Author: tialdelano

Modern Money Keys: An Introduction

Hello friends! As we begin transitioning from the summer months to the fall season, many of you are probably looking ahead and trying to figure out what information you need to make better money choices going forward. There’s nothing quite like the change of seasons to highlight that you, individually, would like to make certain changes.

For that reason, I’m starting a Modern Money Keys series, which will be a few posts highlighting principles that can help tremendously with your financial planning and decision making. I have a lot of materials that I’ve studied in regards to what it takes to overhaul your money mindset and I’ve also experimented with a host of tools related to these materials. I’ve seen a lot that works, and even more that doesn’t work *if* you goal is to grow, save, spend and earn your money in an enjoyable way.

Most of what we’ve seen when it comes to finance is akin to drudgery, miserliness, and settling on penury to reach our goals. It’s so odd that so much of what is taught about money is so strict and miserable, because money – when handled in alignment with your values, with love and with respect – is joyful and abundant. Money can be so much fun to possess as well as to spend!

Yes, it can be managed with tedious and austere energy, if that delights you (and some people do feel more comfortable handling money in this way: if this is you, I don’t knock it!). However . . . If you want to have fun with your money but also have it grow abundantly, support the things that matter to you, and prepare for your future, then this Modern Money Keys series is for you. I’m going to discuss some larger principles related to money, and then break down the practical ways to embrace these principles, while still having a good time and feeling like this isn’t “hard work”. Because you should enjoy how you handle your money: how it comes in, how long it stays, as well as how it recirculates back into the world should ALL delight you!

Do you have any money questions that you’d like answered during this series? Please let me know in the comments below, and I’ll be sure to include it when I write future posts!

Why the Inflation Reduction Act of 2022 Should Worry You

You’ll have to journey with me a bit, before you see that this post is not quite what it seems. . .

No, Internal Revenue Service (IRS) will not be hiring 87,000 special agents. I’ve written about this in several places (beyond this blog), because I cannot stand sensationalism. It’s an abundance of emotion and an absence of sound, factual research that makes me shake my head in disappointment. I usually point to it as a failing of the US education system, but it is often information spread by “learned” people that are experts at exploiting the vulnerabilities of others (including the lack of critical thinking displayed by many) behind the outrage and fallacies being shared. I explained all about the misinformation regarding IRS hiring over on LinkedIn, but I’ll share a copy of that text below, as well.

Photo by energepic.com on Pexels.com

As written August 11:

In July, I posted on my blog that the Inflation Reduction Act, if passed, would allocate $124 billion for IRS tax enforcement. I also stated that this meant more IRS collection jobs would be announced. These jobs would be revenue agents and officers, auditors and specialists, etc.,.

Imagine my surprise when today, I saw the rumors of 87,000 SPECIAL agents being added to IRS. I laughed immediately, because I know the difference between a special agent and a revenue agent, and I also chuckled because I knew that there was NO WAY that IRS would double their workforce by hiring special agents exclusively. Special agents do not consistently collect enough money for IRS – with a current staff of 82,000 – to bring on a group SPECIAL agents than exceed the number of staff they have currently.

There is a difference between revenue agents and special agents. Revenue agents are auditors and unarmed. They do the bulk of the audits conducted by IRS. Special agents are law enforcement, just like FBI and CIA agents. FBI special agents have strikingly similar job duties. IRS’s special agents are armed, because they go to FLETC in Georgia. No official sources have confirmed this 87k hiring boom, and several sources indicate that this is a rumor at best. This rumor came from a poorly comprehended report and a desire to sensationalize a hot topic that few people actually understand.

But, I’ll play along and pretend the 87k hiring rumor is true. Assuming that IRS does hire 87k ppl, I assure you that the majority of those ppl will be tax specialists, revenue officers and revenue agents, not special agents, who really don’t generate revenue consistently enough to justify this type of hiring push.

Please continue to read, read, read, and use your power of discernment. Don’t go by what one source says (even if the source is this post!) If I’m wrong, then I’ll personally put up another post admitting it. But I’m pretty sure I’m not. I just want you all to continue to be wise, be alert, and watch out for those that monetize and exploit your outrage.

