MONEY matters

The IRS has produced a really good virtual small business tax workshop for small business owners. I’m somewhat surprised, as the IRS productions are usually pretty bland, to put it mildly. They seem to really be sharpening their game and this latest attempt is easy to follow and very informative.

Questions about how to file small business taxes; working from home; retirement plans, you name it- it’s all here in 9 different modules. If you’ve been hoping to feel more empowered around the business side of your small business-now’s your chance.

Fleetwood Mac, in their 1976 song “Don’t  Stop”, urged listeners not to stop “thinking about tomorrow” because it would soon be here. How does this relate to you? If you’re like most people, you can probably spend money without thinking about it, but you can’t save money without thinking about it. The truth is; saving isn’t a natural event. It must be planned.

Planning and budgeting require control. Financial planning involves looking into the future, facing financial reality and the sacrifices that it brings, and taking action. Financial restraint isn’t as much fun as spending with reckless abandon, but it’s a lot more fun than winding up broke.

Years ago, there was a commercial on TV where the actor would look seriously into the camera and say: we make money the old fashioned way, we earn it. He was speaking of a stockbrokerage company that successfully utilized that slogan for years. I mention this commercial because I believe we’re headed back to the old fashioned days, where a penny saved was a penny earned.

Prior to the recent stock market crash, our homes and investments were going up in value each year and in many cases, faster than many of us anticipated. That was good news for many, but it also came with consequences.  Due to the rapid rise in net-worth, many people neglected or just simply forgot how to save money during these times. And if you ended up not saving and spending too much one year, cheap money was available in the form of refinancing your home mortgage. Those days are gone.

As we approach 2010, it’s amazing and scary to think how close the world came to another Great Depression. For my money, that was too close for comfort. Although the global economic recovery is still fragile, at least we’re recovering.  With the New Year approaching, there are a new set of indicators to pay attention to. Top on that list is China. I’m not that concerned with China holding close to a trillion dollars in reserve, since selling dollars wholesale would certainly be mutually assured destruction for the U.S and China. What concerns me is U.S unemployment staying at high levels next year and the congress looking for scapegoats.

If we allow China to become the scapegoat, and this theme starts to catch on with members of Congress, we’re going to have problems. Next year, pay close attention to the debates being held in Congress and see if any anti-China legislation starts to gain momentum. Of course, China’s currency policy is manipulative and needs to be reformed. But telling one of your largest creditors what to do, well, that just isn’t going to work. Whether we like it or not, the Chinese finance minister is our lender in chief. How we allowed our country to get so deeply in debt and become a debtor nation instead of a creditor nation is a story that will be told for generations to come. But it is what it is, and right now, China has the upper hand.

As stock markets around the world, including ours, continue to rise, investors that pulled their money out of the market last year are beginning to get restless. It’s reported there’s between $3-5 trillion dollars in cash sitting on the sidelines. If you’re someone preparing to invest in the market again, be mindful of the following:

As many of you know, I spent three years working at Fair, Isaac, home of the FICO credit score. Fortunately, I still have some good sources that work there. Here’s the latest news on some changes that are coming our way in terms of how your score is calculated.

With the stock market finally showing us some love after a brutal 8-9 months of wild rollercoaster rides, it’s easy to slip into old habits and trick yourself into thinking the good old days are around the corner. As President Obama said today, there are glimmers of hope that the economy may be turning a corner. Add to the mix a general consensus form many leading economists that the recession may end in September and you have a positive outlook for the future.

If you’ve been saving money, maybe for the first time in a while, but you sense the stock market is headed back up so you’ll take it easy and put your newly found saving habit on hold, please reconsider. If you have been flexing your frugal muscle and now with some good news from the market you’re feeling that familiar pull to spend, stop, think about what you’re spending the money on, is it a need or a want, can you live without it for now, and then go back to saving more.

With the stock market sinking daily, it’s hard for many investors to stomach the thought of putting money back into the market. That’s totally understandable. As a short-term strategy, many people are keeping their cash in money market accounts or short term savings accounts. If that helps you sleep at night, then that’s what you need to do. But eventually, things will stabilize, markets will go back up, and you’ll need to start planning for your prime years. With average life expectancy at 90, earning less than 2% on your investments over the long term is a riskier strategy than you might imagine.

Most people, even with the best of intentions, usually spend pretty close to what they were spending prior to retirement. Many of my clients that have officially stopped working for money actually are surprised to discover that they are spending more than when they were working full-time. This is why planning for the prime years of your life, formerly known as the golden years, (prime just sounds better), is so essential to future financial security.