6 Reasons You Should Hire A Certified Public Accountant(CPA) To Do Your Taxes

Posted by The Happy Rock on March 11, 2009

I mentioned last year that against my frugal intuition I shelled out the big bucks to hire a CPA to do my taxes. I wanted to follow that post up and share my insight after another year of experience and knowledge to answer the question is it worth getting a CPA to do your taxes. Here are six reasons you should consider hiring a good Certified Public Accountant:

Your taxes are somewhat complicated. Complicated can mean any of the following: extra income from say blogging or contracting, investments, child care expenses during work hours, mortgages or refinancing, energy efficient home repairs, adoptions, rental income, numerous charitable donations, gambling income, job related moving expenses, etc. A good CPA will be able to advise you on the best way to handle your current statement and they will probably even ask about things that you never thought were deductible. Even if your taxes aren’t complicated it may still be worth you time. The Happy Boulderette made below the poverty line during the last year of volunteering and had about the easiest taxes you could ask for, but she saw over a $1,000 difference between online tax preparation software and bartered CPA services.
They are good at what they do and they usually like it. The CPA certification requires them to learn about the tax code and requires them to seek continuing education. The tax code in the US is quite ridiculous and overwhelming. If we are honest with our selves, most of us despise doing taxes and have only a cursory knowledge of the tax code. Let them focus on what they do best and you use your energy for what you do best.
CPA will make suggestions for cutting your tax bill for years to come. Things like keeping receipts for energy bills or other home based business expenses. Maybe charitable donations that you didn’t know were deductible or energy efficient home repairs/upgrades. Those tips will have a compound effect every year you implement them. Just one $500 change would be worth $15,000 over the next 30 years.
No Stress! I have used both online tax software and a CPA and I can’t begin to tell you how good it feels to use a CPA. No nagging questions of whether you understood the tax code. No questions of did you get the most deductions. You still have to prepare the information for them to process, but they are their to answer any questions and guide you the whole way. It is that wonderful.
Computers aren’t humans. They can’t talk you. They don’t reassure you. They offer a one way flow of information, not a conversation. The software might not even be intuitive to you. One skipped or misunderstood check box and you could miss out on a big deduction. Tax software is generally pretty good. I have used Turbo Tax and Taxcut and even a local tax service(like H & R Block), but the they don’t hold a candle to a CPA for me. Did I really have to claim my babysitter as an employee? Can I deduct my home office even if my laptop sits in my living room? Those were not easy questions for me to answer with any degree of confidence while using software. They were answered thoroughly and reassuringly in minutes with a CPA. Computers and software also don’t do a good job of answering tax questions after your taxes have been filed, or when you buy a new house, or lose your job, or any host of other reasons that raise questions in your mind about taxes.
It doesn’t cost as much as you think. Last year’s taxes cost me double what a regular tax service charged me and about 8 times what software charges, but we are only talking a few hundred dollars in most cases. It sounds like a lot, except that for most of us one small tip can easily recoup that cost. Also the bill is usually quite small when compared to the amount of money we are handing over to the government throughout the year. Lastly, if you don’t like the outcome you can resume your favorite tax preparation system the following year without any long term commitment.

All I can say is that I am a cheap frugal stick in the mud, I am not even giving a second thought to shelling out a few hundred dollars this year. For me, it is unquestionably worth the money and this is coming from a guy that would jump through hoops to save 5 bucks.

» Filed Under Productivity(Financial), Taxes

Removing Finance Charges From My Chase Freedom Credit Card

Posted by The Happy Rock on February 16, 2009

After two months of procrastination, I finally called Chase to ask that they fully remove any finance charges related to my first time late payment offense. Did I ever mention that I hate making phone calls even if it is just calling a service rep that I don’t know to get late fees and finance charges removed? The introvert in me often hopes that avoiding the calls will make them go away…that rarely works.

The thing about this charge was that it left me seething. Every time I thought about it, I got upset. Upset because:

One 8 hour late payment resulted in about $100 in late fees and finance charges, $39 late fees and $51 dollars of finance charges that were spread out over two months of statements.
The bill was due on a Sunday and the payment was ready to be picked up on Sunday, but they don’t process payments on Sunday.
As someone who has paid their bill on time for the good part of ten years, I don’t like being treated as a delinquent.
My attempts at removing the fees(5 emails) had failed thus far and I suspected that if I talked to the right person they would remove the fees.

The only thing that kept me using the card is $500 in cash back in just one year of using the card.

