The 5 Steps to Buying Your Happiness in Recessionary Times

President Harry S. Truman once said; “Recession is when a neighbor loses his job. Depression is when you lose yours.” While you may not have lost your job, more than likely, there’s a good chance you have lost a lot of money in your portfolio and are probably wondering what to do. It doesn’t matter if you are a business, individual, or charity, it seems as if all groups have lost faith in the buy and hold philosophy, and many are beginning to wonder if their advisers are actually doing anything to help them. Before you fire your adviser, put everything into cash under your mattress, and hunker down for nuclear Armageddon, there are a few things you should understand about how investments ideally should work within your plan, the role of advisers on your team, and important questions you should be asking whether you invest on your own, or you have someone helping you.

Revisit Your Goals
What’s important to you? If you found out you only had 6 months to live, what would you want to do in your life? Try writing your own eulogy. How would you want to be remembered? What would you want people to say about you? By starting with the important questions of life, you can get a really clear gut check and determine if you are actually doing what you want to do in your life. What are the things that came up? Often, we have limiting assumptions about what is possible in life. We use phrases like; “Some time, some day, if only blah, blah, blah”. When you take the time to have these conversations with yourself (or an adviser), frequently our real values get uncovered and we identify things we’ve always wanted to do. For example, many people say, “I’d want to spend more time with family”, or “I’d want to travel”. Once you have a list of these things, then then think about the reasons or excuses you’ve been making on why now isn’t the time. Usually this sounds like “I don’t have the money”, or “I’m to busy”.

Prioritize Your Goals
OK, so if not now, when? How much is enough? When will be the day? Perhaps you’ve achieved success in your business but you simply just don’t want to be bored with a “traditional retirement”. The important thing to consider here is WHEN. While some goals might seem crazy, no worries, just write them down. Ideally, when would you want to spend more time with family? What would you do? Where would you travel? Start to create some ideal time frames for the things that you said were important to you. Don’t worry about whether you think they are realistic at this point, just recognize that spending more time with your family WOULD make you happy, and write it down. Keep doing this exercise until you have at least 10 items on your list. Once you have the items listed, then prioritize them in order of importance. I like using index cards to do this since it allows you to move things around as you think of new things. Now ask yourself which of your goals you would be willing to give up in exchange for achieving the most important ones. Once you have completed this exercise, you have the foundation of a very powerful life plan for yourself. Now the question becomes how to pay for it.

Buy Your Happiness
OK, so how the heck do you do that right? “But I always thought…,blah, blah, blah”…Stop. Yes, money CAN buy happiness. I know,… I had you at hello, right? Here’s the thing about that…Having money will NOT make you happy, however figuring out what makes you happy, (as we discovered above in the “eulogy” exercise) formed the basis of your new plan. Now that you know what DOES make you happy, (spending more time with family, giving back to society, etc., now the question becomes, how do I use my wealth to buy those things for myself? Before you go postal on me, ask yourself, how much would it cost to leave your job so you can spend more time with family? What’s preventing it now? Perhaps you answered that making a difference in the world would make you happy? Well how much does it cost to make a difference? How much time do you want to spend making a difference? What’s preventing you from doing that now? OK, so your job is preventing that, how much do I need to have in order to “retire” so I can do the things that are important to me. Are you following all this? The point of this is to start to think about what it will cost, both personally, and financially to achieve your most important goals.

Position Your Finances
More than likely, taking less risk with your investments was one of your goals, (aka “Sleeping at night). During our exercise with the index cards, I asked you to prioritize how important your goals were to you. Where did investment risk fall in that conversation? The question really is, “What are you willing to do to reduce the risk in your portfolio?”. I think an even bigger question is, “How much risk do you really need to take in order to achieve your objectives?”. In my experience, investors are quite familiar with the question, “What’s your risk tolerance”, but most people have no idea how to answer that objectively. I have good news for you. Now that you know exactly what makes you happy, what your priorities are, and what you are willing to give up in order to achieve them, you’ve just answered what I believe is the most important question in planning; “How much, by when”.