I wrote a detailed post in late July about the potential impact of the Inflation Reduction Act of 2022 (IRA 2022), and it’s most likely effects on tax law (you can read that here). Yet still, several days after IRA 2022, I see lawmakers actually spreading the same tripe as quoted by careless Twitter users that have never worked at IRS and, prior to IRA 2022, were completely unaware that IRS has special agents, which are not the same as revenue agents.

Photo by Karolina Grabowska on Pexels.com

The whole quote of 87,000 agents that IRS will be hiring? It was an estimate proposed last May, that is in no way a definite plan for this year, just a “wish list” that I, as a federal employee, can confirm is hopeful at best, and IRS would be lucky to hire and retain half of this amount. The hiring levels rarely meet the amounts that agencies project, simply because turnover still happens, other hiring takes priority, and some people will leave because of termination, resignation, or transfer to other agencies. Also, this is a projection for a 10 year hiring plan, because there isn’t enough staff or resources to possibly train 87,000 agents within the next year. The IRS has recorded a record low of auditors and agents, with numbers being the lowest they’ve been since World War II.

Cries about these auditors and agents targeting people earning less than $400,000? Accurate on the surface, but it takes a little digging to understand a critical point. The assertions about people earning less than $400,000 came from Secretary of the Treasury Janet Yellen, who stated something that many completely disregarded (or simply were unable to comprehend): she directed that, “any additional resources—including any new personnel or auditors that are hired—shall not be used to increase the share of small business or households below the $400,000 threshold that are audited relative to historical levels.” That historical levels part really tripped up the speedy (non-critical) readers, and caused all manner of histrionics. According to IRS, these agents, “cannot simply be assigned to global high wealth, partnership, or large and complex business examinations without the requisite skills, training, and experience to analyze returns that are highly complex[…]”; that means they will have to practice honing their audit skills prior to get these $400K+ returns. And, since the historical levels have been much higher than they are currently, you can reasonably expect that some individuals earning less than $400K per year will be audited because, historically, they were. I’d be worried if you follow advice from people who refuse to read for clarity, and who jump on catchy soundbites that suit certain narratives.

Again, to be clear, no one said that all individuals earning less than $400K would be audit free: EVERYONE has noted that the audits for this group shouldn’t go up disproportionately. Only time will tell whether this will happen, but on the outset, realize that Yellen never said that people earning less than $400K were exempt from audits. Many skipped over this part because it didn’t serve a narrative about IRS being the horrible bullies that mistreat every American that cross their paths.

As I stated above in my post from LinkedIn, one source is not enough, and exploitation and monetization of outrage is exactly what certain influential groups desire. I’ve read information from IRS, Government Accountability Office (GAO), and Congressional Budget Office (CBO), as well as groups that disagreed with the measures, such as The Heritage Foundation and a statement from the Republican House Budget Committee Members. I’d caution most people to read multiple sources – from a variety of perspectives – and to ask, “Qui bono?” (Who benefits?) as you read. The same people criticizing certain tax legislation often organize groups, movements, and products designed to get money from their supporters/readers. The same can absolutely be said for those that are eager to support tax legislation, without offering critical analyses of how they have reached the conclusions they so eagerly share on their platforms and social media at large. In short, hot takes are rarely supported by the amount of analysis needed to make a balanced and fair assessment. These groups KNOW that, and capitalize on it.

Photo by RODNAE Productions on Pexels.com

Our rapt attention is currency (hence the phrase, “Pay attention”). Be mindful of how your attention has been monetized by the people whose opinions you adore: most of them are pandering to our worst fears because it is (and always has been) a lucrative gig, and it’s a far more profitable angle than giving balanced, neutral opinions that neither stir hope nor fear in our hearts. Our biggest worry about IRA 2022 should be all of the people trying to cash in on our worries: they’ve figured out how to “sell shovels” to us and many of us don’t even know it.

Finance Friday – What I’m Reading

Along with posting three finance tips every month (you can read the tip for August here), I aim to share one finance book that I think will be helpful for you all. I’ll make sure that I introduce the book of the month at the beginning of the post, and give my favorite points from the previous month’s book in the middle to the end of the post.

