The Rich Look like Beggars, and the Beggars Look like Kings

If you saw my father on a normal day, you'd feel sorry for him. His clothes are worn and coated with a mosaic of dirt, paint, and other unidentifiables. His boots are solid blocks of mud. His head is covered with a worn-out baseball cap, usually soaked in sweat.

You'd think he was a beggar. But he's not. He's one of the wealthiest and fastest growing landowners in northern Mississippi.

Movies and television have created a stereotype of the millionaire, and like most stereotypes, it's completely false. Rich people don't drive fancy cars, live in mansions, or cart around entourages of sexy playthings.

They know better. As one of my most successful mentors told me, "Getting rich is not about how much money spend, but about how much money you keep."

To illustrate, here are some comments from my investors:

A car payment? Why, I can't remember the last time I made one.

About a year ago, my father invited all of our investors to a private conference in his home near Memphis, TN. You've never seen so many rich people. If you tallied up the net worth of everyone in the room, I'm sure you'd go well over $100 million.

When I drove up to the house though, all I could do was laugh. Looking at all of the cars in the driveway, you'd think you were at a retirement home. The newest car in the driveway was from 1998. The majority of them were models from the 80s... and older. None of them were freshly detailed or flashy. You would have never guessed that all of them were owned by millionaires.

Talking to the investors about them was also interesting. I didn't ask everyone about their car, but the few I talked with told me they'd paid for the car in full a long time ago. They were also focused on regularly maintaining the car. Performance was just as important as price.

Buy a mansion? God no. Who needs all that space?

Knowing how to leverage their money and tax benefits, you'd think millionaire real estate investors would live in huge houses. But you'd be fooled, once again. Most of the millionaires I know live in modest houses in good neighborhoods. The average value is probably around $300,000.

They also own the houses debt free. Usually, they bought their house years ago for a steal in a good area, and then they lived there while it appreciated. To properly leverage their equity, they keep credit lines open, so they can take advantage of short-term opportunities.

Wear a suit? No, I prefer to work in my underwear

Through a series of coincidences over the years, I've learned that nearly all of my investors work in their underwear or pajamas. When they're forced to leave the house, they usually wear sweats or khakis. During the past five years, I've never seen one of them wearing a suit.

They have three reasons:

• Cost. Dry cleaning is expensive. You save money by dressing down.
• Practicality. Investors deal with a wide range of less fortunate people that distrust people in suits.
• Comfort. Suits are uncomfortable, so unless you have to impress your banker, stay comfortable.

The Moral of the Story: Live like a Millionaire and You'll Become One

Not surprisingly, the most successful real estate investors I know are the most frugal people I know. I'm not talking about being miserly either. They live exceptionally well, but they do it with less money and more attention to practicality than pizzazz. If you want to get rich, act like them. Start living below your means and you'll see your wealth grow much faster.

Also, I've learned to be suspicious of people driving fancy cars and living in huge houses. While some are genuinely wealthy, most are in debt up to their eyeballs. They're usually insecure people, trying desperately to convince everyone they're rich. To use a metaphor:

You can judge a book by it's cover, but remember, the classics are rarely new and shiny. Their faded covers are evidence of their survival and their tattered pages were created by the hands of countless loving fans.

Being Rich Does Not Always Mean You Are Wealthy

To be truly wealthy is to have money that lasts forever. This may be a blunt statement, but suddenly coming across a large sum of money does not necessarily mean you have become a wealthy person.

To be wealthy is a state of mind. A person with a wealthy mindset may not necessarily be financially rich just yet but will be soon enough. On the other hand, a rich person without a wealthy mindset will squander the money very quickly.

This could not be more true than those who win the lottery. After a few years, these lottery winners no longer possess the millions they came across so suddenly. An amount of money that should have lasted for at least a generation has been fleeted away.

Case in point is UK lottery winner Michael Carroll who won £10 million in 2002 at the age of 19. It is reported that he had lost all his winnings 18 months later on things such as holiday homes, luxury cars, drugs, parties, jewellery and famously, a rural mansion used none other than as a dodgem car racetrack for his new friends.

What is even sadder are cases of other lottery winners that end up with greater financial debt after their windfalls dry up than they had to begin. Some have even declared bankruptcy to be back where they had started - with nothing.

