How to Save a Billion Dollars on Taxes!

H&R Block Bahooey

It’s that time of year again...tax time. And along with tax time comes the barrage of advertisements about who you should pay to do your taxes.

And OMG I passionately hate the particularly annoying advertisement plastered everywhere: “Get Your Billion Back America.” H&R Block has been running these super cute, super slick, super fun ads that let you know if you don't use them, you won't get your portion back. Your portion of a billion dollars! Wow! Makes you feel left out, doesn't it?

Advertisements like these play right into people's fears that they are missing some important deduction, that if they don't use a professional (or as they call them, “Tax Pro”), they'll be paying more to the government, that the tax code is somehow set up for you to have to be "in the know" to get all of the right tax breaks, and that you probably aren't smart enough to do it yourself.

For the majority of Americans, this is a bunch of bahooey. If you are like most people, have a job with W2 income and own a home, your taxes are fairly simple. Should you pay someone to get your taxes done? Well, if you have room in your spending plan and don't want to do it yourself: yes. But will the H&R Blocks of the world get you a bigger tax refund than Turbo Tax will? No. Absolutely not.

Frankly, I think they should be ashamed of themselves.

There's an ethical code you learn when you become an accountant. You're here to help people, not play into their fears. You're supposed to teach them, not tell them they'll never know how to do their own taxes.

Now, if you own a business, have rental properties, or any other special circumstances, then my opinion on professional vs. Turbo Tax is different. The more special circumstances you have, the greater the likelihood that you should hire a professional. The more you have at risk, the likely it is a worthwhile expenditure. But if you fit into one of those categories, the national tax franchises aren't where I’d recommend going. You can read my “where to go” recommendations on Forbes.com: Where Should I Go To Get My Taxes Done?

And, for those of you that who are on a limited income, and for whom paying a professional would be a hardship, research the programs that are out there to help you. The most well known one is VITA. You’re not going to get a hard sell there, like you do at the tax franchises. You’re just going to get some simple, straight forward, free assistance getting your tax return completed.

- Stacey Powell

“Finance Gym offers personal finance coaching in professionally facilitated peer-advisory groups.
Reach your financial goals. Get motivated. Get support. Get results. Are you ready?”

Prioritizing Needs vs. Wants

I no longer need or want a dryer.

We need air, shelter, water, and food (in that order).

Survival rule of threes: You can survive for three minutes without air; three hours without shelter; three days without water; and three weeks without food.

Absolutely everything else is a want.

When it comes to my personal finances. I need emergency reserves.

Everything else is a want.

It’s so easy to get distracted by our wants because there are so many of them and they are so easy to fulfill. I want a new pair of shoes, the store is just down the street, and they’re only $50, done. The problem is that those shoes aren’t going to do anything for me in the long-run.

My favorite financial want vs. need dilemma was when my husband and I moved into our new house and there was no washer or dryer and our emergency reserves were just under my comfort zone. We went to the laundry mat for a month before a friend gave us a free washer because they had just upgraded. Then I wanted a dryer, but my reserves were my primary concern, so we started hang drying our clothes because it was summer and 100 degrees outside. Months later, I no longer wanted a dryer. It turns out that I like hanging my laundry to dry—it’s good for my clothes, the environment, and my pocketbook.

Designating my emergency reserves as my financial priority helps me put my life into perspective and I haven’t even gotten to the amazing emotional rewards.

My emergency reserves provide me with a sense of freedom. When shit hits the fan, I’m prepared. Just want to emphasize that I just used “when” not “if” because no matter what, shit will hit the fan. That’s life. And it’s not just when there’s an unexpected home repair, it’s also when I want to make a life change.

My emergency reserves provides me with choices. The choice to live my life as I see fit. This does not mean to buy the things that I hope will make my life better. I’m talking about the freedom to change careers, travel the world, or even start working as a consultant.

The absolute best part about having emergency reserves is not worrying. When I have less than three months of reserves, I’m constantly stressed that something will pop up, because expenses are always popping up. When I have six-months socked away, I can focus my energy on the important things in life, because I’m not constantly worried about my emergency reserves.  

What's your financial priority? 

-Leah Schonlank

Finance Gym offers personal finance coaching in professionally facilitated peer-advisory groups. 

Reach your financial goals. Get motivated. Get support. Get results. Are you ready?

#Debtfree2014

I have long believed that the reason so many of us feel stuck financially is because we don’t talk about money. I write about it all the time. I think the single most important thing you can do to change your financial position is to find someone to have a constructive conversation about it with.

So imagine my surprise this month when I (for the third time) was making a concerted effort to engage in Twitter (I feel so old) and found people on Twitter talking about their money. I knew there were people like me, financial experts, using Twitter as a platform for their business. But I wasn't expecting everyday people telling their friends about how they've paid off another credit card, made their final car payment or sharing the actual amount of debt they've paid off.