This month’s book is Start Late, Finish Rich by David Bach. I’ve been a fan of Bach for years, and this book in particular has been on my “to complete” list for a while. So this month seemed like the perfect time to restart and finish this book. I love Bach’s approach, and I’m excited to share my favorite takeaways next month, when I announce the next book of the month.

What finance books are you reading this month? I’d love to hear about them in the comments below!

Avoiding Gift Tax – Make Sure The Checks Clear!

Recently, I discussed the issues surrounding the estate of Aretha Franklin. From the sources that I reviewed, it appears that she did not intentionally reduce the size of her estate through gifting to her heirs before her death. It isn’t required that people reduce their estates through giving, however. . . With an annual ceiling of $15,000, affluent individuals of advanced age may prefer to distribute a portion of some inheritances before their death, to avoid taxes to both themselves as well as the recipients.

For those that choose to give before death, whatever you do, make sure your heirs cash those checks as soon as they receive them! A recent tax case (Estate of de Muth v Commissioner) determined that if a check isn’t cleared before a person dies, the checks become part of the estate, and therefore subject to estate tax. Of course, gifters can’t force recipients to quickly cash checks given to them, but if the intent is to ensure that the size of the estate is reduced, then time is truly of the essence.

I was interested in Estate of de Muth because it was always my understanding that it was the date of gifting, and not the date of cashing, that determined when a gift was given. But with the tax courts determining that the act of gift giving occurs upon cashing the check, I now have a different perspective regarding gifts and what constitutes receipt. This is why I love staying aware of the changes with the tax law: you never know what you’ll learn!

I Bonds – A Less Explored Investment Vehicle

Merry Monday, friends! I stumbled upon an investment option late last week, and I was so excited about it that I wanted to share it here with you all.

The Treasury announced that the initial interest rate on new Series I savings bonds is 9.62 percent. You can buy I bonds at that rate through October 2022, and for the first six months that the bonds are held, you will get that interest rate. Bonds usually have much lower interest rates, so this is a great way to get a better return on your investment. I used to buy I bonds with my tax returns, but I’ve gotten away from the practice. I’ve decided to invest in a few bonds before the cutoff date (October 2022).

Please don’t interpret this as investment advice: I encourage you to do your own research and determine whether this is an investment strategy that works for you and your goals. As for me, I’ll be investing some of my discretionary income and holding the bonds until I’m ready to invest in something bigger.

That’s it for today, friends! Check out the I bonds over on Treasury Direct, and see if this is something you want to add to your investment portfolio!

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Aretha Franklin’s Messy Estate – Key Takeaways

A couple of weeks ago, it was announced that Aretha Franklin’s estate has settled a nearly $8 million tax bill, and the way has been cleared for her four sons to start receiving payments from the revenue generated from the use of her image and music. This outcome was a long time coming: Franklin passed four years ago, and her heirs have been unable to settle the estate issues until recently. This development is excellent news, as this opens the way for her sons to start receiving the benefits to which they are entitled.

I won’t rehash all of the details of the case, however, I will highlight some key takeaways that I gleaned as I learned about the messy estate left behind by the Queen of Soul:

  • Destroy previously executed wills. For most people, their end-of-life planning only covers the execution of a will (if they’re proactive). Sadly, some people don’t even do that much planning: far too many people die intestate, leaving their estate planning in the hands of the state where they lived and died. But I digress . . . Leaving a will clarifies how you want your property to be distributed after your death. However, this distribution becomes unclear if you have multiple versions of your will floating around. So, consider destroying previously executed wills whenever you make a revision. The estate is currently comparing 3 different versions of Ms. Franklin’s will, and I’m sure the probate courts will have a field day trying to figure out which one is the one that will be honored.
  • Set up a trust. If you only have a will, you’re doing better than many people. But if you really want to simplify how your assets will be handled, a trust is what you need. Trusts can be established to distribute assets before and after death, they can help avoid certain types of taxes, and they can provide an extra level of clarity that may not be accomplished through the execution of a will alone. Consulting with a trust attorney is a great idea, even if it turns out that a trust isn’t advantageous for your specific circumstances. These attorneys can answer many of the questions you may have related to other estate or end-of-life financial issues.
  • Consider gifting some of your possessions while you’re still alive. The current ceiling for tax-free gifting is $15,000 per person that you choose to gift. Even if you aren’t giving everyone you know $15,000, you can certainly gift some of your possessions now, so that your heirs can avoid gift and estate taxes later.

