As Americans try to spend less and go on a budget this provides an opportunity to teach the next generation financial principles they may never have seen in the prosperous years they have been alive. Here are my ten principles, which I often communicate in person, for teaching children about money:

1. Talk about money. Every time money is involved, parents have a chance to teach their children the values and analysis behind their actions. Money should never be the primary topic of discussion, but it is one of the most important topics through which we communicate our wisdom and values to our children. Every purchase, investment, or donation can be a time to teach your children something about your values.

2. Talk openly about money. Parents make a mistake when they keep information from their children. The only way children learn what is a good deal and what is too expensive is by the experience of what their family earns and what items cost. Hiding this information robs children of the financial education they need.

3. Talk factually about money. Many parents have strong emotions about money, based on their childhood experiences. These emotions are always transmitted to children. Instead of helping children, they can cripple children from growing to make sound financial decisions.

4. Require chores; pay for optional work. Everyone in the family has to help complete the work that needs to be done. If you want to pay your children, only pay them for optional work they can choose to do or not to do.

5. Provide children an allowance they can make real choices with. Talk about money is important, but children need real-world lab experience to understand the consequences of their decisions. Consider giving them an allowance large enough so that they can purchase some of their own needs. Then continue to give them honest advice, and help them ask the right questions to make wise decisions based on their values.

6. Help children prioritize purchases. Ask them if this purchase is better than other purchases they are considering making.

7. Help children comparison shop. Help them consider issues such as cost, quality, and convenience.

8. Require children to wait before making large purchases. Adults should wait at least a month whenever they are making a large purchase. Children shouldn’t be expected to wait that long. Here is a good rule of thumb: Children should be required to wait as many days as they are old in years before being allowed to make a large purchase (over a week’s allowance). There is always tomorrow…and over half the time they won’t remember what attracted them to it in the first place. Developing this habit will help make them resistant to impulse buying.

9. Don’t use money as a punishment. Your priority should be helping to give your values to your children, not buy their outward behavior.

10. Don’t loan your children money! If their desired purchase is something they should be saving for, let them save for it. If you want to buy it for them for the value of the experience, buy it for them. The principles are, “If they want it, they have to save for it. If you want them to have it, you will buy it for them.” Loaning your children money for items they want teaches them they aren’t responsible and they don’t have to prioritize.

Some may disagree with all of these admonitions–I don’t intend to become a “parenting guru” in my spare time–but I do hope that, at minimum, this will help you be thinking about how your wishes get passed down.

Financial Advisor Richmond
Financial Planner Richmond
Financial Planners Virginia

It’s a familiar feeling.

Relief. Exhilaration (or frustration at having to pay *more* taxes!). Gratitude for a job well done by your preparer.

Unless you’ve filed for an extension, however you feel about your tax return…chances are, it’s done.

But, even now, we do get some questions. So, I thought I would answer some of the basic ones for you. If you have any additional questions, feel free to give us a call (800-279-3768 ) or send me an email.

We’re here for you!

1. “When will I get my refund?”
Well, the IRS does seem to have entered the 21st century.

If you had us “e-file” your return, you can check your status right now, or if you had us mail a paper return, after about 3 to 4 weeks.

When you’re checking with the following options, make sure you have a copy of your tax return on hand or know your “filing status”, SSN and the exact dollar amount of the anticipated refund.

• Online: Go to IRS.gov and click on Where’s My Refund.
(or go right to: http://www.irs.gov/individuals/article/0,,id=96596,00.html)
• Automated Phone: Call 1-800-829-4477 24 hours a day, 7 days a week for automated refund information.
• In-Person Phone: Call 1-800-829-1954 during the hours shown in your IRS form instructions. the hold time for the IRS is ... somewhat of an issue

2. “Do I need to keep a copy of my return?”
Yes, for a *minimum* of three years. There’s all kinds of contexts where it’s useful. We do keep one on file, on your behalf, but it’s just smart and safe for you to keep one in a secure place at home. (I’ve already written about Amended Returns, and you need a copy for that process, of course.)