Get Help when Needed
The fact is, we as investors usually don’t take the time to do these exercises, but now more than ever is the time to start. You have to know where you are, and what corrections you can make to get you back on track to achieving what’s important. If you don’t know how to do that, find a good adviser who can. If you have an adviser, talk to them about what you discovered about your goals and see how they can help you achieve them. If you don’t feel comfortable discussing this with your adviser, perhaps it’s time to find another.

When Buy and Hold Fails: From Scrambled Nest Eggs to Starting Over Easy

Perhaps buying and holding as an investment strategy isn’t feeling so good lately. Perhaps you’ve heard, eggs do have lots of cholesterol and eating too many of them can be bad for your heart. If you are one of those who have been relying solely on the conventional wisdom that buying and holding will turn out just fine, you may wake up one day with a financial heart attack from eating too many scrambled nest eggs. But don’t worry, the doctor is in, and the medicine may not be as terrible as you think.

Whether you are an individual, business, or charity, conventional wisdom says “buy and hold” is a winning investment strategy however, you could actually do more harm to your finances by holding depending on your circumstances. The key word here is YOUR circumstances. While it’s true that stocks have historically outperformed bonds and cash over the long term, there have been periods (like now) where this hasn’t been the case. Simply buying and holding can do a whole lot of harm if you don’t know exactly where you stand financially and have a good sense of what you will need to achieve your financial goals. Simply ignoring the market and hoping things will work out can be a great recipe for financial disaster. If you are close to retirement and want to draw income from your portfolio, or you are already are retired and withdrawing money, pay close attention (you Baby Boomers, I’m talking to you).

Forget returns, CASH indeed IS king, and that’s worth saying twice in today’s market environment. Cash IS KING. The question is not so much how much do you have, but how much you need. This is where we begin to scramble our eggs IMHO (In my humble opinion for those of you who are new). I’ve seen this over and over again and it goes to the heart of of why investors are losing faith in their advisers and burying their head in the sand, sticking instead to “buy and hold” and “have a long term view” to comfort them to sleep at night. That’s great if you are 20, 30, or 40 years old, but financial Russian Roulette if you are near retirement or already taking money out. Here’s why. Percentages are mostly meaningless. Generally speaking, the rule of thumb went that you could withdraw 3% from a portfolio indefinitely and not worry about drawing down principal. Go much above that number and you begin to run a risk that if the market goes down and you continue to withdraw money while the investment portfolio is down, regardless of how great of a percentage you earn when it recovers, it could have reached a “point of no return”.

Example:

How much can I withdraw from a $1M portfolio?

Using the 3% benchmark, if you incorrectly assumed you could draw $30,000 this year and raise it by 3% each year to account for cost of living increases and forget about it, take a look at this:

Assume 12/31/07, the portfolio value was $1M, you take an income amount of $30,000 on Jan 1, 2008 and assume the portfolio loses -25% over 2008. At the end of 2008, your hypothetical portfolio value would be $727,500

Assume 12/31/08, the portfolio value was $727,500, you take an income amount of $30,900 (income amount $30k inflated 3%) on Jan 1st, 2009, and assume the portfolio loses another -25% in 2009

On 12/31/09, your portfolio value would hypothetically be worth $522, 450.

The income withdrawal of $30,000 that was once 3%, is now closer to 6%. In addition, notice that while you lost 25% for two years in a row, your portfolio value of $522,450 is nearly half of what it was when you started but making 50% won’t do it. In order to get back to $1M, you need to earn almost 100%! That my friends is a case of scrambled nest eggs.

This is the danger of buy and hold when you are taking money out of a portfolio. Mother’s love to say “Ignore your teeth and they’ll go away”…I think the same is true here. Buy and hold at your own peril.

So what can you do? Good question. As I said earlier, “Cash is king”. It’s not the percentages that are important, it’s the dollar amounts. The doctor says the best prevention is a regular checkup. When you actually take the time to sit down and work through your goals, how much they will cost, and what YOU can do to help achieve them, that’s when things can begin to become clear again. Many people make the mistake of believing that good advisers can make money in any market. In my humble opinion, a good adviser helps clients make smart decisions in times like this. Perhaps taking less risk is more important and you would be willing to work a few years more in order to make that happen, OK, great. How about taking less income in exchange for taking less risk? How about making more contributions during your working years or planning to leave slightly less to your kids in exchange for not having to reduce  your income?

