Your Frap Fund & You

Throwing money away. We can all agree that’s a bad thing, right?

But how do we make sure we aren’t doing it ourselves? Everyday?

Money has a very emotional component for just about everyone I know.

Like me. I never just throw money into my wallet; I always put the bills in order and facing the right way.

So yes, money is an emotion and the use of it should be as well.

I coach my clients to understand the emotional impact money can have and use that to their advantage.

An example? My so-called “Frappuccino Fund” (Frap Fund for short) is such a way.

First I always recommend that a client trying to pay off debt set up a separate bank account fund.

And we call it their “Frap Fund.”

Each time they are out and about and ready to spend money, I ask them to think about it first. Is it really worth the money?

If they decide no, they note how much they just saved. They do this each and every time they would have spent on a coffee, a dinner out, breakfast, etc you get the picture.

For each time you resist the urge to splurge, transfer that amount of money from your regular checking account and put it into your “Frap Fund” account. Which should NOT have an ATM card or any kind of easy access to get the funds. The point is to SAVE money, not use it as your ‘paint the town red’ money (that is in a completely different account if you are anything like my wife!!!)

Several years ago my wife and I decided to practice what I preach.

We set up our very own “Frap Fund” and we began to transfer money into that fund every time we saved money by NOT doing something on impluse.

We went as far as to even save the money from store coupons and those store clubs.

Let’s say I was on my way to Starbucks, which was a daily occurrence for a Frap and then of course a muffin, I would instead go to the office where the coffee is free and transfer the $5 or $6 straight way from my bank account to my online account.

After one year we were able to save over $8,000 doing this!

To me that was real money saved!!!. And, of course, @TheDeeView had to something to spend on shoes from @Zappo's. But wait that is another blog!

The beauty about doing this technique is that it creates a win for you and helps build savings, which is a vital factor in financial planning.

I think as we all move forward from this last recession we really need to focus on savings while reducing our debt load.

Plus, as you might notice, one of the components in the word Fund is Fun!

I find this method of savings, that can involve the whole family is actually fun!

Try it for a week and let me know in the comments below how it went and how much you saved!

Debt & Taxes - One Might Be Avoidable!

Debt and Taxes

I know it is supposed to be death, but somebody else can talk about that. I am more interested in Debt. It is as unavoidable as we seem to think?

I’ve been reading a lot lately from financial planners, after years of hearing about it, payoff your credit card debt!

I totally agree with the philosophy of being out of credit card debt especially today as rates rise and the credit card companies are harder to deal with.

But for me the question always arises which do I payoff first?

A high balance card or a low balance card with a lower interest rate?

Conventional wisdom always says to get rid of the high rate card first and then go after the lower interest rates. While I agree with this on principle, I find that the never works that way! Mainly because my clients never feel like they are getting ahead!

To me the credit card debt is not only financial it is also very much emotional. I want my clients to have a win!

Hell I want a win too!

So my approach is a little different.

I advise my clients to get rid of one debt as fast as they can, even if it means paying off a low balance low interest rate card first. Then move to the next one that is easiest to pay off and so on.

With this plan in place, my clients start to feel the emotional side of having a win.

Remember money is emotional. Treat your money well and it will be there for you.

Another technique I use to get people in the habit of paying down their credit cards (and not using them in the future unless it is an emergency) is to pay off each new charge. The day you make it!

Get in the habit of each and every time you put a purchase on a credit card, that you go home, and now it is so easy with the internet, and pay off that exact amount (or hey, maybe 10 bucks more!) on your credit card account.

This way, you are really using cash and not increasing your credit card debt.

This is a discipline and I know that is seems tough to follow. But I am telling you if you practice the techniques I have outlined, you can and will have a win!

Zappos! My Role Model! #Seriously

Hula Hoops? An accappella singing group? A core value of Create Fun and a Little Weirdness? This is all in a business plan? For a real business? A successful business?

What ever you may think of Zappos (and to tell you more about the shoe experience of Zappos, check out my wife’s blog at www.TheDeeView.blogspot.com) the company is actually the business model we use to run our business. Now we are accountants, with a rather serious selection of financial services to offer. How the could we possibly have anything in common with the retail SHOE Giant of the World?