As for the supporting documents from your return, anything that relates to a home purchase or sale, stock transactions, retirement, business or rental property, should be kept much longer than the three years.

3. “I think there’s a mistake in my return. What should I do?”
Sometimes, you’ll find a receipt or a documentation after April 17th which really would have changed your prior year tax return. That’s, again, when you would have us file an “Amended Return”. Here are some other common reasons to Amend…
• You neglected to report some income earned.
• You claimed deductions or credits you should not have claimed.
• You did not claim deductions or credits you could have claimed.
• You filed under one filing status, but you should have filed under another.

You might have other questions, which I haven’t addressed here. Let me know!

(And don’t forget to write me back a quick note about your experience! THANK YOU!)

To more of your money in your wallet!

Financial Advisor Richmond
Financial Planner Richmond
Financial Planners Virginia

Our clients who filed with us this year already feel the peace-of-mind that you were able to claim every possible deduction which is legally allowed in the tax code for 2011. After all, we put each return through an extensive review process to ensure you keep as much of your hard-earned income as the IRS allows.

But what about your friends? And what about your previous years?

Well, since the filing deadline is already upon us, they (and you) might think that the proverbial “fat lady” has sung on 2011 returns (and 2010 and 2009). Not so.

Because according to the most recent report on the matter, issued by the General Accounting Office, taxpayers overpay the IRS almost $1 billion every year due to incorrect itemization and preparation.

What’s worse is that those who prepared their own taxes (with a software, or on their own) are the most vulnerable, according to the report. But did you also know that taxpayers who used one of the “big chain” preparers are almost as bad off?

An excerpt from an additional report from the GAO: In a Limited Study, Chain Preparers Made Serious Errors

In GAO (United States Government Accountability Office) visits to chain preparers, paid preparers often prepared returns that were incorrect, with tax consequences that were sometimes significant. Some of the most serious problems involved these preparers…

1. Not reporting business income in 10 of 19 cases;
2. Failing to take the most advantageous post-secondary education tax benefit in 3 out of the 9 applicable cases; and
3. Failing to itemize deductions at all or failing to claim all available deductions in 7 out of the 9 applicable cases.

More clippings from the report:
* The 19 paid preparers we visited arrived at the correct refund amount only twice. On 5 returns, all for the plumber, they understated our refund amount by a total of $3,465.
* All 19 of our visits to tax return preparers affiliated with chains showed problems. Nearly all of the returns prepared for us were incorrect to some degree, and several of the preparers gave us very bad tax advice, particularly when it came to reporting non-W-2 business income. Only 2 of 19 tax returns showed the correct refund amount, and in both of those visits the paid preparer made mistakes that did not affect the final refund amount.

So what can your friends do about this? And what could YOU do about it, if you didn’t have us handle your taxes in prior years? Simple: file an “Amended” Return.

Many tax businesses don’t provide this service, but even though we’ve completed our clients’ returns, we WILL review any of your friends’ returns–at no charge.

Financial Advisor Richmond
Financial Planner Richmond
Financial Planners Virginia

It’s true — there are certain people for whom this Note doesn’t apply. There are those who are perfectly fine paying the amount of tax they pay every year, thank you very much.

However, since YOU have chosen to invest yourself in our services (or at one point considered it), you are probably in the second group: those who would love to pay less in taxes, THIS year.

There are two main things which you need to understand:

Immutable Fact #1: Our tax system is not fair.
Yes indeed — the Mitt Romneys, Warren Buffetts, Barack Obamas, Rick Santorums etc etc operate under a vastly different system than most “regular” taxpayers. This is NOT because they are politically-connected (though they are), and the sooner you quit complaining about those who *seem* to be connected … and make the decision to JOIN their ranks, the sooner you will pay less in taxes.