The fact is, there are really lots of choices that people never think to think about because they are too focused on the percentages in their portfolio. Many investors are talking to their adviser about the specifics of the investments, the portfolio strategy, or some fancy investment terms like “standard deviation”, “Alpha”, or “Beta”. Did you know that these terms ARE ACTUALLY Greek? Most advisers are actually speaking Greek to their clients. That’s not funny though, so don’t laugh…If you are simply buying and holding, it’s not a laughing matter either. As Ferris Bueller likes to say; “Life moves pretty fast…If you don’t stop and look around once in a while, you could miss it.” The same holds true for your portfolio.

Nonprofit Recession Survival Guide to Getting Donations

First the markets, then Madoff, now the Obama administration is proposing reductions in the charitable tax deduction for your biggest donors. What else could possibly go wrong? Oh yeah, I forgot to mention the snow day and nobody came to work. One thing is for certain; raising funds in the current environment is much more difficult that it was last year at this time. Here are some specific suggestions and things to keep in mind as you talk to donors:

Speak the Unspoken Truth
Personally, I like this tactic. Call it like it is. What are the most powerful four words in the English language? “I NEED YOUR HELP”. Talk to your existing donors about what is happening and the state of your organization. Tell them you need help. Let your donors know how the current environment is impacting your organization.

Be Specific With The Ask
This is something that is always a good idea. Even before the mess the last year, donor fatigue was certainly an issue. I believe that in general, nonprofits do a poor job marketing themselves when it comes to being specific about their accomplishments, how donations help, and making specific connections between the ask and the impact. Kiva.org is the opposite of everything I just said. Their supporters choose the cause (lending to a specific entrepreneur who needs a loan), and Kiva reports back on the status of the loan from the individual it was given to. It’s a terrific example of the donor getting involved directly with the cause that they support. Strategic, venture, or tactical philanthropy; call it what you want, people have been demanding more accountability in recent years. This trend towards greater accountability and transparency is only likely going to increase. Help your donors go from a “spray and pray” approach go giving, to being focused and knowing exactly what they are giving to.

Create A Donor Adviser Panel
Invite your top donors into a room for a “Manhattan Project” style round table. The objective of the group is not to gang up on them and tell them how badly you need their money, but to come together and brainstorm new ideas for raising funds. Let them know how much you have appreciated their past support and you are offering them a “no money required” way to help make a huge difference with the organization. Ally you want is their input. Not only will they feel appreciated, do you think there might be a possibility they could cough up a little extra after sitting in on that? If I were a betting man, I’d say your odds are pretty good. That’s not the objective though. Remember that. You are after their ideas and things you are not thinking about right now.

Address Financial Fear
Your donors are shell shocked with what’s going on in the markets now. Everyone is. Do you want to be someone’s hero? Address this head on. This is the one I think that nonprofits have traditionally been the most uncomfortable with. Even large organizations that have planned giving departments have struggled with “the line of control” that exists between donors and their professional advisory team. While planned giving folks want to “get that seat at the table”, and be INVOLVED in the conversation with the financial adviser, attorney, or CPA at the time giving decisions are being made, often they are not. Understand that there is a line, and there should be. Generally speaking, the unspoken truth is that donors know that planned giving officers have one motive, to get money for their organization. This is nothing new though, so what?

The real opportunity to be a hero here is to talk about some of the things that donors are afraid of now and things that they can do to feel more financially secure. The number one concern of the wealthy is that they will lose what they have. While this has always been the biggest concern, the fear is now being realized. Understand that unless your donors feel financially secure, they will likely not give at the levels they had given previously. You cannot help them feel more secure, but you can make recommendations that will. One of the things that’s at the top of the list is recognizing that donors and high net worth clients traditionally have had multiple advisers giving them advice. Their accountant is discussing their returns, their attorney discusses their will (or might not have in a while), and their “financial adviser” is talking only about their investments. Most people have no idea who they should be talking to about the big picture and their ability to achieve what’s important to them.  No wonder you have such a hard time getting a seat at the table, that’s because there usually IS NO table. The advice your donors receive is sporadic and fragmented in professional silos and generally NOBODY is discussing the big picture! Markets aside, the tax changes occurring are faster than the drop in their portfolio value and now is a good time for them to be meeting with their team to reassess where they are and reevaluate their goals.