From this, it is fair to say that being rich does not necessarily mean you are wealthy. A truly wealthy person would still possess the majority of the millions of dollars (if not more) because a wealthy person understands the fundamentals of how to manage their money.

It can even be said that a wealthy person has a good relationship with money. Money sticks with them rather than repel away from them. It is through this understanding of how to manage money that dictates how long you will remain rich, or how soon you will become rich.

A wealthy person knows to save their money. With the money that is saved, they firstly spend on things that earn them an income such as quality businesses, real estate and shares. In other words, the money a wealthy person retains is used to further create more money. The money they earn from their investments is then used to fund a rich lifestyle.

On the contrary, for a (temporarily) rich person that does not have a wealthy mindset, they would have chosen to firstly spend on material things and eventually have no money left.

However, nobody is born with a wealthy mindset and it certainly cannot be won. Importantly, a wealthy mindset is learnt. If Michael Carroll had a wealthy mindset when he won the lottery, he would likely still be living very nicely with most of his winnings intact.

If a wealthy individual were to lose all their money today, it is likely that within a number of years, they would be back to a relatively comfortable financial position. Individuals such as Donald Trump, Martha Stewart and Sir Richard Branson have faced financial setbacks in their lives but were able to rebuild their financial positions because each has a wealthy mindset. These individuals firstly focussed on redeveloping their businesses rather than wasting their remaining fortunes on frivolous items and lifestyle decisions. Today, they enjoy life's luxuries because of their wealthy mindset.

Michael Carroll clearly demonstrates that being rich does not always mean you are wealthy. On the other hand, having a wealthy mindset certainly gives you a greater chance at being rich because you understand how to manage and appreciate money. Each of us can learn to be wealthy. By developing this wealthy mindset, you will ultimately attract more money to you than repel it. Only then can you be rich and truly wealthy.

Financial Freedom! Is It For You?

Financial Freedom!

What does financial freedom mean to you?
Does it mean buying anything you want regardless of how much it cost?
Does it mean spending your days in ways that enrich and empower you instead of being at the beck and call of an employer?

Is there anyone in the world who wouldn't agree that the dream to be financially free is a universally desired goal?

But how does one create and maintain this sought after state of financial freedom.

Surely, it is not by working hard at a job. We've all heard the grim statistics of people working hard, only to end up old and very poor.

Having a job is not a secure method to achieve your desire to be financially free!
Many employees, from clerks to CEO's have found themselves unceremoniously dumped from jobs they thought were secure.
Even employees who are lucky enough or maybe foolish to hang on into retirement, working for someone else, are finding that the pension that they counted on is insufficient to cover their hoped for and deserved life of ease. 

Taking an informed, involved and hands on role in your finances is the only way to be financially free.
No one else can be as passionate about your financial goals, dreams and desires as you are.
Others may or may not share your commitment to achieve your financial independence, however, that does not reduce your responsibility to make every attempt to achieve it. 

Very often, when I talk about money and how freeing it is to have enough to live a self-directed life, there is always one person who will say," money is not that important" or "money can't buy happiness". 
Of course it's true that money cannot buy happiness, nothing can, for happiness is a state of mind that you choose for yourself, regardless of circumstances or the attitudes of others.
And money IS important for the things that money CAN do, such as good schools for your children, spending your time how you choose, supporting charities and so much more.

So, how do you achieve financial freedom?
Acknowledge and accept that whatever financial state you are in presently is a result of the actions you have taken up to that point in your life.
Then decide that you want to create a brighter, more secure financial future for yourself and those who depend on you.

Do an in-depth financial analysis beginning with your credit rating.
If your rating is not a good one or you don't yet have a credit history, begin the process of restoring or establish one.
Excellent or even just good credit will be your solid foundation on which you will build your financial freedom.
After addressing your credit score the next step will be to learn about wealth creation tools and strategies.
Get help with this step by leveraging the knowledge of a trusted team of financial planners.
Enjoying a life of financial freedom need not remain just a distant dream.
Get passionate about your desire to build wealth, make a new plan and take well-advised actions. 

Create a new plan and achieve your goals.
You provide the dreams and the desire and we will provide the sound, customized advice and planning that will help you build wealth and achieve financial independence.

