In my professional practice I work with a variety of different types of financial planning clients. Some need help managing significant amounts of wealth. Others need assistance getting out of serious amounts of debt. One thing is usually common in all of my clients. They share a strong desire to make the smartest decisions possible with their money. So as the year comes to a close I wonder if it is too soon to start thinking about making New Year's Resolutions?
2009 was a difficult year financially for many individuals and families. For those with tax problems the financial stress was likely increased dramatically. With a New Year around the corner, the hope of better financial life is a goal for many. The real challenge for people with tax and other debt problems will most often be related to more than just knowing what to do to improve their financial lives. The ultimate challenge is developing positive money related behaviors that lead to meaningful change.
If you have ever made a New Year’s resolution you probably understand the difficulty of changing any behavior. Perhaps you were not ready for change. Maybe you did not know how to implement change the best way. Frequently these resolutions are abandoned due to frustration and discouragement. Lasting change is rarely a simple process. If you have ever tried to lose weight, give up caffeine, stop smoking, exercise more, etc. you probably realized that a simple solution does not exist for everything.
Behavior change can be difficult to maintain over the course of time. Tax and financial planning undoubtedly involves a substantial commitment of time, effort, and emotions and is a form of behavior change. Fortunately, there is a technique that has proven to be the most effective method of achieving tax and financial freedom- Tax Resolution Planning.
If you are looking to change your financial life in 2010 do not wait on the New Year. Take action now and set a strong foundation with an action. Do more than just have good intentions when it comes to important money related decisions next year. Create a written tax and financial plan and implement it. Financial freedom may be closer than you think.
Best wishes for a Merry Christmas and a Happy New Year!
Monday, December 21, 2009
Tuesday, November 3, 2009
Financial Life Planning and Tax Resolution
Financial life planning is about more than just money. A financial life planning approach can provide a deeper meaning to the management of personal finances. Every person going through the tax resolution process needs a vision, purpose, and a plan if they want to succeed. George Kinder is a well respected financial planner and a leading proponent of the life planning movement within the financial planning industry. His financial counseling process includes three questions that are popular for their ability to help clients focus on what really matters to them about money. While I have adapted a version of these questions for the tax resolution client, similar questions are also asked of my Fee Only financial planning clients.
The main purpose of this exercise is to begin thinking about what you want your money to do for you. The first question is designed to initiate the process of thinking about all of life’s possibilities; the second and third questions are created to help people with tax troubles focus on their priorities in life.
Since the accumulation of excessive tax and consumer debt has such an immediate and overwhelming impact on household finances it is easy to lose sight of long-term goals and dreams. Looking beyond the current state of financial stress is an important way to help prioritize goals during the tax resolution process. It also helps to have something to work to achieve while reinforcing the need to attack your tax problems with passion and enthusiasm.
The life planning questions below should be used to help you identify what you want to get out of life. Since money plays such an integral role in our lives it is important that you are able to understand your values that lie beneath the surface of your financial world.
1. Imagine that you have paid off all of your tax and consumer debt. You owe absolutely nothing and have enough money to take care of your needs, now and in the future. How would you live your life? Would you change anything?
2. Imagine that you visit the doctor and he or she says you have only five to ten years to live. You will not feel any pain or sickness, but you will never know when death will actually come. What will you do? Will you change your life? How?
3. Finally, now try to imagine that your doctor says you have only one day left to live. Ask yourself: What did I miss? What did I not get to be or do? Do I have any regrets?
This three questions exercise is designed to tap into the heart’s core. What are your values? What is your vision?
Now is the time to start thinking about a life without any debt. Setting a goal to resolve a tax liability is usually the #1 priority during the tax resolution process as it should be. It can be difficult to look beyond the stress of the here and now when it comes to tax and financial matters. Establishing life planning goals add more meaning to the tax resolution process. If you have avoided debt and do not have a tax problem, these questions are just as relevant during your financial life planning journey.
The main purpose of this exercise is to begin thinking about what you want your money to do for you. The first question is designed to initiate the process of thinking about all of life’s possibilities; the second and third questions are created to help people with tax troubles focus on their priorities in life.
Since the accumulation of excessive tax and consumer debt has such an immediate and overwhelming impact on household finances it is easy to lose sight of long-term goals and dreams. Looking beyond the current state of financial stress is an important way to help prioritize goals during the tax resolution process. It also helps to have something to work to achieve while reinforcing the need to attack your tax problems with passion and enthusiasm.
The life planning questions below should be used to help you identify what you want to get out of life. Since money plays such an integral role in our lives it is important that you are able to understand your values that lie beneath the surface of your financial world.