One particularly courageous soul (@famdebtjourney) links to her blog where she’s declared 2014 the year to put it all out there and share her family’s story about their journey to get out of debt. Beginning with a blog in January, My Family's Debt Journey itemized their debt:

• Credit Card Debt:           $27,102

• Auto Debt:                     $16,173

• Mortgage:                     $133,968

Can you imagine posting everywhere your truth? That’s laying the gauntlet down! Making that kind of public declaration will no debt propel them, and hopefully provide inspiration when the going gets rough. Just like a diet, becoming debt free is a journey with peaks and valleys for sure.

Who would you be willing to share your numbers with? Do you think it would propel your financial health?

-Stacey Powell


Finance Gym offers personal finance coaching in professionally facilitated peer-advisory groups. 

Reach your financial goals. Get motivated. Get support. Get results. Are you ready?

Why Do We Need to Hit Bottom to Change?

For the past couple of months, I’ve been trying to figure out why I (and so many that I know) need to hit a bottom before we implement change.

My current personal quandary is my behavior change due to the current drought. I consider myself water conscious. I’m very aware of our household water usage. And more often than not, I find myself asking someone (friends and strangers alike) to turn off the tap when it’s running unnecessarily. That being said, I also know that I could be doing a lot more.  

For instance, I’ve known for years, that I should implement grey water usage at home. Years! But it wasn’t until last month when Governor Brown declared the current drought a state of emergency that we finally started using our perfectly good grey water at home.

Step one: We switched from environmentally friendly detergent to grey water friendly detergent. Easy to find and reasonably priced at Trader Joe’s.

Step two: Was already done! This is the part that blew my mind. We were already set up for the biggest change, we just had to make a little extra effort to actually do it. Our washing machine already drains into a utility sink, which makes it very simple to stop up the sink and bucket out the water to water the lawn and plants.

The most ironic part of all of this is that we stopped watering our lawn last spring to save the water since we’re planning on replacing it with drought-resistant landscaping. Now that we’re using our grey water, our lawn is starting to come back.

Now, back to money; because everything relates back to money.

Why do we need to hit a bottom before we do something different to change and make our money better?

I’ve talked to so many people that say “I’m good” when I ask them about their money, but when we start diving deeper and asking more questions, they reveal that they’re not doing so good. Turns out that they’re just making due and they just don’t want to deal with it. For most of us, it isn’t till we hit our own personal bottom that we really change anything. And that’s okay. To each his own and all in good time. 

But I want to ask you: What is your bottom? What does it look like? And do you really want to be there before you start making things better? 

-Leah Schonlank

Finance Gym offers personal finance coaching in professionally facilitated peer-advisory groups. 

Reach your financial goals. Get motivated. Get support. Get results. Are you ready?

Why I Love My Credit Cards

A number of experts recommend that people go all cash to learn how to manage their budget. It seems to work for many, but it doesn’t work for me. Personally, I rarely keep more than $20 cash on me when running around in my daily life. I’ve found that when I have $100 in cash, it just disappears. I save all my receipts and still can’t figure out where all of it went. When I keep $20, it seems to last forever.

So, these are the reasons I love my credit cards:

Tracking

I can see every single little thing that I’ve spent my money on all in one place. I can easily see if I overspent on one category or another. I’m also reminded of purchases that may have seemed justifiable at the time, but a month later, give me reason to question my logic.

Convenience

Remember back in the day when people wrote checks at the store and the minute you saw the checkbook come out, you started looking for a new line, because you knew it was going to be a while. Now, that’s how I feel about cash. First the customer has to count it, then the cashier has to count it, then there’s change, or the dreaded “oh wait, let me give you a nickel” scenario. Credit cards are so much faster. No counting required. Swipe. Yes. Sign. Go.

Protection

If I lose my credit card, I can cancel it. If something goes wrong with a purchase, I can dispute the charge. If someone else uses it, the credit card company won’t hold me responsible. Some cards even insure the things that I buy with it.

Rewards

Cash Back. I earn 1-3% cash back on my purchases. And it may not be a lot, but it’s considerably more than 0. I pay my household bills with my credit card for the cash back every month. I even charged the down payment for our car for the cash back.

Plus, some of the sign-up rewards are incredible! My husband and I each signed up for a new credit card the other day because they were offering $200 cash once we spent $500 on the card in the first three months. So we spent $1,000 combined on things that we would’ve purchased no matter what (food, gas, bills, etc…) and they credited us $400 cash. 

It’s always important to remember that ‘they’ (the financial lending institutions) are in the business of making money. They provide these incentives to lure people in and they are betting on the majority to hold a balance so 'they' make money on the exorbitant late fees and interest. Don’t fall for it. If you don’t have the cash to pay it off, don’t use the credit card. 

Speaking of which, that’s the perfect segue into the things I don’t do to make sure my credit cards and I continue to have a healthy relationship:

• I never keep a balance on a credit card. Ever. I pay every single month’s balance in full and on time. Credit cards are a very slippery slope.
• I don’t pay annual fees. It’s not worth it.
• I never spend money that I think/plan/expect I’ll have later. I only spend what I know I have now, can afford, and will have in a month when the bill comes due.
• I don’t authorize indefinite auto-payments on my credit card. If there is something that has to be an auto-charge, I track it very carefully to ensure there aren’t any glitches in the system…Ahem…over charges, fees, or extra charges.
• I double check all return credits to ensure that the money is actually being credited back to my account. As we all know, technology isn’t perfect. So, I keep all of my receipts to remind myself when I need to check. It’s my money, it’s my responsibility.