Those are three of my takeaways from the tax agreement between IRS and Aretha Franklin. I’ll keep an eye on this case to see if any additional developments arise, and if so, I’ll be back with updates. Take care!

Start Selling Shovels

Has the current economy caused you to start panicking a bit? I know that we’ve all been hearing about recessions, experiencing inflation, and living in a world that is more confusing than ever. It’s easy to see why some of us may be uneasy, or even fearful, when discussing financial security. But preparation is always the best antidote to fear, and this post will (hopefully) give you ideas for how to create more security and stability in your finances.

It is never too late to start creating financial freedom. It’s always never too late to adjust current behaviors in order to be more resilient in times of financial difficulty. That being said, you can do one thing, today, to ensure that you have more financial flexibility in the future.

Start selling shovels.

I don’t mean that literally, of course. I mean that you should look at examples of exemplary people who thrived in the past, and use those examples as models for your business and success. The shovels metaphor refers specifically to the California gold rush of the late 1840s. If you recall from history, you realize many of the gold miners actually never got rich. But there was one group that made lots of money, and had no problem securing their financial futures . . .

It was the shovel salesmen. It actually goes beyond the shovel sales, though: anyone that offered secondary or tertiary goods and services to the gold rush hopefuls thrived during this period. Levi’s jeans can still be found in big box retail stores, despite Levi Strauss being deceased for over 100 years. The first shop opened by Strauss in California was in 1853, two years before the gold rush ended. His shop was under the umbrella of the shop his family owned in New York, but he moved to San Francisco in order to provide goods to the thousands of people that relocated in hopes of finding gold.

Strauss found gold without striking one shovel against dirt nor panning in rivers. The gold was in the shoppers, not in the mines. He provided tents, blue jeans (though this particular invention really didn’t hit its stride until the 1870s, 20 years after the end of the rush), bedding, as well as unlikely luxuries, like handkerchiefs and purses. An under-served but eager group of buyers were women, who, moving to California with husbands or male relatives, missed the comforts of their homes. There were also women who moved to California with the hopes of landing a wealthy husband that could provide the comfort and luxury they desired. So, while the miners may have been men, there were other customers that needed to be served.

Sometimes, you have to sell a purse along with a shovel.

What does all of this mean for you, dear reader? You aren’t living in the 1840s, or 1870s. You can get shovels, purses, and blue jeans from Amazon, or, if you’re feeling adventurous, a local in-person retailer. So, what can you do with this story?

Look for the gold rushes, then serve the hopefuls. Start by looking at the “hottest” ways to make money, and come up with businesses and solutions that serve the people that aspire to be the “Next Great” whatever. Give them the goods and services they need, and they’ll make you rich. I’d also advise to lean more toward services, since goods are often easier to find and harder to price competitively without taking a loss initially. But, if your heart is set on offering goods, then do what you must.

No matter whether you focus on goods, services, or a combination, find the shovels you need to offer, and start making money. You can do it!

That’s it for today. Please let me know if this helped, or if you have any questions or ideas that you’d like to flesh out with me. Take care, and I’ll talk to you all soon!

Why Recessions Are NOTHING To Fear

Last week, President Biden announced that we are not in a recession, though the data indicates that we have experienced two consecutive quarters of declining economic activity. There have been many discussions surrounding the topic of recessions, and since I’m not an economist, I won’t pretend to be an expert in this topic AT ALL. However, I will share my thoughts as someone that reads regularly, and that has lived through several decades and seen a thing or two.