Well, for one thing, Zappos has the Zappettes. (We are too small to have the Greg Ettes, but I’m sure that is coming). This is a group of staff that may spontaneously serenade visitors. The receptionists have Hula Hoops, which they may use on a regular basis. (Okay, we don’t have Hula Hoops yet, but we are in the market for a Gong.) The Customer Service Department (the Loyalty Team) have no limits on the amount of time they will take on the phone with each customer (never gonna happen in our office, but hey?)

But the most amazing thing, is that they have a really committed and caring take on customer service for their clients. We do that (though not as well without the Hula Hoops I fear).

They have values like: Create Fun and a Little Weirdness (@TheDeeView makes our staff dance during retreats. They hate it when they see her lugging the Boom Box into a conference room), Deliver Wow through Service (Hey, some of our clients are saying “WOW, the IRS hates me”, but hey, they are saying WOW People!) Embrace and Drive Change (it is an accounting firm, but we are all about making it great for our clients), No snobs (I made that up. I just hate snobs.)

Staff at Zappos have to be prepared to do the wave at any moment. And they have crowns you can wear if you are having a particularly bad day. (We don’t offer crowns, but you do get a free piggy bank.)

They go through 160 hours of Customer Loyalty Training. (Can we send our staff there?) And they love to have their staff Tweet about their experience working at Zappos. (Oddly, though we encourage our staff to do the same, they keep asking for extra money to stay late and Twitter. I don’t understand this myself.)

The point of studying the Zappos business model, is to see if we are giving the ultimate in customer service at our firm, making the most money for everyone and doing it in an efficient manner (cuz time is GOLD, isn’t it?).

So while we may not have Hula Hoops, Greg Ettes, or our Giant Gong yet, that doesn't mean we don't want our office to make people feel as good about paying their taxes as my wife does about her shoes!

March Madness.... And not the good kind!

Just 19 more days to go in this tax season.

And yep, the crazy has hit the fan!

People who don't want to pay any taxes whatsoever, yet they have not made investments in their business, nor any charitable contributions and don't travel for work.

Hmmm... I'm good, but...

Plus the reality is, if you are paying taxes, you've made money. To grow your business, you are going to pay some taxes! #clearlyanovelconcept

Then there are the people trying to save their homes or even commercial properties. You have to love their verve and pioneering spirit but some are getting a little 'creative' #possiblynotwithinlegalboundsthough

On the good news front, B of A announced some new plans of their own to help homeowners (I like to think it was in direct response to my post a few weeks back #delusional)

We are also on a big push to have our clients fully fund their IRAs to the max. One of my client saved $2,000 in taxes. That was a 33% return right out of the shoot.

We're also fielding a ton of questions from clients about what can be considered deductible for business travel ( the Sunday LATimes article 'Is my Latte Deductible" didn't help anything!)

Then there's the small businesses that can qualify for SEP.

Whew, I'm tired just writing about the week, let alone facing another one!

Next blog will be only 12 days from April 15th (just to warn you it might be 3 lines repeated over and over Get me out of here! Please! I'm serious!)

'Til then be happy and keep your darned receipts organized!

Is Your Business Bank Account Protected From Internet Fraud?

You would be surprised that it isn't!

As detailed by the LA times article (http://www.latimes.com/business/la-fi-perfin21-2010mar21,0,456329.column) with the new banking laws, only personal checking accounts are protected from internet fraud. Commercial accounts are not given the same protection.

The article's recommendation? Small business owners (the article wasn't clear, but I can only assume they meant those that are self-employed since corporations cannot have personal accounts) have 2 PERSONAL checking accounts.

I found the article to be illuminating. Having practiced for years, (which is remarkable since I am only 30 yro! LOL),I still learn something new every day.

I have long recommended that anyone self-employed should have 2 accounts, however 1 was personal and 1 was business.

This 2 account system is extremely topical given that I have heard the I.R.S is going to be targeting small businesses, with losses for examinations. Doesn’t make much sense considering small business have been getting hammered in this economy, lack of lending a from the banks, and loss of customers to name a few.

Oh wait I just mentioned banks again in my blog. I have had clients this week refer to banks as the “evil Empire”. They take from the us (the government) pay us back, then screw the taxpayers with higher fees, no loans and limited if any loan modifications.

And Loan modification is still a hot topic in our practice with several people still trying to seek them out. I love it when a highly educated and at one time highly compensated, taxpayer tells me that their loan is being reviewed by a clerk in the Midwest probably making $12 per hour. Hell my gardener makes more than that, and he doesn’t control my financial future! Or maybe he does!