1. Imagine that you have paid off all of your tax and consumer debt. You owe absolutely nothing and have enough money to take care of your needs, now and in the future. How would you live your life? Would you change anything?
2. Imagine that you visit the doctor and he or she says you have only five to ten years to live. You will not feel any pain or sickness, but you will never know when death will actually come. What will you do? Will you change your life? How?
3. Finally, now try to imagine that your doctor says you have only one day left to live. Ask yourself: What did I miss? What did I not get to be or do? Do I have any regrets?
This three questions exercise is designed to tap into the heart’s core. What are your values? What is your vision?
Now is the time to start thinking about a life without any debt. Setting a goal to resolve a tax liability is usually the #1 priority during the tax resolution process as it should be. It can be difficult to look beyond the stress of the here and now when it comes to tax and financial matters. Establishing life planning goals add more meaning to the tax resolution process. If you have avoided debt and do not have a tax problem, these questions are just as relevant during your financial life planning journey.
Friday, October 9, 2009
Creating an Investment Policy Statement
Do you have a written plan in place to guide your investment decisions? If not, how do you know if your investment plan is on track to meet your financial life planning goals?
An excellent way to make sure that you follow an investment plan and have a measurement stick in place to track your progress is the setup an investment policy statement. A solid investment plan requires proper direction and guidelines that will help any investor stay on track regardless of the situation. Plans will frequently change or be altered over time, but if you have a plan in place from the beginning you can always figure out whether or not you are on track to meet your financial goals. That is why you need to put your investment plan in writing and create an investment policy statement to guide your investment decisions. An investment policy statement is a written document that defines how an investment portfolio should be managed.
An investment policy statement typically answers the following questions:
* How much do you intend to invest each month?
* How many years will you be investing?
* What is the expected rate of return for the portfolio?
* What is your target asset allocation mix?
* What are your allowable assets?
* Which no-load index mutual funds or ETFs fit into those asset categories?
* What are the benchmarks for the portfolio (DJIA, S&P 500, FTSE, etc.)?
* How often will you review your investment plan?
* When will you rebalance your portfolio?
An investment policy statement is critical whether you are working with a trusted advisor or using a do it yourself approach to investing. Next time you review your investment performance take a few moments to review your investment policy statement. If you do not have a written set of guidelines for current and future investments you should go ahead and put your game plan in writing.
An excellent way to make sure that you follow an investment plan and have a measurement stick in place to track your progress is the setup an investment policy statement. A solid investment plan requires proper direction and guidelines that will help any investor stay on track regardless of the situation. Plans will frequently change or be altered over time, but if you have a plan in place from the beginning you can always figure out whether or not you are on track to meet your financial goals. That is why you need to put your investment plan in writing and create an investment policy statement to guide your investment decisions. An investment policy statement is a written document that defines how an investment portfolio should be managed.
An investment policy statement typically answers the following questions:
* How much do you intend to invest each month?
* How many years will you be investing?
* What is the expected rate of return for the portfolio?
* What is your target asset allocation mix?
* What are your allowable assets?
* Which no-load index mutual funds or ETFs fit into those asset categories?
* What are the benchmarks for the portfolio (DJIA, S&P 500, FTSE, etc.)?
* How often will you review your investment plan?
* When will you rebalance your portfolio?
An investment policy statement is critical whether you are working with a trusted advisor or using a do it yourself approach to investing. Next time you review your investment performance take a few moments to review your investment policy statement. If you do not have a written set of guidelines for current and future investments you should go ahead and put your game plan in writing.
Wednesday, October 7, 2009
Tax Debt and IRS Levies
Can you afford to let the IRS levy your bank account or garnish your wages? That is what could happen if you owe back taxes and avoid their attempts to contact you.
IRS collection activities are negative events and represent anything but freedom, and therefore should be avoided. You must be proactive and take action to avoid IRS collection measures such as wage garnishments, bank account levies, property seizures, and liens placed on your property. It is important to know what the IRS is capable of doing. Most people find this knowledge a helpful motivator to stay on track with the tax resolution process. If the collection process has already started you should still proceed through the tax resolution process quickly and accurately to start resolving your tax problems on your terms rather than simply accepting defeat and allowing the IRS to control your financial life.
What does the IRS typically attempt to levy?