Practically every decade since the 1920s has experienced recessions. For those that don’t know, the 1970s was marked by record-high stagflation, which has a combination of recession and inflation that put economists in a quandary (proposals to correct one element – either the recession or the inflation – could negatively impact the other element). People have weathered tougher economic times. Of course, not everyone survives severe financial hardship – indeed, the most vulnerable populations offer suffer the greatest – and this post isn’t designed to make light of that. It’s a warning to those that have ears to hear.

In each decade, there have been people who won BIG and set themselves and future generations up for financial ease and freedom. They had a host of varying advantages and disadvantages, but every person that has WON in previous periods of recession had one thing in common: a will to act. Staying paralyzed in fear over possible things to come is a surefire way to remain stuck or to regress.

There is absolutely nothing to fear, if you’re wise, strategic and prepared.

Be wise – Continue to live within your means and reduce extraneous expenses. Live with moderate conservation as your guiding energy: conserve energy, conserve resources, conserve time, all in a moderate way. Excess or gluttony is no one’s friend in these times. Remember to act wisely with what you have and to treat your resources with reverence, neither being indiscriminate nor anxious.

Be strategic – Plan to grow your resources: expanding your financial kingdom, adding valuable individuals to your personal network, cultivating healthy, reciprocal relationships, and positioning yourself to be in communities that are vibrant and abundant. Master multiple skills so that you offer a plethora of value to your networks. Never stop learning: your skills may open doors for you that you didn’t know were possible. Explore as much free online learning as you can. Never forget that resources go beyond cash and tangible assets: PEOPLE are resources, ENVIRONMENTS are resources, OPPORTUNITIES are resources. Expand all of your resources for the best outcome.

Be prepared – I don’t like to post alarmist content, so please take this with the reasonable grain of salt that is intended. Stockpile resources that you suspect may drastically increase in price in coming months (within reason: hoarding is dysfunctional and should be avoided!). Learn practical skills that can help you reduce expenses or that can be traded for other resources within your network. Learn the full benefits of the physical and digital tools you possess, and start leveraging those tools to your advantage. Inventory assets that you have, so that you can have a record of the items of value you possess, in case you decide to trade or sell these to purchase something of exceeding value. And it should go without saying that bug out bags, fully fueled vehicles, and maintaining a full supply of emergency items should be non-negotiable.

You have nothing to fear: you are closer to financial freedom than you know. A few good choices today can mean abundance and ease for years to come. If you aren’t sure where to shore up your defenses, I’ll be offering consultations on my Services page (I’m currently updating it, but it should be live at the time of this posting). Take care, and please let me know the ways that you have been preparing for an upcoming recession!

3 Things to Do in August for Financial Health

One of the things that my friends regularly do is ask me about what they can do to turn their money around. Most of them have lots of money coming in, but they are unclear about how to invest for growth. Or, they are living well under their means but they want more fun in their finances (less austerity, more joy). Still, some don’t have enough money but they are open to making changes that will allow them to increase their income, decrease their expenses, and start living the life they desire.

For that reason, I’m going to start sharing monthly tips to help with financial health. These are things that I’ve done, or that I’ve recommended, that have helped my friends to get more bang for their bucks, as well as created opportunities for them to grow their finances. For the month of August, I’m focusing on stopping the leaks, or reducing the unnecessary outflow of money. If you can stop costly expenses, then you can save more money and (hopefully!) create the kind of wealth that supports the lifestyle you desire. On that note, let’s look at three things you can do in August for your financial health:

  • Review your withholdings and make appropriate adjustments. If you are a W-2 employee or 1099 recipient that has withholding calculated by the payer, then review your withholdings and see if you need to adjust them. If you tend to owe taxes when you file, then consider holding out a little more money as a pre-payment toward your tax liability. However, if you tend to get a refund (especially if it’s a large refund every year), consider having less money taken out of every check, so you end up having access to more of your money as you earn it. If you want some additional clarity on how to do this, I can make a guide for your convenience (just let me know in the comments below!)
  • Request lowered interest rates on current lines of credit. You may be surprised at what your creditors will do for you, especially if you have a great payment history. Requesting lowered interest can mean more money in your pocket, so ask!
  • Eliminate one (or more!) unused or underused subscription or membership. Last week’s post mentioned one way to save money on memberships, but if you have unused or underused subscriptions or memberships that you’re paying for, the best thing you can do is cancel them and save your money. But, along with canceling those subscriptions or memberships, immediately make a plan for what you’ll do with the money saved. If you don’t, that money will likely still be wasted.