The key to success lies in your ability to have a trusted relationship with your donor, understand what attracted them to you, what inspires them, what they are afraid of, and how to connect them with the appropriate resources who can help them achieve everything that’s important to them. To the extent you make yourself a master networker and not make it about you and your cause, you’ll be a hero. Ask your donors, “How can I help, YOU?”

Tune In To Hear Me Interviewed On The “E-Factor”- Tuesday, March 18th, Noon Eastern Time

I’m about to be interviewed on the E-Factor. I invite you to listen in and be part of it! The date will be next Tuesday, March 18th, at noon, Eastern Time (11:00 AM Central, 10:00 AM Mountain, 9:00 AM Pacific). Read below to find out more.

E-Factor is the popular bi-weekly, 60-minute conference call show, which explores the mindset of success, and the people who make success a reality. These are ordinary people from all walks of life, who do extraordinary things. They have become masters at who they are, what they do, and on this show, these remarkable people share their inspirational stories and secrets to help you create success in your own life.

E is for energy – the Energy of Success.

NEXT ON THE E-FACTOR: TUESDAY, MARCH 18TH

Personal Wealth: (an interview with Personal Chief Financial Officer and Coach, Rich Krasney)

For some, insight comes from overcoming a tragedy, or some other monumental life event that causes them to see life differently than they had before. For Rich Krasney, it came from reading a book.

About a year ago, this Personal Chief Financial Officer and Coach for a select group of business owners and entrepreneurs read Napoleon Hill’s “Think and Grow Rich”, and experienced an “Aha” moment, seeing his life purpose clearly for the first time. 

He realized that money is simply a means to an end, and as a result he now delivers his message of “How Money Can Buy Happiness: Balancing Life and Wealth” to audiences (including the Napoleon Hill Foundation, itself). Additionally, Rich is currently in the midst of developing “A Work in Progress”, a documentary exploring how one person can make a difference, and the creation of a new charity.

Dial in to the E-Factor on Tuesday, March 18th to hear why Rich now sees inspirational messages everywhere, and how in being of earnest service to others, you best serve yourself. 

Go to http://www.the-efactor.com/ to register for the call!

The Secret of “The Secet”- Connecting the Dots

By now, it’s no secret that “The Secret” has struck a nerve with both fans and critics alike.  The Secret’s message of “The Law of Attraction” is that everything you attract into your life is the result of what you put out into the world.  If you subscribe to Rhonda Byrne’s “purist” view, you believe that EVERYTHING including health, relationships, success, your father’s drinking habit, and the color of the eyes on the Mona Lisa are within within your realm of control. How could the color of the eyes of the Mona Lisa be in your control? I don’t believe that The Secret did a good job of explaining HOW you could possibly be in control of everything in the universe and that a good deal of the controversy comes from people wanting to know how you connect those dots.

I’m from Missouri (not really), so “show me”. I like to know how to connect the dots. I also like to figure out how to connect the dots for myself. One of the positive messages in many of these types of works is that you can have ANYTHING and EVERYTHING in your life that you wish, you just need to be committed to having it. Pehaps it would be better to not use absolute words like “anything, everything, never, always”. Didn’t your mother tell you to never say “never”? How about we rewrite the above statement to read: “You can GENERALLY have anything you want in your life”. Better? Critics would say yes. Marketers are screaming right about now. When we tone down the message with the word generally, doesn’t the message lose something? Are you inspired to take action when when the coach tells you that we have a pretty good shot at beating this team, however the opposing team’s undefeated record leaves some amount of mental doubt as to our chances? Do you want a that coach or do you want the coach who tells you that “you have already won and that because you have already won, the othe team doesen’t have a chance in hell of beating us today! You ARE champions!”

