Ann M. Hartz, CPA’s Guide to Nailing this Year’s Holiday Budget

Ann M. Hartz, CPA’s Guide to Nailing this Year’s Holiday Budget

Plans, plans, plans.

We’re all about those plans.

These days, we’re working with a fair number of our Des Moines clients to get ahead of all of the changes to the tax code. Yes, there’s a larger standard deduction next year, and that might make sense for you.

But I’ll tell you what DOESN’T make sense: not taking action now when you can actually affect your current year taxes. A few things have made this even more pressing (for example, you can no longer recharacterize a Roth IRA after 12/31 for the previous year, as you used to be able to).

But the primary reason we should take a look at things now (instead of in February, March, or — perish the thought — April), is so we can take tangible, money-saving action instead of trying to clean things up after the fact.

So give us a call: (515) 259-7779, or shoot me an email through the button at the top of the page and let’s get something on the calendar.

(Maybe we’ll make a suggestion for you to MOVE if you live in one of these states. Alright, probably not, but those are some interesting numbers.)

Now, speaking of planning, I just saw holiday swag is available in stores … and I’m not talking about Halloween.

Yes, holiday creep is REAL … and budget creep is a big part of it.

So, WELL in advance … because I am a compulsive planner after all, here’s how to avoid getting sideswiped by going overboard during the holidays…

Ann M. Hartz, CPA’s Guide to Nailing this Year’s Holiday Budget

“A year from now you may wish you had started today.” – Karen Lamb

The best place to begin when it comes to planning for this year’s holiday spending is to examine what you did last year.

Dig up the credit card statements online (and maybe the checkbook registers if you still roll with those!), and add up how much money you spent. You’ll also want to take notes regarding where you spent it. Don’t forget to include money used to purchase gift wrapping supplies, cards, postage, food while shopping, entertainment costs, decor, and special-occasion clothing.

Now that the numbers are in front of you, it’s time to form an opinion.

How do you feel about last year’s spending? Did you spend a realistic and appropriate amount, or did you go overboard? Try to be objective. This analysis will serve as the backbone of your plan.

Look at the Present … And That Pun Is Intended

Financially speaking, how have you fared this year compared to last year? Be sure to look at any changes in income as well as expenses. If your finances haven’t changed and you’re happy with last year’s spending, then you’re starting off in very good shape. If your overall financial status has declined, or if you were less-than-pleased with last year’s performance on your holiday budget, then you’ve got some work to do.

Begin by looking at the number of purchases you made a year ago.

Which ones would you make again, and which ones leave you scratching your head? It may be time to reduce your gift-buying list or change the amount you spend on each purchase. The obvious way to accomplish this is to be less extravagant with your selections. A less obvious but often effective approach is to research your potential purchases. Sometimes you end up paying extra for the convenience of one-stop shopping, so look through the newspaper to find which stores are offering deals.

Then check online to see if you can beat their prices by purchasing somewhere else. This practice will cut down on last-minute shopping, which can be an expensive proposition.

Think About Future Years

So, you’ve figured out how many purchases you need to make, as well as which ones need scaling back in terms of price. Now it’s time to create a holiday budget. Once again, there is no magic formula. Creating a budget and sticking to it requires two main things: common sense and commitment. Let’s take a closer look.

A budget should always be based on the money you have, not the money you can borrow. If you are still paying off charges from last year, then you need to avoid using credit cards to make gift purchases this year. The amount of money you decide to allocate toward holiday spending should be based solely on what you’ve saved or what you will save from now until the time you start shopping.

When drafting your budget, start by creating a list of recipients, along with columns for the gifts you intend to buy and the dollar amounts you expect to spend. (Is that too uptight? No, I don’t think so.)

As you make purchases, keep track of the results. If you overspend on one gift, it is imperative that you make it up somewhere else. Your diligence is one of the keys to staying within your budget.

It’s also important that you watch out for potential pitfalls, including impulse shopping. Getting into the spirit of the holidays is one thing, but spending frivolously based on a last-minute decision is something else. You’ve got a list, and your job is to stick to it!

One final thing that may need an adjustment is your overall philosophy. It’s easy to look at the budget you’ve created as a restriction. After all, it’s nothing more than a set of rules. The flip-side is that these rules are there for your protection. Sticking to them will not only help you feel comfortable about your finances before and after the holidays, it will free you from the stress that comes from accumulated debt. When you look at it this way, a holiday budget can be downright liberating. Give yourself the gift of a financially stress-free holiday, by planning in advance.

And is there anything more that we could do for you, to help?

Until next week,

 

Ann Hartz

(515) 259-7779

Ann M. Hartz, CPA

Ann Hartz’s Key Points On How To Make Sound Financial Decisions (Part 2)

Ann Hartz’s Key Points On How To Make Sound Financial Decisions (Part 2)

We just wrapped up all the extension returns for TY2017, and can finally place our gaze SQUARELY at what’s ahead.

Which is a funny thing to say, because, well … for too many of our clients, we are continuously looking backwards — simply because they haven’t worked with us before the year is over, and we aren’t able to make the proactive moves that we could make, if given more time.