A key point that is often missed when talking about saving money is finding the best way to use those savings. Most of the time, we think we will put that money into a savings account, which may grow and eventually offer a bit of a financial cushion. But the truth is, the money that is freed up by making small adjustments is often squandered. As soon as you know how much money you will save by making small changes, you should quickly designate where that money will go, and put that money where it needs to be without haste Will you put it into a savings account that has a higher yield? Get a clear focus for what that account is for, so that you aren’t tempted to spend the money whenever you’re feeling bored or frustrated. Will you put it in an investment account? Make it an account that makes it a little difficult for you to make frivolous withdrawals. Will you use it to reduce debt? Set up or modify your auto-payment, and increase your current payment account by the amount you’re saving by trimming expenses elsewhere.

Those are three tips (and actually, a fourth tip, too, if you include the savings designation idea!) that can be done during the month, to bring you a little closer to the financial condition you desire. Have a great day, and look out for more tips in the months to come!

Take Advantage of the Summer Slowdown – Major Money Tips

Hello friends! We are roughly 6 weeks post June 15th, the most recent major IRS deadline for a large group of taxpayers. This time of year is generally among the slowest for tax professionals, and the perfect time for taking a well-earned vacation. Likewise, many business owners that have non-seasonal businesses may experience a slump in activity, as well.

Aside from going somewhere lovely for a vacay, there are a few other ways to take advantage of the summer slowdown. When enjoying this downtime, it’s easy to forget that there are things that can be done now, in order to make the remainder of the year a bit easier on you. If you’re lucky, taking action now may create some additional pockets of downtime even during the busier seasons! Here are some things both tax practitioners as well as taxpayers can do during this quiet period:

  • Start compiling the documents needed to complete the next scheduled quarterly estimated tax payment (for people that do not pay taxes through wages – the next quarterly due date is September 15, 2022)
  • Contact any clients that have filed extensions, and provide a quick checklist of documents to have before completing their returns. If they need to request missing documents, this is a perfect time to do so. If you’re not a practitioner, then reviewing IRS’s records for your most recent tax year is also a good idea: as a taxpayer, it’s helpful to know what figures and income statements IRS has, so that you can ensure that you have all of the documents reported under your tax ID number.
  • Conduct a review of 2022 business activities up to this point, and identify 1-3 areas for improvement. Come up with one small, concrete step that can be taken today, to move toward that improvement.
  • Reach out to clients to express appreciation for continued support (this applies to tax practitioners as well as individuals that have goods- or service-based businesses).
  • Start and finish reading one book related to your area of expertise. Select another book or two to read during the last 4 months of the year.
  • Digitize any paper records that have been missed, and save these documents in secure ways.
  • Find one thing to outsource either for the summer or the upcoming fall and winter seasons. Set up a payment arrangement to cover the outsourced service until the end of the year.
  • Set your remainder of the year goals (September to December goals). Get a head-start on some of those goals now.
  • Review your paper calendars (or digital calendars) for the past three months. Complete anything that was inadvertently missed.
  • Create a business vision board (I’ll be upgrading mine and sharing it in a future post).
  • Write out your business vision for 2023, and use the remainder of the summer, as well as the upcoming seasons, to arrange your affairs for a smooth transition into your vision.
  • Check on the completion status for required continuing professional education courses (CPE). Schedule and take those necessary CPEs while you have free time.
  • Review your current memberships and affiliations to see if you’re taking advantage of all of the benefits of being a member. If not, start using those perks today. If the organizations you’ve joined aren’t providing enough benefit, reconsider whether you should remain a member (cancel memberships if appropriate).

I am already scheduling most of these activities for myself, because these are tasks that I have been neglecting for a while now, and I know my life and business will improve drastically once I work on these. If you’re doing any of the things listed above, let me know about it in the comments below! I’d love to hear about your plans.