Get Organized To Do Things Right

My biggest frustration this week is seeing a friend upset about giving her new accountant all the information he needs to help her file her 2009 income tax return. The reason my friend is working with a new accountant is because she got audited by the IRS because her old accountant had incorrectly prepared her previous tax returns.

The problem is that the old accountant taught her some bad habits. She would once a year send in tax information she thought the accountant needed and he would then, to the best of his knowledge, complete her tax return - even though he didn't have all the correct information. In a word the tax returns were done half-ass.

Now my friend is working with a new accountant who is asking her for information that he needs to correctly prepare her tax return. The problem is that the information the accountant needs is a lot more stuff than she was used to sending to the old accountant. She's now finding it a hassle to organize all the information. In fact she's pissed. She's asking me why she needs to give "all that information" to the new accountant. I guess the inconvenience is worse than learning her lesson from the recent IRS tax audit.

My friend is upset because she doesn't have easy access to her tax information. Actually her information reminds me a lot of my daughters clothes in her bedroom - scattered.

Let's face it, doing things right means doing things you don't want to do, or else you would have already done them. Most people on My Street haven't learned how to organize themselves around their finances or they would be living on Main Street. Getting organized means creating a system where not only do you know WHERE everything is, but also know WHAT everything is.

The next thing for me to do is to sit down with her and create some simple system to help her get organized. I'll let you know how it goes...

WOMEN TAKE A LARGER ROLE IN FAMILY FINANCE

A development few have noticed. The recession that started in 2007 quietly brought an economic shift to millions of American families - the woman of the house became the primary wage earner.

In June 2010, Labor Department data showed that nearly 22% of American men aged 25-65 were unemployed. This male population also undoubtedly makes up a big chunk of the “underemployed”, which includes part-time workers and those who have given up looking for jobs. As of June, 16.6% of Americans were underemployed.

So in mid-2010, we have a situation where perhaps about 25% of men aged 25-65 cannot find full-time work. (That figure might be higher.) It’s also worth noting that layoffs have plagued construction and manufacturing - two sectors of the economy with mostly male employees.

The effects? Women are presently breadwinners in millions of families. When a new breadwinner emerges in a family, you often have some shifts in the family’s financial life – and financial priorities and objectives can be altered.

As an article on the website of Financial Advisor Magazine noted, some financial consultants are seeing a “significant uptick” in the number of women asking them for advice. When a secondary earner in a family becomes the prime earner, that person usually develops more awareness of the family’s financial state and may seek financial advice in a way that the previous breadwinner has not.

In 2010, are women more realistic about retirement? The 2010 Retirement Confidence Survey from the respected Employee Benefit Research Institute (ebri.org) indicates that women are much more realistic (and pragmatic) about their financial readiness for retirement than men. In the 2010 survey, 19% of men said they felt that they would have enough money to live comfortably throughout their retirement years, while only 12% of women taking the survey said so. While 33% of men felt they would have enough money to cover basic retirement expenses, only 25% of women did.

If you ask many financial consultants, they will tell you that they find women more open to financial education, with fewer entrenched beliefs and presumptions. Women are often quick to realize how much they don’t know, how much they can learn, and how much needs to be done. Only 22% of the workers in the 2010 EBRI Retirement Confidence Survey said they had savings or investments of more than $100,000, so coming to the realization that you need to do more for retirement is a very good thing.

Some men have a very subjective take on the financial world and their financial status and potential, whereas women tend to be in search of a candid, objective assessment of what needs to be done and what options are available. With the economy affecting retirement accounts, retirement dreams, and employment, it isn’t surprising that high-earning women are taking the lead for millions of families – and taking and interpreting all the financial advice they can get.

How To Find Your Occupassion

Finding your "occupassion" requires that you focus on answering these questions.

1. If you could do anything all day for "free" what would you do. What activities do you love doing that when you do them give you more energy?

2. What are you naturally gifted at? What do you do so well that other people marvel at? What do you do that you consistently receive complements on? Be careful at minimizing your unique talents or not acknowledging them at all. They may come to you so easily that you may not acknowledge them at all.

3. The final question is what turns the last two questions from a hobby into an occupassion. Ask yourself how you can make money doing what you love to do and what you are naturally gifted at.

Do what you love and the money will follow - as long as you also focus on the money! And who doesn't want to make a lot of money having a lot of fun?

Do you have an Occupation or an Occupassion?

I've recently had conversations with people who are considered by American standards as very successful. They have prestigious jobs, comfortable homes, harmonious relationships, good health, and they all make a lot of money. The best part is that they seem genuinely happy.