After some prayer I was finally motivated to the point of action. I armed my self with all the relevant information which included the statements for the credit cards and for my bank payment. holding strong to the fact that they thought of me as a valuable customer. They had just raised my limit to $5,000 in a slow economy. I didn’t even plan to try and use ‘I own a personal finance site that talks about your company’ line.

When I called I got a reasonable customer service rep who listened intently as I laid out my case as strongly and politely as I could. She started to give me an annoyed scripted response about how the due date can fall on any day, but I politely persisted and said that she had to get a manager to remove the fees. A friendly manager came on and I politely told the story again and added stronger language about how I have one credit card and switched to Chase because of their service, but now every time I use the card I want to cancel. I continually stressed how I was a good loyal customer and how if this was resolved I would be a loyal customer again.

She relented and offered to remove half of the fees($26). I was placated. Not completely happy, but placated nonetheless. If I wasn’t averaging $40 a month in cash rewards from the card, I would be much more upset. Plus at $26 replaced in ten minutes, it feels like earning $156 an hour.

» Filed Under Credit Cards, Money Savers, Productivity(Financial)

Sometimes You Just Don’t Feel Like Saving Money

Posted by The Happy Rock on June 17, 2008

Blasphemy, I know…but it is true. I am not talking about some calculation that I do in me head that says doing X isn’t worth the time for the money, but about blatant laziness or avoidance. Sometimes when certain moods strike I am just unwilling to put in a little extra effort to save another dollar or two.

Three incidents stand out in my mind from the last week or two :

I can remember about a week ago realizing that I had not been charged the sale price on ice cream. I was already in the car with the groceries and my son and I didn’t feel like going back in for the $1.50.
I was at a flea market with my brother-in-law, who currently makes his living off eBay, and I just did not feel like haggling. I was just buying a small toy for The Pebble and I knew I could get it probably %50 or more cheaper than I did. I just paid full price.
Price Protectr had emailed that the price on a recently purchased book had dropped about a dollar, but I avoided sending a quick email multiple times until I finally let it go.

I know the money involved in these three examples is minor, but the same thing occasionally happens with larger money returns and other random finance activities. The bigger the purchase, like a car, the more detrimental the behavior. I am usually not hard on myself, because I know that my energy for such activities was invested into other areas of life that are more important. With that said I do see an oppurtunity for growth. The oppurtunity to just summon a little extra strength when I see a similar lackadaisical situation developing. Even reaching deep within myself to overcome my shyness and make the extra call or haggle that I sometimes avoid because of my personality foible. Now that I have made a public declaration my weakness, I will be more strengthened to tackle the problem in upcoming siutations.

Does anyone else every feel the same way? Got any examples?

» Filed Under About Me, Cars, Frugality, Productivity(Financial)

Step Towards Financial Simplicity – NJM Bank Account Closed

Posted by The Happy Rock on May 20, 2008

I mentioned a few weeks that I wanted to further simplify my financial system and closing extra accounts is a big part of that. Well…I closed my NJM Bank Checking account. I have been putting this off for about a year, because the prospect of having to pay the occasional ATM fee made me cringe. Yes, I can be that cheap. The $8.00 a month ATM fee reimbursement was the sole reason I kept the account around. The ironic part is that the extra interest I will earn by having the money in ING will more than cover the extra ATM fees that we incur during the year.

The account was our first foray into the online banking world and I was happy to sign up 4 years ago, but things changes. They also gave me $25 for opening both a savings and a checking account and the interest on the checking account was 1-2%, which was pretty good 4 years ago. Since then we have moved our banking to ING Electric Orange and are very pleased.

So why not just keep the account around to avoid the occasional $3.00 ATM fee at the boardwalk? Simplicity! This may sound crazy, but having an extra account hanging around that still charges service fees if you don’t feed it a direct deposit and not having all of my money in easy to use baskets adds a level of complexity. I know this doesn’t seem like a big deal, but if you have a 100 of these types of situations in your life you end up wasting hours and days thinking about things that aren’t worth your time. Even if you aren’t directly thinking about these things, these ‘open loops’ add a small amount of stress and use mental space. It is really hard to imagine that removing these types of ‘little’ tasks can have a profound effect on your life, but it does.

I am speaking from experience. As I continue to prune and simplify, each year the level of stress and in my life drops despite adding more and more important tasks. If you can’ imagine it, I understand. Looking back I can’t say that I thought it would have made a difference…it sounded silly. I was willing to give it a try though, and my life, wife, and children are reaping the benefits of simple systems that free time and energy for the things that truly matter in my life.