Because all of those men, and other people like them, understand the second fact…

Immutable Fact #2: A tax return is a report, NOT a strategy.
Yes, we’re pretty good at coming behind with our magic brushes and cleaning up the mess made by many of our clients in their finances and taxes. But there is a much better way to fly.

It’s called tax planning, and it’s essentially comprised of three parts:

1) Strategic review: Assess the current situation, and identify short-, mid-, and long-term strategies to lessen your taxes, and grow your income.
2) Implementation: This can be a little tricky (especially if you do it yourself), because there are bound to be accounting and local regulatory questions which arise. We recommend that you stay with your same team who developed the tax strategy so they make sure you’re doing what you need to do.
3) Proper compliance: There are plenty of folks out there who will give you “the secrets to paying less taxes!!!” — but are they willing to put their name on a dotted line and defend it? If not, RUN from these people. They are true blowhards. Or worse, they know that their advice will lead to a fraudulent return.

But the main thing to understand is that in order to REALLY get your tax situation improved, you MUST plan ahead.

Otherwise, you’re just cleaning up a mess when filing your tax return.

I hope I didn’t ruffle too many feathers … but if so, understand that most of all, we are here to walk with you no matter WHAT kind of planning you do (or don’t do)!

Financial Advisor Richmond
Financial Planner Richmond
Financial Planners Virginia

We have many clients who are receiving refunds this month, and that number of course will only be rising. So, here’s a thought for you: What would it look like for you to give your refund away?

Yes, this is a radical idea to think about, but consider: what does this refund represent to you?

If you’re like many families, it’s a bit like “found money” — i.e., an unexpected windfall. And, in those scenarios, it’s tempting to hoard, or to splurge.

However, as with other windfall scenarios which I’ve written about in the past, one of the smartest things you can do is to give a portion (at least) of it away.

Why do I suggest this?

Well, I believe it’s actually “enlightened” self-interest in the long run. And not just in our sense of feeling good.

I see the balance sheets of folks from every walk of life, and over the years I’ve noticed an interesting phenomenon: individuals and families who make giving a priority, even when they aren’t “wealthy”, seem to do better in the long run. And I mean financially–not just in their state of mind.

(Though, there are significant “state of mind” reasons for giving. Have you seen, as I have, that those who freely give seem to be more pleasant company?)

Before you write this off as being “ask the universe” mushiness, understand that A) I don’t subscribe to that baloney and B) I am merely reporting an observed phenomenon. Do with it what you will.

You see, I make it a point to seek to observe how money works. And, for some reason — money gets attracted to those who aren’t only in hot, desperate pursuit of it. It’s almost like in romance — potential lovers are usually turned off by the overly-aggressive seeker.

I know it might feel painful. But trust me when I tell you that it can actually provide you with a deeper feeling of joy than if you choose to cling tightly to everything which comes your way.

I hope I didn’t ruffle too many feathers … but if so, understand that most of all, we are here to walk with you no matter WHAT your balance sheets look like!

Financial Advisor Richmond
Financial Planner Richmond
Financial Planners Virginia

Yes, this is a long list — but it’s the unfortunate reality of our tax code that it’s not even comprehensive! But these items will cover 95% of our clients. Really, this is for ensuring that we’re able to help you keep everything you deserve to keep under our tax code.

Even if for some strange reason you won’t be using our cost-effective services this year, feel free to use this list as a handy guide…

Personal Data
Social Security Numbers (including spouse and children)
Child care provider tax I.D. or Social Security Number

Employment & Income Data
W-2 forms for this year
Tax refunds and unemployment compensation: Form 1099-G
Miscellaneous income including rent: Form 1099-MISC
Partnership and trust income
Pensions and annuities
Alimony received
Jury duty pay
Gambling and lottery winnings
Prizes and awards
Scholarships and fellowships
State and local income tax refunds
Unemployment compensation

