The Sky is Falling

Well, maybe not the sky. But with the Dow Jones Industrial down 23% in just a week and a half it sure seems like it.  World financial markets are reeling, banks are failing, and the US government must think that money grows on trees, because the government’s response to the problem is to throw money at it. One question I have for all the Senators and Congressmen, “Where do you think all this money is coming from?” Either the printing presses are rolling and you are printing more money, or you expect to take it out of my pocket.  I don’t like either option.

The news media is busy feeding the flames of panic. I quit watching. I just couldn’t stand another breathless, busty  blond, eyes wide with excitement, telling me about the future horrors if the current crisis is allowed to continue without someone doing something.  Oh yes honey, the horrors. You probably won’t be able to get a new Lexus this year!  You might even have to go to only once a week manicures! Whatever will we do! And what really gets my goat is the amnesia the media seems to have.  It doesn’t seem all that long ago that the crisis was rapidly rising oil prices. Yesterday it was reported that adding to the crisis, is the rapidly falling price of crude oil. Hmmm?  Seems to me that should be a good thing.  I certainly don’t mind that it is costing me $5 less to fill up my tank than it did just a few months ago.

I’d like to inject just a little bit of sanity into the mix.

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Debt Free Forever – Adding Up The Debt

This is the second post in a series that will explore how you can become debt free, and stay debt free forever. Future posts will talk about when you should and should not use credit cards for purchases. Why you should care about your credit score, how to save money on every day expenses, will credit repair companies help you or hurt you and much more. Make sure to subscribe to our feed so you don’t miss a single installment of this series.

I hope you have read the first post and have made your commitment to become debt free forever. Last time we talked about the problem of debt, and of the fact that most people do not get an adequate financial education. With this post we are going to start into the real work of becoming debt free forever. And the best place to start is with credit card debt.

Credit cards are easy to obtain and easy to use. In fact, most stores will give you a discount on your purchase if you will sign up and/or use the store credit card. Why is that? Because they know that you will probably not pay off your purchases every month, and that they will earn more from you in interest charges and fees than the discount that you get.

It is interesting to see just how much a purchase made on a credit card can end up costing you. Let’s look at an extreme example.

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How To Get Out of Debt and Become Debt Free Forever

Table of contents for Debt Free Forever

  1. How To Get Out of Debt and Become Debt Free Forever
  2. Debt Free Forever – Adding Up The Debt
  3. Debt Free Forever – The Credit Card Pay Off Plan
  4. How To Get Out of Debt – Debt Free Forever

This is the first post in a series that will explore how you can become debt free, and stay debt free forever. Future posts will talk about when you should and should not use credit cards for purchases. Why you should care about your credit score, how to save money on every day expenses, will credit repair companies help you or hurt you and much more. Make sure to subscribe to our feed so you don’t miss a single installment of this series.

The United States is in a debt crisis. A 2.57 trillion dollar crisis in 2007 according to the Federal Reserve. The average American household caries $8,565 in credit card debt. What makes this particularly scary is that many consumers are not getting over the heads in debt from frivolous spending. As salaries and wages haven’t kept up with rising costs, consumers are turning to their credit cards to make ends meet.

Many people are aware of the problem and would like to become debt free. But they don’t know how. Schools don’t teach finances, and with the amazing amount of both good and bad information on the internet it is hard to know where to turn. In fact, it is easy to get ripped off and end up even worse than before.

In this series I am going to give you a basic financial education and step by step directions that will help you get debt free, and stay debt free forever. You won’t need to buy anything, you won’t need to hurt your credit rating or declare bankruptcy. Each post will talk in depth about a specific credit or money topic. Then I’ll give you an assignment to work on. Stick with me, and you will become debt free forever!

Now here is your first assignment.

Assignment One: Make a Commitment
Let me be honest. This isn’t going to be easy, and you are going to make plenty of mistakes along the way. So you need to make a commitment. A strong commitment to do what it takes, and to keep doing what it takes, until you reach your goal. So today I’d like you to set the goal of becoming debt free, with the commitment to do the assignments exactly as they are assigned. And if you make a mistake and fall off the wagon, make a commitment to get right back up, brush yourself off, and get back with the program. Making a public commitment makes you more accountable, so feel free to post here if you will work with me to become debt free forever!

IRS Standard Mileage Rate Raised

Recognizing that the sky rocketing gas prices may be making driving more expensive, the IRS has dramatically increased the standard mileage rate for business miles.

When calculating deductions for business auto use, taxpayers can use either actual expenses, or the standard mileage rate. The mileage rate takes into consideration not only fuel prices, but maintenance and depreciation. Many taxpayers prefer using the standard mileage rate because it simplifies record keeping.

The standard mileage rate is usually adjusted for inflation at the beginning of the year. However, because of high gas prices the IRS has done a mid-year adjustment. Beginning July 1, 2008 taxpayers can deduct 58.5 cents per business mile, up from 50.5 cents per mile.

Taxpayers are also allowed to deduct mileage expenses related to moving, medical expenses, and charitable work. Apparently cars cost less to drive if you are driving for charity, medical care or moving. Medical and moving miles can be deducted at 27 cents per mile, charitable miles are only worth a 14 cents per mile deduction.