In short, I use credit cards because they save me money and they help me track my spending. 

-Leah Schonlank

Finance Gym offers personal finance coaching in professionally facilitated peer-advisory groups. 

Reach your financial goals. Get motivated. Get support. Get results. Are you ready?

Sudden Wealth and Mindfulness

What would you do if you won the lottery? Or a jackpot? Or, a more likely scenario, received an inheritance?

The statistics surrounding sudden wealth are remarkable:

•  Family money rarely survives three generation, with 70% evaporated by the end of the second generation and by the end of the third generation, 90% of the wealth is gone.
• Those who receive inheritances in their 20s, 30s and 40s only save about half of the inherited money. The other half is either spent, given away or lost investing.
• Lottery winners in one large study in Florida were found to be twice as likely to have declared bankruptcy within five years of their win than those who hadn't won a lottery.

In my years of working with clients around money issues, I've worked with those who have received large inheritances, small inheritances, large jackpots, and significant insurance settlements.

The first sudden wealth client I ever had, I must admit, I was not yet experienced enough to be guiding them. It was early in my career, but at the time I reasoned that they were refusing to go to anyone else; they trusted me because of a mutual friend. I led with what I knew to be sage advice: don’t make any sudden decisions. Carve out a small percentage for mad money, and then let’s look at the long term choices and implications. By the time I got them back on the phone later that month, they’d spent, loaned and gifted half of their winnings. It doesn't take a rocket scientist to figure out what their trajectory was going to be. They were one of the above statistics.

As I've gained more experience, and spent more time learning about our behaviors with money, my experiences with clients have become much richer. Some of my most rewarding experiences have been working with clients who came to me with a goal of “honoring their inheritance” that was received from a cherished and loving family member.

Some have honored their sudden wealth by being good stewards of the money, carving out an amount they were committed to saving, and not touching it. Others have honored the money by choosing something really special to spend it on. Still others used their sudden wealth to wipe their slate clean on debt that had been weighing them down.

Of the clients that I've worked with that looked back and felt good about their decisions, they had one thing in common: mindfulness.

They thought about and talked about what they wanted to do, they made a plan, they looked back from time to time to see if they were sticking to the plan, and they were honest with themselves (and me) about areas that they veered from their plan.

If you've found yourself in a place of sudden wealth, here’s my advice:

• Become a student – read a book on inherited wealth or lottery winnings;
• Hire a trusted and certified professional – it will be well worth the investment;
• Start a journal – write or draw your intentions for the money;
• Set look-back milestones – monthly at first, and then quarterly, look back and see if you are using the money within the intentions you set.

The spiritual axiom “how we do one thing is how we do everything” can become our crystal ball. If in the first few months of your sudden wealth, the money was spent outside of your intentions, it’s time for some truth-telling. Draw, or spreadsheet, or however you are able to see into a crystal ball what the path will be of your money. It will likely look very much like it did in those first few months because, how we do one thing is how we do everything.

More than anything, though, I urge you to bring mindfulness into your financial life. Five, ten, twenty, even forty years from now you’ll look back on the decisions that you made. If you practiced mindfulness with the money, you’ll feel good about your decisions, no matter what those decisions were.

-Stacey Powell


Finance Gym offers personal finance coaching in professionally facilitated peer-advisory groups. 

Reach your financial goals. Get motivated. Get support. Get results. Are you ready?

To Debt or Not to Debt?

My very wise uncle, is a firm believer (and promoter) that if they’ll loan it to you, borrow! Especially, if they’re loaning it for less than you’ll make on it. I should note that he is not a professional money guy, he’s a lawyer, so we take everything he says with a grain of salt. 

That being said, I agree.  

But then I hear some money guy (it always seems to be a guy) on the radio telling the world: Pay off your debt now! Pay off your house now! Live debt free! And it reignites a yearly discussion between me and my husband. Which of course is a good thing. Just because we’ve done something for years, doesn’t mean that it’s still the right decision…So we discuss. 

Should we pay off our mortgage early? 

The answer was “no” when we bought our house and it’s been “no” every year since. We pay a little extra every month, but we don’t have any plans on paying it off early. Our answer is based on our circumstances: we bought a small fixer upper in a good enough neighborhood, close to the bottom of the market, for a low price and locked in a low interest rate. 

When we bought the house, we decided to get a 30-year fixed loan rather than the fashionable 15-year with a lower interest rate because we wanted to lock in the rate for as long as possible, because you just never know what the future holds and we can always pay off the 30-year sooner, but we can’t extend a 15-year. 

In addition, we plan on buying another house during the next recession and we can’t do that if our money is tied up in our first house. 

At the end of the day, everyone’s circumstances are different. It’s up to each of us to determine what’s best for ourselves. And I’ve found that the best way to figure something out is a good old-fashioned conversation over a massive cup of tea. 

-Leah Schonlank

Finance Gym offers personal finance coaching in professionally facilitated peer-advisory groups. 
Reach your financial goals. Get motivated. Get support. Get results. Are you ready?