Let’s get ahead of the game, shall we?

Give us a call ((515) 259-7779) or shoot me an email through the button at the top of the page, and let’s set up a time to do some tax planning on your behalf. This is especially the case if you own a business in Des Moines (or have a side hustle) … with all of the changes this year, I anticipate that our calendar is going to be quite full in December with last-minute moves.

But taxes aside (I know, funny coming from me) … there are still plenty of mental “traps” that you can fall into, if you don’t get your mind right regarding money.

For years, we’ve worked directly with families in vastly different situations. And there are plenty of tactical maneuvers we advise — both from a tax standpoint, and a more holistic, financial standpoint — but nothing can replace the proper financial mindset.

Last week, I gave you two “mental mistakes” that you might be making with your financial decisions:

1)    Wrong Mental Accounting

2)    Subtle Price Anchoring

This week, I have a couple more.

Ann Hartz’s Key Points On How To Make Sound Financial Decisions (Part 2)

“You can’t undo the past … but you can certainly not repeat it.” – Bruce Willis

Aside from the tactical moves that we often help families and clients to make, there are often underlying psychological traps that can influence the mistakes we make with our money. Things like…

Self-Sabotage Trap #3: Fixating on losses, instead of moving on

Definition: Our consistent tendency to avoid loss, rather than acquiring gain.

Typical Example: An investor is more likely to sell a stock which has increased in value, rather than selling stock that decreased. Over time, her investment portfolio is made up of investments that have decreased.

Cure: Don’t think of selling a stock for less than you paid for it as being a loss. It can actually work as a gain for two reasons:

* Tax deduction (which can really help!)
* The other side of opportunity cost: opportunity GAINED (i.e., you can better utilize that money elsewhere)

So, don’t check your portfolio so often. If you don’t know you’ve lost money, you don’t experience the pain. (And riding the roller coaster of your portfolio’s value is a waste of emotional space.)

Since stock prices go up in the long run, the longer you go without looking at your portfolio, the greater chance of seeing a gain.

Sometimes taking that loss really is the best thing you can do.

Self-Sabotage Trap #4: Financial Herd-Following

Definition: The tendency for us to want to do the same thing as a large group of others, with no thought to whether that action is rational or irrational.

Typical Example #1: Buying when prices are high because everyone else is.

Typical Example #2: Selling when prices are low because everyone else is.

Cure: Warren Buffett said, “Be fearful when others are greedy, and greedy when others are fearful.”

Keep this in mind when making your next financial decision. If everyone is telling you to buy this or buy that (i.e., gold, silver, real estate), then do the opposite.

In the financial investment world, if it seems too good to be true, then it usually is.

One idea is to write yourself an investment policy statement or contract.

Include factors such as:
 * Investment objective
 * Investment goals
 * Desired asset allocation and diversification
 * Summary of your risk tolerance
 * Rebalancing schedule

Before making any changes, consult with this contract.

You can also take advantage of our inherent tendency to do what’s approved by others, to affect positive behavior in yourself. For example, let’s say you are trying to pay off debt. Tell your three closest friends, make an informal contract, sign your name at the bottom, and then email it to them. The pain you would incur from breaking that contract is high, relative to the pain of breaking your behavior if you went about it alone.

You might be making more mistakes than you realize. Perhaps these.

But do let me know: is this helpful to you?

And is there anything more that we could do for you, to help?

Until next week,

 

Ann Hartz

(515) 259-7779

Ann M. Hartz, CPA

Ann Hartz’s Common Financial Mistakes (Part 1)

Ann Hartz’s Common Financial Mistakes (Part 1)

You pay your bills on time. You try to save as much as you can. You even follow the advice you read in the books and hear on the radio about how to keep your finances in check.

But you’re still not getting ahead.

Well, sometimes, it’s the unchallenged, mental assumptions about how we’re handling our money that rise up and bite us in the keister.

You see, in the course of our daily work around here, we not only work with tax forms and legal/financial documents a TON … but we also get a regular crash course, via those documents, on how people (our Des Moines clients, mostly) have arrived to the place where they actually have something to *protect*.

In short, we get to be around a great many well-accomplished families and individuals from Des Moines.

So, perhaps it’s odd to you, but I’ve learned to pay attention to the little lessons I can learn from my clients, and from people of means around the country.

I’ve discovered a few things along the way about what keeps people from the kind of accomplishment and means that so many of them are looking for, at least when it comes to their finances.

Let me know what you think…

 

Ann Hartz’s Common Financial Mistakes (Part 1)

“Remember that not getting what you want is sometimes a wonderful stroke of luck.” – Dalai Lama

 

In the course of working with clients, I’ve identified some financial mistakes I see (as well as ones I’ve made myself!), which can be fixed.

These are the sorts of financial mistakes that don’t normally show up in balance books, but are revealed after looking at overall trends. In some ways, they can be VERY difficult to fix … but that’s often because we aren’t even aware we’re making them.