Give it a try. I suspect there are more than a few ‘open loops’ that pop right into your head. Just the fact that they are so easily accessible means they are taking energy from things that you would rather be thinking about like spouse, children, your business, leisure, and helping others.

» Filed Under Chasing Dreams, Personal Finance Systems, Productivity(Financial)

Why APY Matters And The APR Lies

Posted by The Happy Rock on March 28, 2008

APR and APY. I know that I have had to look up the difference more than once in my life. It is one of those facts that is easy to understand, but they easy to forget. The numbers are usually similar, but the subtle difference can cost you a lot of money. So, what do they mean and what is the difference.

Annual Percentage Rate(APR) is the rate that a company assigns to the financial product. If a credit card has a 12% APR that means that will mostly like charge 1% a month for 12 months. If you carried a $10,000 balance on a 12% APR credit card, the simple interest would be $10,000 * 12% or $1,200 dollars in interest for the year. Seems simple enough, but what about the APY.

Annual Percentage Yield is the actual rate that you receive at the end of the year after taking into account compounding interest. Banks and lenders don’t use the simple interest formula they use compound interest. Using the compounding method on the same $10,000 balance on a 12% APR credit card, you would pay $100($10,000 * 1%) in interest the first month. The next month you will pay $101($10,100 * 1%) in interest the second month, $102($10,201 * 1%) the third month and so on until the end of the year. This compounding will actually cost you $1,268.25 interest rather the $1,200 you would have thought. That difference is the displayed in the APY. 12% APR compoudning monthly is 12.68% APY.

Earning interest on interest works for you when saving, but against you when you borrow money. Lenders will try and show you the APR, while savings vehicles will show you the APY. Either way FOLLOW THE APY.

» Filed Under Banks, Productivity(Financial)

Do We Earn The Right Not To Budget?

Posted by The Happy Rock on November 7, 2007

I have admitted it before, The Rockette have never lived on a formal budget. The closest we come to real budgeting is what I label retroactive budgeting. This is when you come up with reasonable spending amount for the different categories like groceries, clothing, entertainment, etc. Then at the end the month you compare the actual totals to your suggested limits.

When we were in the midst of shedding our 70k in debt, we did this almost every month. As the debt shrunk, so did frequency of our retroactive budgeting. I have been trying to decide whether this is a negative thing.

Three things happened as our debt decreased and was eliminated.

Our behavior and spending patterns changed. With less debt and new spending habits our monthly totals feel within a reliable range.
As the immediacy of the situation abated, so did our intensity. Our intensity got us through the tough times and turned the tide, but then our attention slowly began to leak elsewhere.
I felt like we earned the right to not check. Not checking as closely became the reward!

The thing is, changing the direction of the net worth train and your financial habits is heavy tiring work. Work that pays off down the road and work that removes stress. For those of you that are in the midst of an intense debt struggle, this can be a light at the end of the tunnel. For those of us who weathered the storm and are in cruise control, you know that freedom that is created from not having to worry and stress over your finances.

Sometimes, I think I am sacrificing financial efficiency, because of laziness. Other times I remember that the reason I got out of debt was to have the freedom to focus on other areas of my life without having my finances dictate decisions. Obviously, I think the latter is more often the reality or else I would be much more diligent about checking.

What are the readers opinion on the matter? Are you earning the right to ‘slack’, or are you going to better off if you stay focused and efficient?

» Filed Under Debt Elimination, Energy, Favorites, Motivation, Productivity(Financial)

Book Review : The Quiet Millionaire by Brett Wilder

Posted by The Happy Rock on October 8, 2007

Recently I recieved a copy of The Quiet Millionaire: A Guide for Accumulating and Keeping Your Wealth by Brett Wilder from a publicist. I jumped at the chance to read a new finance book, and bring the review to The Happy Rock readers.

To start, when reading a book of advice, you must take a look at the author. Brett Wilder “is a Certified Financial Planner® with over forty years of professional experience as a personal and business financial adviser. He founded the Financial Management Group, Inc. in 1989, a fee-only financial management and investment advisory firm registered with the Securities and Exchange Commission. ” That resume looks pretty solid. Brett should know his stuff, so let’s take a look at what he knows.