How To Be a Millionaire On Minimum Wage

“Robert Reich, once observed ‘most minimum wage workers aren’t poor.’ He is right.” - Johny Isakson, U.S Senator (Robert Reich is former U.S department of Labor Secretary)

Minimum wage earners keep complaining about their salary. They say they cannot retire rich. Most of them just go through their work and retire relying only on their small SSS pension and the little retirement that their company will be giving them.

For most minimum wage earners, becoming a millionaire when they retire is quite an impossible dream. They contend that they can only be a millionaire if they receive a hefty sum of retirement money from their company.

Is it really possible to achieve millionaire status by your own efforts alone ? (Humanly speaking) Let us consider this actually scenario.

In the Philippines, Central Visayas Region, the current minimum wage is P 241.00. Multiply it by 26 days of work you get P 6,266.00.

Let’s just say that you are 30 years old and you faithfully saved that P 266.00 per month and spent the rest of the P 6,000.00, that would amount to P 3,192.00 per year

Do the math. If you put that P 3,192.00 in an investment vehicle that would give you 10 % interest per month in interest (compounded), do you know how much your money would become in 30 years, that would be P 1,052,001.00. If you started this kind of savings program when you were 30 years old you will retire a millionaire at 60 years old by your own savings program alone, add to that the retirement benefits from your company, your monthly pension from the SSS and your PAGIBIG “savings.”

What if you decided to add another P 500.00 in your monthly investment and invest P 766.00 instead? This would amount to P 9,192.00 per year and at the end of 30 years it would amount to a whopping amount of P 3,029,447.00 (At 10 % interest per year compounded)

Perhaps later on you would increase your savings to P 1,766.00 a month if you receive a salary increase. If you do that even on the 10th year after you start saving only P 266.00 a month, you will retire with P 4,472,777.00.

The growth of your money is possible because of what we know in the world of finance as the Rule of 72. 

Albert Einstein’s greatest discovery was not the theory of relativity, it was the Rule of 72. (Although some people say that the rule existed long before he was born, most would agree however that he has popularized it)

What has the Rule of 72 have to do with investing and growing your money ?

Basically knowledge of the Rule of 72 is the basic building block of learning that each budding investor should have.

Simply stated the Rule of 72 helps you determine the following:

1.) What interest rate you should avail of in order for your money to double quickly.
2.) How many years does it take for your money to double.

In a nutshell the Rule of 72 is stated as follows:

72 divided by interest rate return = No. of years it takes for your money to double.

So, if you put P 100,000.00 in a bank account, it will take 72 years for your money to become P 200,000.00 since the bank only offers a 1 % percent interest rate. (72 divided 1 = 72)

Let’s say you get a little wise and you put your P 100,000.00 in a time deposit account it will take 18 years in order for your money to become P 200,000.00 (72 divided by 4 = 18)

Basically the higher the interest rate the less number of years your money will it take for your money to double.

So if you put your P 100,000.00 in an instrument that would give you a 12 % interest rate it will only take 6 years for your money to double (72 divided by 12 = 6) 

However take note that the Rule of 72 is more accurate with lower interest, the higher the interest rate rises the more inaccurate it becomes. (An example of this is that if you earn have P 100.00 an invest it in an instrument at 72 % interest rate per year according to the Rule of 72 your money will become P 200.00 in 1 year. However this is not entirely accurate since you will need a 100 % interest rate in order for it to become P 200.00 in 1 year time)

Interested in how many years would it take for your money to TRIPLE and what should be the interest rate that you should avail of? then you should use the Rule of 115. It works basically the same way as the Rule of 72, just substitute 72 with 115.

Earning the minimum wage ? No problem with the Rule of 72, You could be a millionaire !

Donating Your Car To Charity

Donating a car to charity is not that difficult. However, you need to be aware of the new tax regulations before you donate your car to a non-profit organization. The IRS provides some general rules of thumb on car donations:

Starting in 2005, if the claimed value of your donated car exceeds $500 and the item is sold by the charitable organization, your tax deduction is limited to the amount of money the charitable organization actually receives from selling the vehicle.

The charitable organization must provide you (the donor) with a written acknowledgement within thirty days of the sale, specifically stating the net amount they received for selling your donated car.

