The Blog Of TL Wall Accounting

Archive for January, 2013

Decreasing Debt

This is the first of a two part series on managing your money. It goes beyond just thinking about budgeting your money, something we feel strongly about. Instead, it’s looking at debt, why you want to reduce it and how, and then looking at why you need to also think about increasing revenue. That’s for next time; right now, let’s talk about debt.

Having too much debt can be debilitating. Sometimes people come up with some radical ways of attacking it. There was a recent story on CNN where a young man just out of college with around $26,000 in debt decided he was going to pay it off in 2 years. How he did it was to go extremely austere. He didn’t turn on the heat in the winter, and he lived in Minnesota. He bought a lot of foods at discounted prices and ate much of the same thing over and over, even when it expired; that put him in the hospital a few times. He bought few clothes, and when he did he went to discount places. He didn’t drive a car for those 2 years so he wouldn’t have any expenses related to that.

There were a few other things he did, but he did end up paying off his debt. It was a pretty extreme way of doing it, and I’m not sure it’s worth going to the hospital, especially if your insurance isn’t as good as his apparently was. What it did point out though was how well things can go if you have a plan, even if it’s not as extreme as his was.

How do you increase debt? Obviously you stop spending too much money. However, you still have to live, and if you have kids, you still need to address their needs. Here are some ideas:

* Cut down on snack foods

* Buy foods that allow you to cook large meals that you can eat many times.

* Buy some items in bulk or on sale and freeze them if you have to

* Cut down on eating out

* Plan your trips out for the day ahead of time and plot a course so you’re not driving all over town, out of order, and wasting a lot of gas

* Instead of going to the movies pay for a service like HBO, which offers 13 channels (2 in Spanish) for only $7.99 a month, which offers movies for children and adults alike at a reasonable price. You can cook your own popcorn for less than 30 cents a bag.

* Plan what you want to buy before you leave the house, and stick to that

* Leave the house with a specific dollar amount in mind and don’t go over that amount, no matter what

* Pay a bit more on at least one of your bills every month, and concentrate on the one with the highest interest rate

* If you must use a credit card, wean yourself down to only one and monitor how much you spend on it

If you can follow most of these rules, you’ll be able to pay down debt without increasing more, still be healthy, and possibly be able to afford one fun day every couple of months or so, which helps make staying in control much easier to deal with. Give it a shot; you might surprise yourself.

The Four States Of Taxpayers

How do you prepare for your taxes? Strange as this may seem, it’s not necessarily true that people who are expecting big refunds are always the people who file their taxes fast and early. It’s also not true that people who feel that they might have to pay something are always waiting until the last minute either.

Dealing with taxes is a much more mental process than that. As it is with business and employees, you find that not everything concerning taxes has to do with money. It has a lot more to do with personality and the perception of it all. Let’s take a quick look at the four states of taxpayers.

1. Energetic. Those people who are energetic are ready to get things out of the way, no matter if they’re getting a refund or not. Those who are getting refunds look forward to their return and how they’re going to spend the money. Those who aren’t sure or know they’re not going to get a refund want to know what their liability is and also want everything to be over so they can get on with life. There’s no hiding with these folks; good for them.

2. Distracted. Distracted people mean well, but they keep putting things off because they have other pressing matters to deal with. Sometimes those pressing matters are as minor as getting something to eat, but who doesn’t think eating is more important than taking care of their taxes?

3. Stressed. Just like the energetic people, it doesn’t matter whether they’re getting a refund or not. They see the entire process of taxes in the first four months of the years as a major challenge. Numbers are confusing to them, or maybe past history has put them on edge. If you’re married, you might have had problems getting refunds so many times that this is an unpleasant time of year, no matter how much in taxes you paid out.

4. Laid back. These folks don’t really care one way or another; they’re just not in the mood to be bothered by any of it. I’ve known people who didn’t file their taxes for a couple of years in a row who, if they had, would have reaped thousands in refunds, and even after they eventually file and learn about the penalties, they’re not bothered by any of it. I know others who haven’t filed taxes, ended up owing money, and set up payment plans and got on with life.

For all of these states, it can help to have an accountant who knows you and is prepared to get you through the process. Accountants obviously prefer to get everything early, and if they know your pattern they’ll work with you for your benefit and theirs as well. Many people need the extra boost, and they like knowing that their accountant cares about their needs. It’s something to think about at tax time when you have to decide between one of those tax agencies or an accountant you’ve worked with before.