The book is meant to be an inside look at the type of clients that he professionally manages. These aren’t your Donald Trump’s, but your slow wealth accumulating business owner types called “Quiet Millionaires”. The book contains 15 chapters that attempt to define the decisions that have facilitated his clients millions. It covers the basic building blocks in personal finance like exploration of your purpose and relationship to money, a personal financial review, budgeting, home ownership, business ownership, health care, insurance, borrowing, and investing. The chapters average about 25 pages, and don’t get bogged down in the minutia. It reads quickly, and is well organized and laid out.

What I liked :

1. The approach to wealth building is refreshing. It is encouraging to see more books that aren’t preaching get rich quick schemes. It is especially encouraging to think that most of his clients accumulated wealth in an ‘average’ fashion.
2. Most of the pertinent personal finance topics are covered. The chapters provide enough meat to get you asking most of the right questions on a given topic.
3. The book contains a few nice lists that grabbed my attention: 7 major obstacles to financial success and 7 investing mistakes. They were pretty spot on, and were delivered succinctly.
4. The “Quiet Millionaire Wisdom” margin notes and the chapter summaries are helpful for skimming and gleaning the authors main points.

What I didn’t like :

1. I personally know that a lot of the techniques in the book are solid, but I am not sure that a person who is new to personal finance would be convinced that this is the path to millions. I don’t think the book backs up the title by underselling the idea that these principles work. The book read much more like “The Beginner Guide to a Solid Financial Future”, rather backing up it title. This is more a knock on the title, not the content.
2. Large sections that were not that relevant. A good example would be the multiple pages describing the differing Medicare plans. I just skimmed these sections, but they may be more relevant to others.
3. Some of the sections are weak. Mr. Wilder sees that most of clients are small business owners and is a big proponent of that path. Amazingly, the chapter on business ownership was lacking. Also the coverage on what I consider junkier insurance policies like whole life was questionable.
4. The constant request to seek the proper financial professional got old and took away some of the book’s credibility.

To wrap up: if you have the basic financial concepts down and are looking for deeper knowledge or support on your quest, I would look elsewhere. Given the title I wish that it would have given a little more coverage on who Brett Wilder is and why the information is important. The fact that most of the book is based on real life millionaires that are Mr Wilder’s client is extremely important and relevant, but not given enough coverage.

In all though, I think this is a good book. If you are looking for a book that covers most of the personal finance topics reasonably well in one place, then this book is a good place to start.

Sources : The Quiet Millionaire Website

» Filed Under Books, Productivity(Financial)

Marriage and Money – The Budget Meeting

Posted by The Happy Rock on September 6, 2007

What often happens in marriages with combined finances is that one person will assume control the finances. They pay the bills, watch the accounts, and retain all of the money know how. In our family that is me. Being the analytical numbers guy, I willingly take on that task. On of the pitfalls of combing finances is that one person often ends up with all the power. Power doesn’t have to just mean setting rules, but it can also mean bearing the financial stress and controlling information. The other spouse often becomes oblivious to the actual amounts and inner workings of the accounts, and with that they lose their ability to provide their input and insight. This can wreck havoc on a marriage, but seems to happen all to often. Most times it starts out as innocent ‘sharing’ of duties, but ends in financial disaster.

Let’s look at one tool that helps couples handle their money and finances in marriage. For The Happy Rockette and I, we try to avoid that ugly path by having a monthly budget/finances meeting. It is not as scary as it sounds, what the meeting boils down to is laying all the financial cards on the table and talking about them. If you don’t have a budget, please don’t feel like you need one to talk about your finances.

You can vary the meeting frequency depending on the current state of the finances. If you are deep in debt and the stress is high, meet every week or every other week. If things are in cruise control skipping a month isn’t a big deal.

For us the meeting is usually scheduled for one of our many hour long car rides. To start the meeting, bring a current snapshot of the finances. I usually print the account summary page from Quicken or Microsoft Money. Bank and credit card statements or a spreadsheet print out would be perfect too. From there The Rockette will look things over, and make sure she is comfortable with everything. If she has ideas or questions, we will talk it through and come up with a plan together.

Subjects can vary from long term goals, to the budget for groceries, to 401k contributions, vacations, or whatever needs to be discussed related to money. Any actions that need to be taken are recorded and ‘assigned’ to one of us, so that they can be reviewed at the next meeting.

If there is a point of contention, we try to respect each others opinion and reschedule the discussion on the hot topic after we have had some time to think. We usually try to keep the meeting short, 15-30 minutes. If it runs longer than that, we will either follow up later, or wait until next month.

That’s a brief summary of what a monthly money meeting looks like. For us it has been a wonderful tool for handling our money together in marriage.