Once we gain that awareness, however … well, you begin to notice that your finances are “suddenly” in a much better place. At that point, it’s easy. Because all it takes is thinking a little differently…

Self-Sabotage Trap #1: Wrong Mental Accounting

Definition: Tendency for families to divide money into separate accounts based on subjective criteria.

Typical Example #1: Treating $100 you received as a gift from Grandma, differently than a $100 bill earned.

Typical Example #2: Having money languishing in a savings account earning 0.25%, while carrying high-interest debt to pay off at 12%.

Cure: Funnel income, no matter the source, into one savings account.

For any “found money”, such as a tax refund or gift from Grandma, quickly decide where that money is best utilized.

As for expenses, occasionally change how you pay. If you always pay with a credit card, try cash. This will get you remembering that all of it, for the purposes of your mental “books”, should be lumped into one monthly bucket.

Self-Sabotage Trap #2: Subtle Price Anchoring

Definition: Our tendency to relate the value of a purchase to a price point which, rationally, should have no bearing on the amount spent.

Typical Example: The “rule of thumb” to spend two months’ salary on an engagement ring.

Typical Example #2: A realtor will tell you that “in 2015, this house was going for $500,000 — and is now listed at only $350,000!” … causing you to think this house is undervalued.

Cure: For big ticket purchases like a house, car, or engagement ring, ask a friend whose financial values you respect for their input.

For everyday purchases, avoid looking at the MSRP or sticker price.

Ask yourself:

    Can I afford this today?

    What do I really want to spend?

    What is this really worth to me?

Marketers are experts at this sort of price-anchoring, and we really should know better … but yet we still fall prey to it. Try not to let outside sources set up the comparison by which you should be considering such large purchases.

There are a few more big ones, but for the sake of brevity I’ll save those for another week.

But do let me know: is this helpful to you?

And what more could we do for you, to help? Shoot me back an email through the button at the top of the page. I read every one.

Until next week,

 

Ann Hartz

(515) 259-7779

Ann M. Hartz, CPA

 

Getting Your Mental State Out Of Fear And Anxiety By Ann Hartz

Getting Your Mental State Out Of Fear And Anxiety By Ann Hartz

I might be wrong, but I get the sense that many of my friends and clients in Des Moines are getting wiser about the dangers of our digital age.

Because they are, indeed, quite real.

There is a famous clip of an interview with NYT-bestselling author, and cultural commentator Simon Sinek that made the rounds about a year ago on the way millenials have been trained to think by the always-online lifestyle.

But if we think that the things he discusses in that video are only pertinent to younger people, we are fooling ourselves. Many things that have defined this millennial generation have trickled upwards into every generation via the mass media.

And look — I do taxes and help with finances for a living. I’m not an expert in these matters.

However, I do see what happens to my Des Moines clients who get wrapped up in the media cycle of fear and negativity, and, well, what often happens to their finances as a result.

Frankly, I’m tired of seeing clients and friends who are “beaten down” by all the fear and anxiety in their lives.

And there is one major source for it — which is entirely optional.

And I suggest you “opt-out”, if you will.

So if you’ll pardon this diversion from my normal financial fare, here goes…

Getting Your Mental State Out Of Fear And Anxiety By Ann Hartz

“Time sets the stage; fate writes the script; but only we may choose our character.” – Liam Thomas Ryder

Life in the modern world isn’t always a trip in the sunshine.

But it’s made so much harder by the tendency of our world to suffocate you with mental junk and global negativity.

I believe that the number 1 danger for ALL of us moving forward in 2018 is allowing today’s world to starve your brain with “junk food” and deaden your spirit with the overwhelming feeling that you are small, insignificant … helpless.

I’ve learned to avoid the 24-7 news channels, and the sites online that traffic in fear. I figure that I’ll see what I need to when seeking out resources for our clients about current events. But let’s look, for example, at CNN.

CNN is about as bland as you can get — it’s “normal” to “normal” people. But I also realize, most “normal” people accomplish relatively little in their time on this planet (at least on the outside). Those of us who are going somewhere in life must have better things to do than to listen to talking heads opine about political gamesmanship and the dozens of tragedies that we can’t (and won’t) be able to do anything about.

Right now, the world is swimming in negativity. And you need to be serious and proactive about it. Because — if you don’t — it’ll kill your vocation, kill your career growth, kill your dreams and everything you really care about.

The mass news media is NOT your friend.

They feed on fear, and they sell paranoia, division and hyperbole. It’s what they do.

And not only must you protect yourself from this drip, drip, drip of depression, you need to fight it on behalf of your family and friends, your coworkers and customers.

Tell them what’s good. Greet them with a smile and with encouragement. Tell them what they’re doing right. Give them a voice to the hope still latent within their bones — which is too often buried in a junkpile of media-fueled negativity.

You (and they) need to celebrate little tiny victories. Every. Day.

This is an essential skill for a business owner, for a careerist, for a parent at home — and for all of us: when you have a major victory in your life, you need to find encouraging people who will celebrate it with you. Because good news is good news indeed.

Until next week,

Ann Hartz

(515) 259-7779

Ann M. Hartz, CPA

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

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