The IRS may intent to levy any federal payments due, retirement benefits, Social Security benefits, wages, or employee travel advances or reimbursements. The IRS can also levy property such as real estate, automobiles, business assets, bank accounts, wages, commissions, and other income. A levy is a seizure of property. The IRS will try to levy assets unless you TAKE ACTION. Why allow the IRS or any creditor to take control of your assets on their terms? If you owe taxes you need to pay them (or at least come up with some type of tax resolution alternative). However, you need to have a plan to pay them on your terms and not the terms of the IRS.
The IRS may involuntary collect the tax debt owed to them through different types of levies. A levy is served after the IRS has exhausted all other collection efforts to encourage taxpayer compliance. Levies commonly attach a taxpayer’s bank account, salary and wages, and/or business accounts receivable.
The IRS is required to release levies in several circumstances, including:
• The levy is creating an economic hardship.
• The taxpayer agrees to make an Installment Agreement.
• The liability is no longer owed.
• The 10-year statutory collection period has expired.
• The levy was wrongfully served.
• An Offer in Compromise is accepted for review.
The two circumstances most often utilized to request a levy release are when the levy is creating an economic hardship or when the taxpayer agrees to make an Installment Agreement. In both of these situations, the taxpayer must provide a Collection Information Statement for Individuals and Self-Employed Individuals (Form 433-A) and/or Collection Information Statement for Businesses (Form 433-B). To obtain a levy release, the taxpayer must also file all required tax returns and be current in estimated payments or Federal Tax Deposits, if required.
The IRS usually will not release a levy until the taxpayer has proposed a solution to the delinquent tax problem and demonstrated that they will remain in compliance with future obligations. In certain circumstances, the IRS may release a levy if the taxpayer promises missing tax returns or financial information by a fixed date, but this cannot be counted on. It is always best if the taxpayer can get all of the needed documentation before contacting the IRS for a release of levy.
In conclusion, if you are facing the possibility of an IRS levy it is always in your best interests to take action. Do not avoid the tax problem. A tax resolution plan is a proactive strategy that will help you resolve tax debt problems the best way possible for your situation.
Contact LifeSpan Financial Planning at 877-TAX-9110 if you are interested in finding out more about using a Tax Resolution Plan to overcome tax problems.
IRS collection activities are negative events and represent anything but freedom, and therefore should be avoided. You must be proactive and take action to avoid IRS collection measures such as wage garnishments, bank account levies, property seizures, and liens placed on your property. It is important to know what the IRS is capable of doing. Most people find this knowledge a helpful motivator to stay on track with the tax resolution process. If the collection process has already started you should still proceed through the tax resolution process quickly and accurately to start resolving your tax problems on your terms rather than simply accepting defeat and allowing the IRS to control your financial life.
What does the IRS typically attempt to levy?
The IRS may intent to levy any federal payments due, retirement benefits, Social Security benefits, wages, or employee travel advances or reimbursements. The IRS can also levy property such as real estate, automobiles, business assets, bank accounts, wages, commissions, and other income. A levy is a seizure of property. The IRS will try to levy assets unless you TAKE ACTION. Why allow the IRS or any creditor to take control of your assets on their terms? If you owe taxes you need to pay them (or at least come up with some type of tax resolution alternative). However, you need to have a plan to pay them on your terms and not the terms of the IRS.
The IRS may involuntary collect the tax debt owed to them through different types of levies. A levy is served after the IRS has exhausted all other collection efforts to encourage taxpayer compliance. Levies commonly attach a taxpayer’s bank account, salary and wages, and/or business accounts receivable.
The IRS is required to release levies in several circumstances, including:
• The levy is creating an economic hardship.
• The taxpayer agrees to make an Installment Agreement.
• The liability is no longer owed.
• The 10-year statutory collection period has expired.
• The levy was wrongfully served.
• An Offer in Compromise is accepted for review.
The two circumstances most often utilized to request a levy release are when the levy is creating an economic hardship or when the taxpayer agrees to make an Installment Agreement. In both of these situations, the taxpayer must provide a Collection Information Statement for Individuals and Self-Employed Individuals (Form 433-A) and/or Collection Information Statement for Businesses (Form 433-B). To obtain a levy release, the taxpayer must also file all required tax returns and be current in estimated payments or Federal Tax Deposits, if required.
The IRS usually will not release a levy until the taxpayer has proposed a solution to the delinquent tax problem and demonstrated that they will remain in compliance with future obligations. In certain circumstances, the IRS may release a levy if the taxpayer promises missing tax returns or financial information by a fixed date, but this cannot be counted on. It is always best if the taxpayer can get all of the needed documentation before contacting the IRS for a release of levy.