Here is a list of the benefits that it has brought to our marriage:

Openness/No Hiding
Valuable Communication
Multiple Viewpoints and Insights
Sharing of Financial Stress and Decisions
Diffusion of Power
Accountability
Unity

What tools are you using to strengthen your financial situation in your relationships?

» Filed Under About Me, Marriage, Marriage(Communication), Productivity(Financial)

Recovering From The Microsoft Money Server Upgrade

Posted by The Happy Rock on August 10, 2007

I cleared a hurdle I had been putting off for about three weeks now; I spent about two hours tonight bringing my Microsoft Money records back up to date. It was two hours I didn’t have, but two hours that were sorely needed. In mid July Microsoft decided that their Money servers need a complete overhaul. Since that time I haven’t been able to download my transactions for my ING Electric Orange checking, savings, or my one credit card. With the July Cash Spending Experiment in full swing, I wasn’t too worried about it since my normal way of operating wasn’t needed. Now with July over, I finally needed to bite the bullet and fix what they broke.

To be honest I did spend about 20 minutes searching for better personal finance software options, and thought about upgrading from Money 2005 to 2007. I didn’t switch or upgrade, because I honestly don’t have the time and energy to invest in learning a new tool. Plus I have three years of budgeting and finance information in Money format. I would love to entertain any reader suggestions about possible good transition software from Money. With that said, Money suites my needs fine.

After some minor frustration and keyboard pounding I was able to trick Money into being able to access my accounts again. The big tip was to go to the financial institutions and download the transactions manually to help Money learn. Believe it or not, it really helped. Once that was done, I had probably 100 transactions to reconcile and categorize. That is my favorite feature of personal finance software. It really helps my conceptualize and track how much money we are spending and were it is going. Money can also do some simple charts which not only look pretty, but can serve as good marriage communication tool. I finally finished up by taking care of some bills.

I could have really used the two hours for other activities, but it really feels good to have that squared away again. The next big task is to square away the pile of receipts from all the July cash spending, and see if we actually saved any money.

» Filed Under Experiments, Finance Software, Personal Finance Systems, Productivity(Financial)

Map Out Your Personal Finances With Bubbl.us

Posted by The Happy Rock on May 22, 2007

For just under a year we have been saving to fund our emergency fund. During that period our finances have been on auto pilot. Monthly budget meetings were taking five minutes, and there weren’t many decisions that needed to be made. We finally have our emergency fund to $12,000 or about 5 months expenses and now it is time to attack the retirement and college savings. Seems like a perfect time to shake things up and create more simplicity and freedom in our finances.

Before we get there though, I wanted to thank Wachovia for graciously providing the impetus to simplify our financial system. The final straw was when an unexpected $5.95 charge showed up. I later found out this was a new monthly service fee for electronically downloading account information to Microsoft Money. We were ready to change. I decided it would be helpful to map out the flow of money through our current financial system. I decided to use a Web2.0 mind mapping tool, because it is easy to use, free, and provided a nice interface for wordpress. Here is a the map of our current personal finance system using the very cool bubbl.us interactive wordpress plugin. Feel free to drag and zoom the diagram for your viewing pleasure.

Please email or comment, if you are having problems seeing the clickable diagram.

I did this for a couple of reasons : first, it is hard to keep track of all of the money movement in my head. Second, I tend to be a visual learner. Third, it is would be a nice reference for the family. Finally, I thought it would be neat to share in the blog.

Here are some things that I noticed as I thought about each piece of the system and the money flowed between them.

Complexity. The system worked not because it was a great system, but because we had developed good habits. There is significant time being wasted when shuffling between all of the accounts.
The NJM account is pointless. As soon as money is transferred in, I transfer it to savings. Even though all of our finances are joint accounts and managed together, there was needless separation of the accounts. The account happened to be left over from a half-hearted switch to the internet friendly NJM Bank years ago.
Our main checking account was not giving us any interest. A brief check in Microsoft Money revealed that we carried an average balance of $2,500 to $3,000 in our checking account last year. This could earn us an extra $100+ a year in interest.
The two day settle period to move funds between checking and ING savings is very cumbersome.
My credit card is really outdated. There are much better options that have come along in the last few years.
I liked having access to branch services like counter deposit,bond cashing, change cashing, and international money exchange, etc.

In my next post I will share how we are updating the system to create more freedom for the things we truly. value.

» Filed Under About Me, Personal Finance Systems, Productivity(Financial)