As an example, let's say you make a car donation to a non-profit charity, and the fair market value of that car is $5,000. The charity then sells the car without "significant use" or "material improvement", for a total sale price of $2,500. Your deduction is limited to $2,500, not the $5,000 fair market value.

This is substantially different than earlier years when you could deduct the entire estimated fair market value instead of the amount that the car donation actually raised for the charity.

Another caveat is that many non-profit organizations use a third-party administrative service to handle the pick-up and auction sale or your car donation. The resulting administrative fees are often 20% or more of what the car sells for at auction.

Your tax deduction is correspondingly lowered by the amount of third-party fees because the net amount the charity receives has been reduced. In the example above, your car donation deduction would be reduced from $2,500 to $2,000.

There are a few exceptions to these car donation tax deduction rules of thumb that are recognized by the IRS.

Car Donations: "Significant Use" & "Material Improvements"

If the charity significantly uses or materially improves the vehicle, they must certify that in the form of an acknowledgement to the donor (within 30 days of the contribution). In the case of significant use or material improvement, the donor may usually deduct the vehicle's market value ($4,000 in the example above).

To be considered "significant use", an organization must use the vehicle to substantially further its regularly conducted activities. The recipient organization's use of the vehicle:

1 - Must not be insignificant
2 - Must not be intended at the time of the donation

Significance also depends on the frequency and duration of use by the non-profit organization.

"Material improvement" includes major repairs or other improvements that significantly increase the vehicle's value. Cleaning the vehicle, minor repairs, and routine maintenance are not material improvements.

Make sure you don't get misled by a car donation sales pitch saying you can claim higher tax deductions than the IRS allows.

For more information, see IRS Publication 561, Determining the Value of Donated Property ( PDF 101K) at www.irs.gov

10 Things Every Taxpayer Needs to Know About the Pension Law

The Pension Protection Act, signed into law on August 17, 2006, is designed to address the nation-wide problem of under-funded pension plans. The law penalizes noncompliant companies and encourages employee contributions, but many of the changes directly impact taxpayers of all ages, regardless of retirement status. 

"Taxpayers will benefit from many of the act's provisions, some of which come in the form of tax breaks, but individuals cannot take full advantage of the tax breaks until the new laws are fully understood," said Michael Smith, Managing Authorized Taxpayer Representative at tax services firm FSI Tax Corp. 

The following is a rundown of the most important tax code changes and how they will likely affect taxpayers, as well as retirees. 

1. Direct IRA Tax Return Deposits

Taxpayers can now have their tax returns deposited directly into their IRA accounts. The IRS already offers taxpayers the option to automatically deposit returns into checking and saving accounts. By adding IRA accounts, legislators hope taxpayers will contribute more funds toward their retirement accounts. 

2. 529 College Savings Plans 

Many temporary tax laws enacted by the 2001 tax cuts were made permanent by the Pension Protection Act. This includes the ability to make withdrawals from 529 college savings plans without suffering tax penalties. 

"Tax-free college savings withdrawals may seem inappropriate in a pension law, but this provision is welcomed by parents who would otherwise resort to tapping their IRAs to fund their children's education," said Smith. 

3. Saver's Credit

Another 2001 tax break that was set to expire this year is the Saver's Credit, a tax credit matching up to $2,000 for lower-income workers who put money into their retirement accounts. This tax break benefits workers who earn less than $25,000 because pre-tax contributions lower the taxpayer's reportable income and the Saver's Credit provides additional tax relief with its matching funds. 

4. Increased Contribution Levels

In 2001, the IRS temporarily raised employee-sponsored retirement plan contribution levels from $2,000 to $4,000 this year, $5,000 in 2008 and then adjusted by inflation. The higher limits were set to expire in 2010, but the act made them a permanent increase. 

This change, also intended to encourage increased contribution amounts, applies to 401(k)s, IRAs, 403(b)s, 457s and catch-up contributions for workers aged 50 and older.

5. Direct Rollovers from a 401(k) to a Roth IRA

Employees who move from one workplace to another were previously permitted to transfer their 401(k)s to traditional IRAs, both of which require taxes to be paid once money is withdrawn. Only then was the individual allowed to transfer the account into a Roth IRA.