In conclusion, if you are facing the possibility of an IRS levy it is always in your best interests to take action. Do not avoid the tax problem. A tax resolution plan is a proactive strategy that will help you resolve tax debt problems the best way possible for your situation.
Contact LifeSpan Financial Planning at 877-TAX-9110 if you are interested in finding out more about using a Tax Resolution Plan to overcome tax problems.
Tuesday, September 22, 2009
Creating a Personal Spending Plan
The definition of insanity may be doing the same things over and over again and expecting different results. I think the key defining element of seeking financial change (and eliminating insane amounts of debt) is doing the right things over and over again and actually getting positive results. Spending with a plan is the right thing to do, and it must be done over and over again.
The creation of a personal spending plan is one of the most important steps of the tax resolution process. A personal spending plan is also the foundation for achieving financial freedom. On the surface a spending plan or budget is extremely basic. Most people do not even have a simple budget much less a spending plan to guide their financial decisions. The purpose of this tax resolution step is to create a personal spending plan that will help you make sure that your money is working for you the best ways possible. Spending plans are also needed to resolve your tax debt and reach your other life planning goals.
A budget is generally defined as:
a) an itemized summary of estimated or intended expenditures for a given period along with proposals for financing them,
b) a systematic plan for the expenditure of a usually fixed resource, such as money or time, during a given period, and
c) the total sum of money allocated for a particular purpose or period of time.
When used as a verb the word budget means to plan in advance the expenditure of something. These definitions each focus on the action of planning. Budgeting is defined as estimated projection of the amount of certain expenses. During the tax resolution process you should use the word budget as a verb and take action. Tell your money where you want it to go rather than trying to figure out where it all went or worse, spending more than you have available and relying on credit cards and debt to get you through the month.
Unfortunately, most people approach the budgeting process the wrong way and do things backwards. They use a legal pad, spreadsheet or budgeting software and track where spending occurred across various categories (food, utilities, credit card bills, etc.). This is a great way to see where your money went during the previous month. But it is a horrible way to plan where your money will go in the future. During the previous step we analyzed where your money has been going in the past. Going forward, you should use the information gathered during the cash flow analysis to create a spending plan or budget.
The budgeting process is often misunderstood because it is typically viewed in a negative manner by the people who need one the most. We have discussed at length how many individuals in debt display problematic financial behaviors. One of the biggest problem behaviors is trying to manage personal finances without a plan. The lack of a personal spending plan or budget is common in the majority of people with tax problems. Many people are resistant to change when it comes to budgeting. Some tax resolution clients view a budget as a form of constraint that inhibits freedom. This is ironic because a personal spending plan will actually lead to financial freedom if used consistently.
Every single household spending plan is unique and each person will be presented with his or own set of challenges. Do not expect your personal spending plan to work perfectly the first time around. It may take a few months to figure this process out. This is normal. Whatever happens on a month to month basis, DO NOT QUIT and NEVER allow frustration to get in your way. Remember that the LifeSpan Process of Tax Resolution and Financial Freedom requires you to take action to replace negative financial behaviors with positive alternatives. The old way of doing things got you into this mess. Replace the old way with a new and improved way of handling your personal finances.
The creation of a personal spending plan is one of the most important steps of the tax resolution process. A personal spending plan is also the foundation for achieving financial freedom. On the surface a spending plan or budget is extremely basic. Most people do not even have a simple budget much less a spending plan to guide their financial decisions. The purpose of this tax resolution step is to create a personal spending plan that will help you make sure that your money is working for you the best ways possible. Spending plans are also needed to resolve your tax debt and reach your other life planning goals.
A budget is generally defined as:
a) an itemized summary of estimated or intended expenditures for a given period along with proposals for financing them,
b) a systematic plan for the expenditure of a usually fixed resource, such as money or time, during a given period, and
c) the total sum of money allocated for a particular purpose or period of time.
When used as a verb the word budget means to plan in advance the expenditure of something. These definitions each focus on the action of planning. Budgeting is defined as estimated projection of the amount of certain expenses. During the tax resolution process you should use the word budget as a verb and take action. Tell your money where you want it to go rather than trying to figure out where it all went or worse, spending more than you have available and relying on credit cards and debt to get you through the month.
Unfortunately, most people approach the budgeting process the wrong way and do things backwards. They use a legal pad, spreadsheet or budgeting software and track where spending occurred across various categories (food, utilities, credit card bills, etc.). This is a great way to see where your money went during the previous month. But it is a horrible way to plan where your money will go in the future. During the previous step we analyzed where your money has been going in the past. Going forward, you should use the information gathered during the cash flow analysis to create a spending plan or budget.