But I digress. The article brought up a good point. All of that money in your business account is not protected under the new banking laws governing internet fraud. A hacker could drain the entire thing and the bank is completely off the hook!

So my new advice to clients is to still have 2 accounts, but both PERSONAL (at least according to the bank). One they use for truly personal transactions, the other is for business use.

This way you still are protected from internet fraud and keep your accounts separate so in the case of an audit the Federal Government isn't racking through your personal life!


Have a good week everybody . Remember April 15 is just around the corner and don’t forget an extension of time to file your taxes, is just an extension of time, not an extension of the taxes that may be due. Those are still owed on April 15th!

Good luck and Happy Tax Season.

Can Our National Debt Be Fixed?

This week I read Fareed Zacharia’s article entitled “Defusing the Debt Bomb” where he proposes fixes to resolve our debt.

It was an amazing read (find it here @ http://www.newsweek.com/id/234277). It made me think about his comments and the potential fixes as well.

Now I’m not an economist but I would like to offer up some thoughts on this (because you know, that’s how I roll).

If we were to add a value added tax (VAT) nationwide (as Fareed suggests), yes, we would all then be paying into the system based on our spending habits. That’s great right? EVERYONE contributes (hear that owners of the LA Dodgers?)

The only problem? Lower and middle income earners would need to have some sort of remedy in the tax code to balance out their overpaying into the system. That could work.

However, if we limit the deduction on mortgage interest, as proposed by Fareed, what will happen to the housing market in this country?

It’s already been hit hard and if mortgage interest payments aren’t a tax deduction, how will that affect the housing market. Would it force banks to write everybody’s mortgage down to the prime rate? And fix them for 30 years?

Wouldn’t that give people much lower monthly payments, freeing up disposable income for savings and buying all the crap that us Americans like to buy and need to buy to jump start the economy?

After review, I’ve come to the conclusion that implementing Fareed’s ‘Fixes” (along with tweaks to the overall tax system) we really could make our debt go away and put the American people back on a firm financial footing.

No matter what certain leading politicos and economists are saying about the housing market making a ‘recovery,’ I am down in the trenches witnessing homeowners going into foreclosure because the banks simply won’t work with them.

They don’t care someone lost their job and their wife’s hours have been cut back. They better pay that ‘balloon payment’ or else.

So my advice to our elected officials? Get off the stick and force the banks to deal with this enormous mortgage problem in one fell swoop. Then we can deal with the VAT issues or whatever else we need later.

Of course this will never happen since we need to remember our politicians always look out for themselves and getting reelected.

Screw the people.

Okay, end of rant. You can go back to Fareed’s much more articulate treatise on the issue! ☺

Sex, Death or Taxes… Which one am I writing about this week…

Hmm, I know which one would get the biggest audience. Which one would become so morose it would turn everyone off, then there’s the subject of death. LOL

Everyone hates taxes. They suck.

You see that paycheck stub and think of everything you could be doing with that money that’s withheld. Or as an independent contractor you resent the money you have to put aside from each job to cover your quarterlies.

Sure, I could talk about the roads and the schools, and you know, the whole national defense thing that your tax dollars go to, but frankly in those moments that doesn’t matter.

It’s your money! Why are they taking my money?

Let’s stop for a moment, because unless you want to become an anarchist those thoughts are only going to bog you down.

The government, whether we like it or not, is forcing us to budget. Sure we get paid a certain amount, but a portion of that can’t be used.

Hmmm… What about if we put into place a budget for our hopes and dreams that held that kind of weight?

Want to buy a house? Withhold from your paycheck just like the I.R.S. Don’t let that money even hit your main account. Open up a savings account and deposit into it just as surely as the FTB withholds your taxes.

Want to expand your business? Create a ‘withholdings’ account and put money into it as consistently and vigorously as if you were going to be audited if you didn’t.

We could learn a thing or two from Uncle Sam. Vague promises and wishes don’t get the bills paid. Hard, cold cash in the bank account does!

And do I really have to mention that your CPA or Accountant is the best person to set up this system? The best person to help you determine what rate and frequency you should be saving?

I guess next week I should write about a cherrier subject, death, since I’m sure not a whole lot of people read this one! :-)