Homeowner/Renter Data
Residential address(es) for this year
Mortgage interest: Form 1098
Sale of your home or other real estate: Form 1099-S
Second mortgage interest paid
Real estate taxes paid
Rent paid during tax year
Moving expenses

Financial Assets
Interest income statements: Form 1099-INT & 1099-OID
Dividend income statements: Form 1099-DIV
Proceeds from broker transactions: Form 1099-B
Retirement plan distribution: Form 1099-R
Capital gains or losses

Financial Liabilities
Auto loans and leases (account numbers and car value) if vehicle used for business
Student loan interest paid
Early withdrawal penalties on CDs and other fixed time deposits

Automobiles
Personal property tax information
Department of Motor Vehicles fees

Expenses
Gifts to charity (receipts for any single donations of $250 or more)
Unreimbursed expenses related to volunteer work
Unreimbursed expenses related to your job (travel expenses, entertainment, uniforms, union dues, subscriptions)
Investment expenses
Job-hunting expenses
Education expenses (tuition and fees)
Child care expenses
Medical Savings Accounts
Adoption expenses
Alimony paid
Tax return preparation expenses and fees

Self-Employment Data
Estimated tax vouchers for the current year
Self-employment tax
Self-employment SEP plans
Self-employed health insurance
K-1s on all partnerships
Receipts or documentation for business-related expenses
Farm income

Deduction Documents
State and local income taxes
IRA, Keogh and other retirement plan contributions
Medical expenses
Casualty or theft losses
Other miscellaneous deductions

Financial Advisor Richmond
Financial Planner Richmond
Financial Planners Virginia

1. Indefensible claims
There are so many old wives’ tales saying that certain items trigger an audit: home office deductions, passive losses, schedule C (sole proprietorship) activities, etc. But you really can’t predict the trigger (and you can drive yourself crazy trying), but you *can* adopt the “be reasonable” mantra about every item on your return (with our help, of course), including these. So if you don’t have a decent claim for a home office, we’ll help you not to claim it. If your money-losing sole proprietorship is really more a fun hobby, treat it as such.

Look–don’t be scared to take deductions and losses you’re entitled to, but don’t take tax positions you aren’t comfortable defending. If you take reasonable tax positions, you’ll likely find you won’t end up needing to defend them. And if you do face an audit, it will likely be far easier.

2. It doesn’t all add up.
This seems like it should go without saying, but make sure you add, subtract and multiply accurately. Check your numbers through each step and do some simple math checks when you finish. If you do make a math mistake, you are likely to get a math correction notice from the IRS. This isn’t an audit. But our goal is to minimize your interaction with the IRS bureaucracy, which, ah… isn’t known for the best mail handling practices.

3. Lost 1099
This can be confusing, because the Form 1099 comes in many varieties, including 1099-INT for interest, 1099-DIV for dividends, 1099-G for tax refunds, 1099-R for pensions and 1099-MISC for miscellaneous income. These forms are sent by payers of such funds to both you and the IRS.

So regardless of how many 1099s you receive, make sure they all are accounted for on your return. There are also Forms 1098 which lenders send (to you and the IRS) recording how much interest you paid. The IRS matches your return against the 1098s and 1099s. So one sure way to guarantee an IRS query is to fail to account for something! If a Form 1099 is wrong–say it reports more income than you had–you can explain or deduct it on the return, but you need to first report it.

4. Suspicious OVER-reporting
I’m not talking about under-reporting income, or holding necessary information back. But you’d be surprised how many professionals and amateurs alike try to submit too much *supporting* information. True, if your return is complex, you may need to add explanations or disclosures in footnotes. Be concise, truthful and accurate, but don’t provide copies of sales agreements, settlement agreements, bank statements, etc., unless you are later asked to by the IRS.