Interestingly enough when I asked them what they thought had made them so successful they never told me that their goal was to have any of the things I mentioned above. They felt lucky that they were in great relationships and had good health. What they did mention was that they felt blessed that they had found early in life a passion for what they are doing now. They have a purpose every morning to get up and go help someone live better, become better, or make someone's life a bit easier. Maybe that's that the secret. Don't just get an occupation, find your "occupassion."

So how do you find your occupassion? Comeback Friday to learn more.

Hope Continues!

I recently celebrated a very interesting one year anniversary with someone on My Street. In fact, from my previous experience of working with immigrant families, I was almost assured that I would have never celebrated a one year anniversary with them. Let me back up. Over twenty years ago, I left a successful career to open up my own wealth planning firm in what I call MY STREET. My Street is any typical neighborhood in America, one similar to the one in which I grew up in - a community of hard working (lower) middle class people.

The media always talks about Wall Street and Main Street. I could never identify with the people on Main Street. People on Main Street were people who worried when they heard the stock market being down, or refinanced to take advantage of lowering interest rates. People on Main Street considered taking a vacation closer to home when times were tough. People on My Street were people who worried more about losing their jobs in a tough economy. They didn’t have stocks portfolios. In fact they didn’t even have much in savings. People on My Street refinanced their homes to pull money out to pay off other debt, and vacations were something they only dreamed about. So, twenty years ago I created a financial planning firm to help hard working people create wealth on My Street.

Unfortunately, I hadn’t been able to help those rare families who had had the fortunate experience of winning the lottery or inheriting a large sum of money (usually from someone outside of their family). Coming onto sudden wealth just seemed to make these families uncomfortable. Usually before the end of a year they would decimate their funds for many reasons (most that I don’t care to get into right now). So over the that last few years, I transitioned to helping the children on My Street who went to college and became professionals or had built small businesses while keeping an eye on their parent’s finances.

Exactly a year ago, a woman in her 50’s (with very little formal education) showed up to my office telling me that she had inherited around 2 million dollars from a person that she cared for. She told me that she was going to use close to a million dollars to help her three children (in their 20’s) buy homes, and that she wanted me to help her invest the other million dollars. Based on my experience of working with people who had no experience of ever having money beyond meeting their basic needs and being highly influenced by unscrupulous family and friends, I just didn’t want to see another family lose most of their money again. I was tired of feeling completely frustrated, sad, overwhelmed and depressed about not having much control over their irrational financial behavior.

I told myself - if this family doesn’t take my advice, it will be the last family I will ever help on My Street who inherits any sudden wealth. I decided to help them with great reservation. A year later… the woman and her husband have used their wealth to buy some of the best health insurance, get an estate plan completed, put money away in an emergency reserve, build a conservative million dollar investment portfolio, and helped their children buy homes and start a business. A year later they have more money in their portfolio than they have ever had their lives. Not that I haven’t experienced certain bumps along the way with them. The bumps were overcome with continued financial education. If they continue in the right direction, not only will their lives be changed positively forever, but also those of their children and future grandchildren.

They will never know that I needed them just as much (or if not more) than they needed me. I needed them to give me continued hope that my firm could actually make a difference to the people on My Street that I came back to help. Hope continues!

S.A.V.E. for Financial Success

I created the acronym S.A.V.E. as an easy way to remember some simple steps to create financial success.

Simplify: Life is so complicated these days that most people don’t know if they are coming or going. I once heard that if the devil doesn’t make you bad, he makes you busy. This busyness of life creates an unfocused and disorganized life. The reason why a lot of people don’t achieve more success is because they have reached what Dan Sullivan calls - a ceiling of complexity. To break through the financial ceiling you need to gather and organize all your financial documents so you can see if what you are currently doing is working for you. Do you have more than one checking or savings account open? Do you need all those credit cards? Can you consolidate some of your investment accounts? Do you have all your financial information at your fingertips?

Automate: A lot of people left on their own can’t save a dime. Most people are also emotional investors. So to overcome our human tendency to overspend, you need to automate your savings for your financial goals. This means that you should have your employer directly deposit some of your earnings from your paycheck into your retirement plan. You should also have your bank automatically take a specific sum of money each month from your checking account and directly deposit it into your savings account. It’s the only way I know how to save that works 100% of the time.

Variety: You have heard that you should never put all your eggs in one basket. This is just common sense when it comes to investing. This wasn’t so common for all the employees at Enron who invested all their 401k money in their company stock account. Variety is diversification plain and simple. Diversification requires investing in different types of asset classes, like cash, fixed income, and equity investments. If you need professional help, hire a Fee-Only Registered Investment Advisor to guide you through the investment diversification process.