The law now permits former employees to transfer their employer-funded retirement accounts directly into a Roth IRA, a popular option due to the fact that contributions are made after taxes are taken from earnings, which means that there are no taxes due upon withdrawing funds. 

"The tax code changes enacted by the Pension law benefit taxpayers and steer them toward contributing to their own retirements," explained Smith. "While companies should be held accountable for funding employee pensions, each taxpayer should take advantage of changes that make it easier to ensure a secure retirement."

Tax Deductions for Charitable Giving 

Non-pension-related tax code changes include several provisions that significantly increase charitable giving regulations, some of which are unlikely to please donors. 

5. Documenting Items

To discourage taxpayers from inflating the value of non-monetary charitable donations for inflated tax deductions, the IRS now requires taxpayers to fill out a form detailing the gifts. Additionally, any significant household item, valued at more than $500, must be appraised before the taxpayer can take a deduction.

Many charitable organizations, including Goodwill Industries International, say the new provisions will guard against worthless donations more suitable for the trash bins, but critics argue that increased regulation will discourage would-be donors and cause a decrease in charitable giving.

6. Documenting Monetary Gifts

Monetary donations will also require documentation. Regardless of the amount, a taxpayer should retain proof of any donation. Appropriate documentation can be a bank record, canceled check, credit card statement or receipt from the charity. 

"These records are not required to be included in the tax return but they should be kept on hand should the IRS request proof," advised Smith.

7. Direct Donations from IRAs for Seniors

Another tax law that many charities support affects only seniors. For the next two years, donors 70 ½ or older will be able to donate to charities directly from their IRAs, an accommodation that keeps the donated amount tax-free and avoids tax penalties for early withdrawals. 

This provision benefits eligible taxpayers who take the standard deduction, which many older filers do because they receive larger standard deductions. This can also benefit individuals facing donation limits. Generally, people cannot donate more that 50 percent of their incomes, but the money does not count as income when it comes directly from the IRA.

Officials at charities such as United Way claim that despite being temporary, this provision will likely bring in tens of millions of dollars. 

Other Pension Provisions

8. Automatic 401(k) Sign Up

Employers are allowed to automatically sign up employees for a 401(k). This change encourages participation from people who may not otherwise bother to sign up for the plan in the first place, though they will have the option to opt out. 

9. Investment Advice

Because employees often choose safer investments for their 401(k)s, which generally result in modest returns, the act allows them to receive investment planning advice to encourage riskier investments with the potential for higher returns. The act also provides protection against dishonest advisers who steer employees toward decisions that could increase their own profit. 

10. Non-Spousal Benefits

Two provisions that expand allowable withdrawals are pleasing gay rights activists. The non-spousal rollover lets retirement account assets be transferred to a designated beneficiary upon the retiree's death and the hardship distribution allows retirement account assets be used for a medical or financial emergency of a beneficiary other than a spouse or a dependent. 

The majority of the Pension Protection Act aims to ensure that companies fully fund traditional pension plans over a seven-year period, starting in 2008. But many provisions promote increased individual employee participation in retirement planning. 

Smith said that while the new law expands allowances and makes it easier for individuals to increase retirement savings, it may be a step toward employee-funded retirement plans - a move that has many critics concerned.

Tax Return Outsourcing Will Give You Peace of Mind!

Tax return is the official entry related to the financial expenses of an individual or a company in a given financial year. Any individual who has an income is supposed to pay taxes annually to the government. The amount that a person, a company or any business has to pay as the tax amount differs depending on various factors. The tax preparation season in the United States witnesses hectic activity in the office of the accountants and CPAs. Everyone wants to pay their taxes in time and become tax free as soon as possible. Tax return outsourcing is the best bet for accounting firms to deal with this heavy influx of customers during the tax paying season. 

Outsourcing means to give out the work of your firm to a third party. Outsourcing is one of the most successful business processes that have been undertaken in recent times. The amount of success and profit associated with this is immense and everyday many new businesses are undertaking this process. Paying taxes in time is very important if you want to rest easy during the tax paying season. And to pay taxes in time, you need to have your tax return prepared well in advance. There is no point in rushing to your accountant's office at the eleventh hour. 