Disclosures can be made on regular paper or special IRS forms. A Form 8275 “Disclosure Statement” on plain paper can be used any time you need to disclose something that can’t be adequately disclosed on the forms. Form 8275-R “Regulation Disclosure Statement,” is for disclosing positions that are contrary to IRS Regulations or other authority. You shouldn’t be filing a Form 8275-R–or taking a tax return position that would require it–without professional help.

Frankly, though, any disclosure statement should be checked with someone who can take you by the hand and ensure it’s done properly (ahem).

5. Fighting unnecessary fights.
Here’s where some of our clients have gotten in trouble in the past, despite our admonitions: If you take reasonable tax positions, and complete your return accurately, checking your math, why should you pay a bill if the IRS sends you one? Frankly, it’s a matter of practicality (and wisdom) rather than principle. It just doesn’t pay to fight with the IRS on small matters. So don’t get into the bureaucratic system and risk bigger problems for a few dollars. Just pay it and move on.

6. Ticky-Tack Prior Year Amending
Here’s the reverse situation of my previous point: amended returns are reviewed much more regularly than initial returns. So if you forgot a deduction or otherwise think you can get a small amount back by amending, think twice before amending your return (i.e.–consult with a pro). Consider whether you might have bigger problems if other matters on your return, unrelated to the amendment, are reviewed. Yes, you can win a battle…and lose a larger one.

7. Trying to go it alone.
Yes, this is a bit self-serving — but I’ll also make a “damaging admission” here: some tax professionals argue that a return prepared by a professional is less likely to be audited. However the facts are that there’s little reliable data to support it. That being said, having a professional prepare your return will give you the added firepower of years of experience in handling such matters in your corner.

So to absolutely ensure that whatever happens, you’ll have such a someone at your side — and that your back will be guarded on the front end, give us a call: 800-279-3768 .

And a last word: No matter how careful you are, there’s no way to guarantee you’ll never have a tax controversy. Sometimes your number just comes up. But when your number is called … make sure you aren’t alone.

Financial Advisor Richmond
Financial Planner Richmond
Financial Planners Virginia

According to recent data from the Federal Reserve (what do they NOT keep track of??), more than nine million households in the U.S. reported getting an inheritance of at least $100,000. And there is other data which suggests that baby boomers stand to receive over $8 trillion in inheritance over the next few decades.

But sometimes such “blessings” end up as curses to those who aren’t prepared.

Consider former baseball star Lenny Dykstra, who recently filed for bankruptcy in 2009 after once having a net worth estimated at $58 million. And, of course, the stories of lottery winners has become so pervasive that Hollywood has even begun using it as regular plot device on TV.

So — a few quick essentials for you to consider, should you find yourself on the receiving end of a small fortune. These aren’t pieces of investment advice, per se, but rather some guidelines which will help you emotionally handle the new situation:

1) Move slowly at first.
Take some time to let it sink in and get through the emotion of it all. Most of the bad decisions made with sudden wealth happen in the first couple months. So lock it up in a low-yield savings account for three months, proceed as normal, and use that time productively.

Do this during that time…
2) Circle back to your life goals, and evaluate how the money will help you achieve them. Just because you’ve suddenly been given some cushion, doesn’t mean your life has to radically change. It might get easier … but if you leave behind the goals you created BEFORE this windfall, it’s more likely that it will get harder.

3) Find a disinterested advisor to be a buffer. It’s often best to work with someone who already has experienced handling the finances for people of means. That way they, too, won’t get caught up in the emotion of it. Let them be your “go to” gatekeeper for your greedy cousin or high school friend with those “can’t miss” investment ideas.

4) Immediately, give a portion of it away. I’ve written about this dynamic before, but there’s something special which happens inside your mind when you give away your money: it loses its grip on you, ever so slowly. And, far from turning you into a profligate (and unwise) giver, what can happen is that you aren’t as affected in your character by the sudden influx of funds. Which means that you don’t become more flashy, nor do you become a tightwad.

5) And, of course, assess your tax strategy. Coming from me, this should be a no-brainer, but every gift has a variety of ways by which it can affect your taxes. And many of the moves which we can help you make can protect you greatly.

