluate where you are with your saving and investing.

You may not want to retire for quite some time yet. That’s a wonderful place to be. But you should be considering whether you have saved up enough to match your desired lifestyle spending. It’s a good rule of thumb that you should have saved about 8-10 times your annual lifestyle spending at this point.

If you haven’t?

4) Catch up on your savings.

At age 50, the maximum savings limit in a 401(k) or 403(b) account increases from $18,500 (which is the 2018 limit under age 50) to $24,500 (it was $500 less for each amount in 2017). At age 50 or older, 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.

5) Lastly, begin considering what you really want out of retirement.

Consider that living a life of purpose doesn’t necessarily mean decades of simple recreation.

Reaching the place where you don’t “have” to work is a wonderful marker of true financial success. But you can make the decision to view your retirement years as an opportunity to do new, meaningful work. Commit yourself to a nonprofit or a ministry endeavor. Find ways to strategically invest your time and energy into different work that matters (aside from your first-half career).

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

I do hope this helps … and no matter where you find yourself, there is “no shame in our game”, and we are in your corner.

Until next week,

Ann Hartz
(515) 707-0884
Ann M. Hartz, CPA

New (and Old) Tax Scams Taxpayers In Des Moines Need To Know About

New (and Old) Tax Scams Taxpayers In Des Moines Need To Know About

You’d think that this would be about golf, since here we are smack in the middle of summer. But I’m here with a word of caution about other kinds of traps, not of the sandy variety.

Last week, we spoke about executors, and I’ll return to that subject soon.

But today, I thought I’d issue some words of caution about some new (and some old but still kicking) scams out there targeting Des Moines taxpayers of all stripes.

We’ve had to clean up after the fact on behalf of some clients in the past on these issues, and trust me … vigilance BEFOREHAND is far superior to after-crime cleanup.

You’d think from the fact that it isn’t “tax season” that these criminals would let up.

Alas, no.

New (and Old) Tax Scams Taxpayers In Des Moines Need To Know About
“Don’t let the same dog bite you twice.” – Chuck Berry

The most common forms of scams targeting Des Moines taxpayers occur before April 15th (or the 18th, as it was this year), but as tax planning and correspondence continues year-round, so do the fraudsters.

It seems that once they get a taste of that sweet, sweet stolen money, they keep inventing more.

So here are some newer ones for which to be on guard, as well as a reminder about some of the regular variety…

Real bank accounts sent fraudulent money
This is a new twist to a common problem: fake returns filed. But in this instance, the criminal sends funds to YOUR bank account … and then comes to you, claiming that there has been some sort of error. They do this in order to prevent the IRS from raising an alarm for funds being deposited into unrelated accounts.

The scammers then contact you, either posing as an IRS representative calling about a refund error or as an agent of private collection agency going after tax debts. As fake agents, they tell you to send the funds back to the Treasury — except it’s really going into their hands. As collection agent impersonators, they instruct you to forward the money to their little fake collection agency.

Fake charities come calling
Every time a natural disaster strikes, these outfits pop up like moles to be squashed. They advertise, and spread via social media and typically don’t appreciate it when you ask difficult questions. That’s why if you have any questions about a charity and the group seeking your contribution won’t answer them, don’t give. Legitimate Des Moines nonprofits are happy to prove that they are really doing the good work they advertise.

The IRS has set up an online tool to verify charitable organizations called “Select Check” that can help you navigate the murky waters of this area. In general, a good rule of thumb is to give to established charities, or those endorsed by trusted friends.

Fake withholding verification
In this doozy, the crooks will mail (or fax, if you can believe it) a letter to their scam targets, most often those who are international taxpayers or non-resident aliens. The letter tells them that although they are exempt from withholding and reporting income tax, they need to authenticate their information by entering personal and tax info on the enclosed, phony version of Form W-8BEN and faxing it to the crooks.

The first problem is that these forms are only supposed to be sent to a “withholding agent“, and they often reference fictitious forms. Don’t fall for this one — run these sort of things through us before complying.

Fake IRS agents calling you
This one has been apretty common tax scam as of late. The IRS estimates that 2 million taxpayers have been called over the past year. And lest you think we’re getting collectively wise, they also estimate that they have already gathered over $60 million in fraudulent funds. And they are still going at it. Watch out.

There are more out there like this, so if you suspect you’re being targeted, here’s what you should do…

  • Contact the Treasury Inspector General for Tax Administration. Use TIGTA’s “IRS Scam Reporting” web page to report the incident.
  • You can also report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov.
  • Send any phishing emails you think you’ve received to: phishing@irs.gov

If you think you actually may owe taxes, but are leery of the source telling you:

  • Ask for a call back number and an employee badge number.
  • Call the IRS at 800-829-1040. IRS employees can help you.
  • Or, if you would rather not land in phone-tree oblivion with the IRS, you can give us a call: (515) 707-0884

The main thing: use your common sense. Be skeptical. And remember that we’re in your corner.

Warmly,

Ann Hartz
(515) 707-0884
Ann M. Hartz, CPA

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