Education: Unfortunately most Americans are financially illiterate. You need to make a commitment to learn about financial success. The best way to learn is to read. . There are a lot of great financial books, magazines, newspapers, and websites with great consumer friendly information. Avoid anything that smells like get rich quick books, television shows, or seminars. Make some time daily to read and invest in yourself!

Remember the 4 simple S.A.V.E. steps to guide you to Financial Success.

Nobody Is Going To Do It for You

In my life I have come to the conclusion of absolutely knowing just a few things for sure. One of those things is that you just can’t make anyone do anything they don’t want to do. Even if they tell you that they want to do it. I hear so many people say that they want to become wealthy but rarely are they ever willing to do the work that comes with becoming wealthy.

I have found that the difference for some people on My Street is understanding the difference between motivation and inspiration. Motivation is temporary external pressure that you feel. An example would be when a boss tells you that you need to do something or you will be fired. Inspiration is a more permanent and intense form of personal pressure. You take on a project at work because you really want to and you want to show everyone how good you really can be. Most people are self-deceived in believing that they are inspired when in reality they are just motivated for a short time. That is why I am not a big fan of motivational speakers. I have learned throughout the years that motivational speakers are excellent at manipulating your emotions to get you to quickly buy their products which eventually end up collecting dust on your shelf somewhere. Becoming wealthy requires applied knowledge, persistency, and time. You are going to have to fight your inner demons and find the courage, self-determination, and faith to do whatever it takes (as long as “whatever it takes” falls within your own moral compass).

Here are few other principles that if applied can change the direction of your life:

My Street Money Principle 1: Wealthy people make the time to focus on their core strengths and delegate or manage their weaknesses. The problem is that very few people ever take the time to reflect about what unique capabilities they can use to bring value to themselves and the people around them.

My Street Money Principle 2: Don’t just think about your goals, write them down. Academic studies have proven that people who write down their goals have a higher percentage of achieving them than those who don’t. Most people on My Street blame being too busy to do this. Don’t be too busy to create the life of your dreams!

My Street Money Principle 3: Create a circle a support. A circle of support is a list of people in your life that want you to succeed. They are the people who help you express your full potential. They can be your spouse, parents, your baby sitter, your accountant, attorney, etc. You can go to my website www.louisbarajas.com to download a free Circle of Support form that I use with the people on My Street.

The problem isn’t knowing these principles, the problem is applying these principles to reach your preferred future. Remember, nobody is going to do it for you.

Should I Invest Right Now-Right Now, or Later-Later?

George Lopez says that when we asks his Latino friends if they want to do some activity with him, like play golf, they respond by saying - do you want to do it right now-right now or later-later? I ask you a similar question, should you invest right now-right now, or later-later? Let me help you if you have no idea on how to answer this question.

The reason to invest right now is based on the concept of compounding. Mark Twain once said that compounding is the 8th wonder of the world. What is compounding? Compounding is the concept of growing your money geometrically not arithmetically. Did I lose you already? Hang in there. Would you prefer to have a $100,000 dollars today or 1 dollar doubled every day for 20 days (one dollar today, two dollars tomorrow, four dollars the next day, etc.)? Does this sound like a trick question? One dollar doubled every day for just 20 days turns out to be over a million dollars. This is the power of compounding.

Compounding also tells us that the sooner we begin saving, the less money we will have to put away in the future. For example if you are 24 years old and invest $3,000 a year for only 10 years at an 8% interest rate by the time you are 65 years old you will have $550,897 (having invested $30,000). If you wait until you are 34, you will have to invest $3,000 a year for almost 35 years (having invested $105,000) just to have the same amount of money.

These examples should convince you that you need to start investing today. Don’t be like the typical old person who tells me, “I can’t believe I am 60 years old and I don’t have any money. I should have started when I was young. If I had only met you years ago…”

If I have convinced you to start investing - what is your first step? Start with your retirement plan at work. Have your company withhold at least 10% of your salary from your paycheck and have it directly deposited into your 401k plan. If you don’t have a pension plan at work, you could open up an Individual Retirement Arrangement (IRA) at a bank or online with a no-load investment company. You can have money withdrawn from your checking account and directly deposited into your IRA on a monthly basis. Another great way to get started is to invest in mutual funds. Seek professional advice before investing in anything you don't understand.

By the way, George Lopez, if you are reading this, I have sent you a couple copies of my book asking you for a testimonial. Can you send it to me right now-right now, not later-later?