If you have an accounting firm and are looking forward to undertake tax return outsourcing, there are certain things you need to take special care of. Any individual who works in the United States of America is required to file tax returns and pay income tax by the 15th of April every year. So, your accounting firm must be prepared very well to deal with this and tax return outsourcing is the appropriate means for this. First things first, you have to find out the best outsourcing firm that will do the work for you efficiently without any fault. 

Due to the advancement in the field of science and technology, communication has become very easy no matter in which corner of the globe you are in. Outsourcing work is also done using these advanced means of communication. The third party that does your tax return outsourcing work begins the work once you have provided them with all the documents containing the financial details of your customers. While transferring the financial details of your customers you have to be very careful about the security of that data. For this you will have to check out the security features that the outsourcing company has in place to protect your customer information. 

While doing tax return outsourcing through a third party, you are basically handing over a very important aspect of your business to them. So it becomes all the more important for you to do this entire process systematically and in a well planned manner. The very success and failure of your business depends on the kind of outsourcing work that you undertake for your accounting firm.

Tax Return Forms

According to federal laws governing taxation, any person, receiving an income in one form or the other, need to pay income taxes to the government annually. But, the job of preparing tax returns, the calculations and the many tax forms involved, constitute one of the harrowing experiences being an honest tax payer. To make matters worse, the complexity of calculations increases with the income. That is, more the income, more complex will be associated tax calculations and also the number of tax forms involved. This article focuses on the last of the facts mentioned, the tax forms, especially 1040ez, 1040a, and 1040. 

The first step in the run-up to tax return submission is selecting the right form. The basic of the tax forms is the 1040 ? also 1040ez and 1040a ? which has to be appropriately filled by every person filing tax returns in any case. It is meant for all kinds of income, over $100,000 annually, and also for itemizing deductions when not opting for standard deductions. 1040ez, again a basic tax form, on the other hand is meant for people who are single or when married, jointly. The conditions governing the 1040ez form are, the tax payees must not have any dependents, not blind, age less than 65, and have an annual earned income (taxable) less than $100,000 with an earned interest not more than $1,500, and have non-itemized deductions. Finally, the form 1040a is for those who have an income less than $100,000 annually, but with itemized deductions. 

The stickiest part with tax preparation in fact is the right selection of the tax forms. Boy! It can be really confusing. To make matters worse, most of the people, they start thinking about tax returns only in the 13th hour, all warnings and ads by the tax department not withstanding. Some even end up paying the fine for delayed tax returns. But, none of these last minute heroic acts is ever going to give any respite to the person as far as the ordeal waiting for them is concerned, if not compounding it further. Here, one simply cannot afford to go wrong in the selection of tax forms and filling it. An error anywhere ? in the type of form (1040ez or 1040a or 1040) or the data incorporated - could lead to other complexities such as an unprecedented delay in tax refunds or even a fresh request to pay the income taxes from the tax department to clear the confusion. 

Hence, considering such possibilities, it is advisable that if anyone is confused regarding the tax forms to use or with tax calculations, don?t hesitate to consult a tax specialist. They could help you with the tax calculations and the selection of the right form and documents (of course, they?ll take a pay for the service). On a general perspective, however, it is only advantageous to remain educated about taxation?s various dimensions and requirements. A professional could extend the much needed assistance, but it is always on a safer side for the individual himself/herself to be aware of the basic rules regarding taxation. Let?s not take everything for granted!

Another plus with acquiring enough knowledge about the different dimensions of tax preparation and the tax forms - 1040ez, 1040a, or 1040 ? is that then he/she could easily and safely shift to tax preparation software like TurboTax that are easily available in the internet to complete the formalities. TurboTax software is accurate, easy and simple to use, and what all you need to do is to first download the tax preparation software on your PC, and then provide the figures the computer asks of you. However, it is very important that the right figures be provided to the Turbo Tax software always so that there are no mistakes that may arise in the 1040a, 1040ez, or 1040 forms, when all the calculations are finished. 

One could get the tax forms - 1040ez, 1040a, or 1040 ? from IRS or public library. 
Make sure that you fill it out properly and include all the required documents before submitting it to the authorities. Ensure your signature on it and also the social security number without any errors. A misquoted SSN could cause lots of difficulties, both for the tax payer and the tax authorities.