Many families I work with tell me how helpless they feel when it comes to their finances. They complain about the economy, the week job market, inflation, the devaluation of the dollar, the price of gas, and so on. I'm quick to remind them to STOP focusing on the things they can't control and shift their attention to those things they can.
As an individual American you cannot control the Global Economy in any way! As an individual American, you cannot guide the direction of our National Economy. The one thing you can do as an individual American is control your Personal Economy.
I tell families to focus on how much money they're spending and how they're allocating their assets. In other words, find ways to reduce costs to increase their household's net income. I also challenge them to find ways to increase their revenue (i.e., how much money they make).
In his book, 7 Habits of Highly Effective People, Steven Covey introduce the concept of the Circle of Influence (see figure). The Global Economy and our National Economy reside in the Circle of Concern (i.e., things we cannot control but affect us). Covey instructs us to redirect our focus to those things we can control in our lives (i.e., Circle of Influence). Our Personal Economy resides in the Circle of Influence where we can impact how much money we can make, how much money we can put into saving and the ability to reduce our costs.
Now, I am in no way advocating the 'ostrich approach'; stick your head in the sand and pretend the reality of Global or National economies don't exist or matter. What I am advocating, much like Covey, is a shift in 'directed energy' from worrying about what may happen to protecting yourself financially in case anything does happen. In other words, spend your energy on those things you can control and change (i.e., your Personal Economy) and let God (or the Adam Smith's Invisible Hand of the Market) deal with the rest.
Host of 'Life or Debt' on Spike
High school was very tough for me. I was the skinny, lanky kid who never quite fit in. I remember a guy, we’ll call him Mike (not his real name) who was constantly badgering me and always found ways to make me feel smaller than a thumbtack in front of others; especially the girls.
Upon graduating from high school I counted not seeing Mike ever again as one of my many blessings!
Fast forward 20 years later and I receive an invitation to go speak to the students at my old high school and share my ‘secrets of success’. By that time I had obtained a B.S. in Electrical Engineering, an MBA and was President of Sales and Marketing for a telecommunication company.
As I walked the hallways toward the auditorium my mind was flooded with memories both good and bad. I was so caught up in my reflection that I didn’t notice a man waving at me and calling out to me. He was wearing a green jumpsuit; I could tell he was the janitor. As he got closer he had a big grin on his face and said, “Do you remember me?” It took me a moment but then realized it was Mike! “How are you doing? I heard you’re the guest speaker!” he said excitedly. “I can’t wait to hear you speak!”
He then proceeds to tell me, without any prompting on my part, that he’s married, has 3 kids and he’s been working as a custodian at the school for several years. I say nothing as I’m still trying to process that this is bully Mike now being really nice to me. We talked a bit and he then escorted me into the auditorium.
As I begin to speak I noticed Mike standing off to the side hanging on my every word and a smile that I interpret as ‘beaming with pride’ as if to say, “I know that guy”. He went from a bully to my backer!
That day I learned a valuable lesson. Our minds are loaded with snapshots of people who we’ve frozen in time that no longer exist. Bully Mike had changed yet I still carried the old snapshots of him in my head all these years. I realized then that I needed to delete them from my mind.
People change and holding onto past personal grudges no longer made sense. Mike wasn’t the person he used to be and neither was I. I committed that day to leaving the past in the past.
p.s., When my new show 'Life or Debt' premieres on March 13th on SPIKE, I wonder if Mike will be watching :-)
By Victor Antonio
When working with families I remind them to take certain steps to reduce their expenses or taxes. They always respond, “I know. I know.” and then proceed to give me some excuse as to why they haven’t done it. I remind them of the old saying, “To know and not do is the same as not knowing.” So here are 5 things you can do to reduce your taxable income and keep more of your hard earned money in your pocket.
1. Retirement Savings = Lower Taxable Income
During the year, one of the best ways to reduce your taxable income is to fund a retirement account or increase your contribution to one. By putting money into a traditional IRA and 401(k) plan, you reduce the amount of money you’ll get taxed on. Also, I highly recommended that you max out your contributions, to a 401(k) for example, to the employer’s matching limit if you can afford it.
2. Deduct Your Job-Hunting Costs
If last year you were looking for a job in the same line of work or field, you can deduct those job-hunting expenses on your taxes. And yes, qualifying expenses can be written off even if you didn’t get hired for a particular position. These expenses can include, but are not limited to: transportation (mileage, airfare) and fees (tolls, fares, parking) to and from the interview, lodging if you had to stay overnight, food, printing costs for resumes and business cards, postage, online job-hunting services, and so on. Make sure you track down all the expenses you incurred because they can add up to a substantial amount. Note: If you’re job-hunting for the first time these expenses do not qualify for a tax write-off.
3. Deduct You Moving Costs
Sometimes finding a new job will require you to move to a new city or town. If you land a new job that’s at least 50 miles farther from your home than your previous job was, you can deduct those moving expenses as long as your new employer isn't reimbursing you for them.
4. Home Office Write-Off
If you are self-employed or use a part of your home for a home office, you may be able to deduct expenses such as: mortgage interest, utilities, insurance, Internet and/or phone services. There are two ways to estimate the amount you can write-off. First, if for example you have a 3 bedroom home and you use one room strictly as an office, you may be able to deduct a one third (one of three rooms) of those qualifying expenses. Or, you can take a $5 deduction per square foot of your home office, up to 300 square feet, for a maximum $1,500 deduction.
5. Reduce Taxable Income for the Self-Employed
If you’re self-employed, have no employees and need a way to reduce your taxable income, Simplified Employee Pension (SEP) plans are a type of tax-deferred retirement savings plan for the self-employed and small business owners. With a SEP, a business can make tax-free contributions to an individual retirement account using tax-deductible dollars. Self-employed persons can contribute up to 20% of their net self-employment earnings towards their own account but are limited to a maximum dollar amount of $52,000 per plan participant for year 2014. Here’s the best part; the plan can be adopted as late as the due date of the tax return for the tax year in question which means you can decide to contribute at the last minute before submitting your taxes.
Lastly, I’ve given you a few ideas to reduce your taxes and keep more of your money. I strongly recommend you get together with your tax advisor to discuss and confirm the above options, as tax policies change constantly, and also to explore what other write-offs or tax reduction tactics might be available to you. The more you know, the more money you can keep.