You can find out more at the IRS Website.

Being a Millionaire, Not What it Used To Be

Everyone wants to be a millionaire, right? To join the ranks of that exclusive club, whose members have proved to the world that they have made it. Well, maybe not so exclusive. According to CNN.com the number of millionaires in the world has grown to over 10 million! And the worldwide number of super-rich, those with more than 30 million dollars in assets, has grown to over 100,000.

Most of the new millionaires are coming from countries with fast emerging economies, India, China and Brazil. But the United States is still home to the highest number of millionaires.

But of course, a million dollars isn’t what it used to be. Thanks to inflation, a million dollars today is only equal to $783,000 in 1998 dollars, and a pitiful $568,000 in 1988 dollars.

It is interesting to look at where the millionaires are putting their money today. For the most part they are not investing in Forex, Real Estate, or other fast money schemes. With today’s economy millionairs are putting 40% of their assets in those “save and boring” investments, money market funds, bonds, and preferred stocks.

Would you like to join the millionaire club? You are most likely to get there not by winning the lottery or finding the perfect get rich quick scheme. The best way to get there, make saving a priority, spend less than you earn, own your home, and avoid consumer debt.

When To Hire a Professional – Accountant

Starting a new business? Most new businesses are bootstrapping it, trying to get the business going while spending the least amount of money. But at what point does it make sense to hire a professional? This is the first in a series on how and when to hire professionals for your business.

After 20 years of offering accounting services I can tell you when most new businesses finally hire an accountant. It is when their business has hit it’s first growth spurt and they are running to keep up with business, their accounting system (or lack thereof!) isn’t working for them, and maybe they have even gotten a letter from the IRS. Things tend to be in chaos and the business owner(s) have no idea if they are making money or not. They are just trying to keep up. I’d like to suggest hiring an account before crisis hits. You’ll save money and maybe even your sanity. Here are some times when it makes sense to visit an accountant.

Right Before You Open Your Business

This is probably the most important time to consult with an accountant. During these initial first sessions a good accountant will give you advice on how to set up an effective accounting system, how to maximize your tax deductions, and which type of business entity is best for your business. (Corporation, LLC, Sole Proprietor, etc.) They will also point you in the right direction as far as what payments and reports you need to file with various government agencies.

Tax Time

You may be an expert when it comes to doing your own taxes, but the rules are different for businesses. Not only that, with tax law constantly changing, you are probably too busy running your business to keep up on the latest tax law. Often a good tax accountant will save you more in taxes than you are paying them in fees. At the very least, have an accountant prepare your taxes the very first year you are in business.

When You Are Looking For Investors

Smart investors with lots of money don’t get that way by trusting business owners. When you have an Independent Auditor review you books you give investors the assurance that financially everything is on the up and up. They then know that your financial statements are a true reflection of your business.

When Gross Receipts Reach $100,000

Preferably earlier, but once your gross receipts reach $100,000 you need professional accounting . At this point the accountant’s knowledge of money management and tax savings will almost certainly be cost effective. And your time will be better spent running and marketing your business.

Make sure that you are not “penny wise and pound foolish” when it comes to hiring an accountant. At the very least, consult with an accountant during these key times in your business. If you are searching for an accountant, one resource I found was AccountingAisle.com. They provide a service where they will match you with a local accountant based on your specific needs. You can also check with your local chamber of commerce, or ask other successful business owners in your area to give you a referral.

You Don't Have to Pay Taxes… Or Do You?

I was on a forum, and there it was. A poster declaring that you don’t have to pay taxes, that taxes are illegal, just watch this video and it will explain everything. I didn’t watch the video, I’ve seen too many of them I know how it goes. There will be a discussion of how the 16th amendment was never properly ratified, or a new definition of Income, maybe an explanation of how to file a Zero income tax return. Probably followed by an appeal to send just $49.95 for your un-tax kit.

So I replied to the forum poster that the IRS has probably heard his argument before, and dismissed it. Also, like it or not, they are the ones making the rules. I told him the best way to lower your tax burden was to either find a good tax professional who knew the tax law, or buy yourself a good tax book (like the JK Lasser book) and learn how to work within the laws to create the lowest legal tax liability. The other alternative is to not make much money. A married couple with 2 children who’s income is from earnings can make over $30,000 without owing federal income taxes.

He didn’t like my response. And gave the typical response of tax protesters everywhere. He said that if everyone knew they didn’t need to pay taxes I’d be out of a job. He claimed I probably knew that people didn’t have to pay taxes, but I wouldn’t tell them because I was working with the IRS to keep everyone “slaves to the system”.

That argument always makes me laugh. If I knew a legal way for people to avoid taxes I’d be the most popular tax adviser in the country. I’ve seen how much money people will pay for a tax scam, I can only imagine what they would pay for the real deal.

So before you hand over your money to “crack the code” or “un-tax” yourself, do me a favor. First read the IRS’s free PDF on the most popular tax scams. Then check out the Quatloos site for more information on scams, and the scammers that run them. Finally, take a look at eTaxe.com for some interesting commentary on the major tax protester arguments.

Now, I’d love to hear your tax story. Have you tried one of these “systems”? What did it cost? Have you heard from the IRS?