Financial Advisor Richmond
Financial Planner Richmond
Financial Planners Virginia

Far too many marriages fall apart. And, sadly, one of the most often-cited reasons for that being the case is financial angst.

We’ve seen enough beautiful marriages around here, that I believe that I can put together a few commonalities of how finances are handled in some of the best of relationships — be they marriage, or otherwise…

Start saving when young. Every seven years you delay starting a savings plan cuts in half your ultimate net worth in retirement. Chances are that you know someone who’s getting married this year so send them a copy of this article. It may be more valuable than any check you write.

Budgeting together. Couples that share church activities or philanthropic causes do better financially because their common vision allows them to work together instead of pulling in different directions. They do well while doing good.

So, the more chances you have to do something which helps you to clarify your shared vision, the better the marriage team. Even the simple process of creating and adjusting a family budget provides a forum for discussion of what is really important to the family.

Realize that a budget brings freedom — not constraint. Couples without a budget can, and often do, fight over every dollar spent. But couples who have worked together on a budget are already in agreement on the big picture. Once the difficult decisions are made, the specific purchases in each category are much less critical.

Here’s one way this works (among many): Having decided how much money the family can afford to spend on clothes for him and for her, it doesn’t matter as much if he prefers lots of inexpensive clothes and she prefers a few nice pieces, or vice versa. A budget allows discretion and freedom to prevail within the context of cooperation and teamwork.

Pay your family first! Even if it hurts, at first, saving equals paying yourself. And don’t worry in the beginning overly much about where you’re placing your savings — only after you’ve saved several times your annual salary does the rate of appreciation become more important than the actual rate of savings. The main thing, early on, is to do it!

Because money makes money. And the money that money makes, makes even more money.

Limit the amount you spend unless you both agree. One big mistake can undo months of frugality and sacrifice. So it’s a good idea, that for big purchases, you require both members of the team to agree. Honoring each other in this way helps avoid resentment and disgust.

Have a small slush fund. Both members of a marriage should have a slice of the budget which is completely at their discretion. So long as their spending stays within this thin slice of the budget pie, they can be completely frivolous. Maybe it’s only 0.5% of your total budget, but it’ll provide a place to put purchases which otherwise might cause marital strife.

If one member collects ceramic pink pigs and the other signed collectible hockey cards they can both enjoy their frivolous expenditures without jeopardizing budget items that are more important to the family.

Couples that learn to live proportionately maintain their balance, whether they are rich or poor. No matter the circumstances, they include some fun, some gifting, and some investing as a reflection of their shared family values.

And it starts with having the conversation. So do it!

Financial Advisor Richmond
Financial Planner Richmond
Financial Planners Virginia

The national average credit card balance for 2011 was $6,576, down from $7,404 the previous year — and while it’s certainly nice to see improvement, I also know that any kind of debt can feel like you have Justin Tuck climbing on your back. (That’s a New York Giants reference, by the way. Google him if you must. Not a small man.)

So, you may be in a better situation … it may also be worse. So, to answer the questions we often get around here from clients facing tough times, I’ve put together a step-by-step process which we often help people work through.

1. If you ever hope to pay off your credit card debt, pay more than the minimum payment each month.
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. Implement a regular *system* for credit card debt reduction.
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. You can negotiate with your credit card company.
No, you do not need to be an attorney or other professional to negotiate with your credit card company (you will need patience and persistence though). 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 willing to make deals.

4. Write letters to each of your creditors acknowledging your debt and the situation, and tell each one when you can begin repayment.
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 make you feel better about yourself.

5. Keep track of what you are able to pay each creditor every month.
If you are not able to pay the full amount of your credit each month, you still should still pay something to stay on top of it. You should work off 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. Don’t fall prey to intimidation tactics
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.

Financial Advisor Richmond
Financial Planner Richmond
Financial Planners Virginia