The budgeting process is often misunderstood because it is typically viewed in a negative manner by the people who need one the most. We have discussed at length how many individuals in debt display problematic financial behaviors. One of the biggest problem behaviors is trying to manage personal finances without a plan. The lack of a personal spending plan or budget is common in the majority of people with tax problems. Many people are resistant to change when it comes to budgeting. Some tax resolution clients view a budget as a form of constraint that inhibits freedom. This is ironic because a personal spending plan will actually lead to financial freedom if used consistently.
Every single household spending plan is unique and each person will be presented with his or own set of challenges. Do not expect your personal spending plan to work perfectly the first time around. It may take a few months to figure this process out. This is normal. Whatever happens on a month to month basis, DO NOT QUIT and NEVER allow frustration to get in your way. Remember that the LifeSpan Process of Tax Resolution and Financial Freedom requires you to take action to replace negative financial behaviors with positive alternatives. The old way of doing things got you into this mess. Replace the old way with a new and improved way of handling your personal finances.
Monday, September 14, 2009
How Does a Personal Spending Plan Work?
A personal spending plan is a written plan to guide your spending habits and provide you with important direction for your money. Operating without a budget or personal spending plan can put you on the fast track to tax problems and debt while giving you a strong sense of feeling completely out of control financially. Following through with the budgeting process and sticking with a personal spending plan will help you assume control of your finances and will empower you to make smart financial decisions.
You cannot eliminate your tax and financial problems without a spending plan. You will not achieve financial freedom with a savings and investment plan. A personal spending plan will help you resolve your tax problems. Subsequently it will allow you to reach financial freedom by maximizing your ability to pay off your tax debt as quickly as possible and then save or invest as much as possible for your life planning goals.
Be prepared for everyone around you to think you are going insane when they see you are implementing a spending plan. Friends and family may act confused or completely freaked out by the fact that you have seen the light and are now operating on a budget. Most people just do not get it. They are probably spending without a clue themselves. That is why most Americans are in debt. It is important to realize this in advance because you should be prepared to explain to your friends and family why you are choosing to manage your money in a more effective manner. There is no need to be embarrassed or ashamed by the fact that you actually have the courage to say enough is enough- I am taking control of my life!
Most budgets fail because they lack purpose. During the tax resolution and financial freedom process your purpose is clear. Eliminate the tax problem, get out of debt, and focus on more important financial and life planning issues. When you create and stick with a personal spending plan never lose sight of the main purpose of following a budget in the first place- tax and financial freedom.
You cannot eliminate your tax and financial problems without a spending plan. You will not achieve financial freedom with a savings and investment plan. A personal spending plan will help you resolve your tax problems. Subsequently it will allow you to reach financial freedom by maximizing your ability to pay off your tax debt as quickly as possible and then save or invest as much as possible for your life planning goals.
Be prepared for everyone around you to think you are going insane when they see you are implementing a spending plan. Friends and family may act confused or completely freaked out by the fact that you have seen the light and are now operating on a budget. Most people just do not get it. They are probably spending without a clue themselves. That is why most Americans are in debt. It is important to realize this in advance because you should be prepared to explain to your friends and family why you are choosing to manage your money in a more effective manner. There is no need to be embarrassed or ashamed by the fact that you actually have the courage to say enough is enough- I am taking control of my life!
Most budgets fail because they lack purpose. During the tax resolution and financial freedom process your purpose is clear. Eliminate the tax problem, get out of debt, and focus on more important financial and life planning issues. When you create and stick with a personal spending plan never lose sight of the main purpose of following a budget in the first place- tax and financial freedom.
Tuesday, September 1, 2009
Tax Resolution and Financial Planning
What role does financial planning play during the tax resolution process? Financial planning is about taking control of your finances and is often defined as the process of meeting life goals through the proper management of your money. The planning process helps people make smart decisions about money and prepare for the demands of the future. More importantly, financial planning is about a better now. Some obvious demands are life's major events: getting an education, buying a home, retiring, providing for your children and even their children. Financial planning also concentrates on day to day concerns such as organizing your finances and preparing for the inevitable surprises that occur in life.
So, how does the financial planning process work when a financial crisis related to a tax problem occurs? Tax resolution is a financial planning challenge that is just as much about replacing ineffective financial behavior patterns of financial decision making with more positive ways of managing money and paying taxes as it is getting rid of the tax problem itself. Therefore, tax resolution planning is a natural fit with the financial planning process.
Subscribe to:
Posts (Atom)
Posts