In my wealth management practice, I tell people that they can have whatever they want in their life.  In order to have what you want, we need to have a plan on how to get from point A to point B; you need to connect the dots so to speak. Frequently in life, people sell themselves short on their dreams, visions, and goals because of limiting assumptions that we have. “I’m too old for that, I don’t have the time, I don’t know the first thing about that, I would but, I could but, I should but”.  You CAN do that, you just have not made it a priority. Where there is a will there’s a way? Ever heard that? Our objective then becomes to figure out what it is that we truly want, and understand all of the limiting assumptions and excuses that are preventing us from attaining what we want, then create the roadmap to achieving those goals. 

Can you have ANYTHING you want? Can I be 25 again? I’m not sure. Frankly, to believe that life is completely within my control is much more empowering than feeling like i’m not in control. My greatest accomplishments in life have come from persistence and not giving up when people said it can be done. It’s done. That’s the Secret 🙂

The New Law of Attraction in Financial Planning

Have you ever had an “Ah Ha” moment when things seemed to become crystal clear to you and everything just made sense? This happened to me recently after an acquaintance recommended a book called “Think and Grow Rich”, written by Napoleon Hill in 1937. As a Certified Financial Planner™ practitioner, I have read many books on personal finance and financial planning over the years, however nothing prepared me for what I read in “Think and Grow Rich”.

My Coach
I utilize a coach to help me learn things about my industry, stay ahead of the curve, manage my time more efficiently, and learn about the things that I don’t know that I don’t know. While going through my coaching program, I was given a book list that would help me to gain insight from other experts in my industry. Among the books, was a book on “values-based” financial planning. Now I already knew that values were important in financial planning, however after reading Napoleon Hill’s book, I had my “Ah Ha” moment. The values conversation became crystallized in my mind. Picture the following:

On a routine visit to your doctor, you are told that you have a rare medical condition and you only have 6 months to live.

Would you be doing what you are doing right now in your life and your business? If you aren’t, why not?

What would you be doing differently? If you had only 6 months, would you be tempted to want to make a difference? How about reconcile with your family and relationships? What will people remember you for? “What will be written on your tombstone?”

Over the years, I have encountered many different kinds of people who each have their own ideas about what they want from their money. In many cases, I have found that people don’t know what they want from their money, or their life for that matter. Early on, I realized that it was important to help people to focus on their goals, rather than the return in their portfolio. When I read “Think and Grow Rich”, my mind saw something that had I had not seen before. Goals are not values. A big portfolio, buying a vacation home or a fancy new car does not bring happiness. If you answer why those things are important and how achieving those make you feel, you will have a better understanding of your values. The value could be, “Buying the home makes me feel like I have accomplished something”. Why is that important? “Accomplishment makes me feel fully fulfilled”, you might answer. Take the time to understand the values behind your goals.

Your ”Wake Up” Moment 
We have all heard stories about people who survived horrible diseases, had near death experiences, or had some other life “wake-up” event that stirred them to change their life. Perhaps you remember the scene in the WWII movie “Saving Private Ryan” when just before Tom Hanks dies, he tells Private Ryan to “Earn This”, (his life was saved by men who died saving him). Were continually reminded about the deeds of “The Greatest Generation” and are often amazed at how purposefully that generation lived their life. Perhaps it was because this generation faced the definite reality that every day in battle could be their last. Perhaps that they told themselves that if they lived, they would live a purposeful life. Perhaps if the doctor told you that you only had 6 months to live, your priorities might be different than they are today.

Ultimately, using your money to achieve what’s really important to you is the law of attraction in financial planning. People have strong emotional connections to their money and what it means to them. When you successfully make the mental connection between your true underlying values and your financial goals, it will serve as a personal compass and a discernible foundation for an inspiring plan for your money and your life.

Want the Secrets About Money They Don’t Teach In School? « Richie Richer’s Guide To Everything Money (and more…)

Financial Planning, Meet Philosophy

Several years ago, I took an interesting philosophy course. The instructor suggested that in order to become “wise”, we needed to embrace some critical concepts. I’ll call this concepts “The Circles of Knowledge”. The main points go something like this:

• There are things you know you know- I know I know that the earth is round.

• There are things you know you don’t know- I know that I don’t know how to speak French.
• There are many more things you don’t know that you don’t know-I don’t know for example, that left handed people named Skip are five times more likely to have sleep disorders, nor did I know that there was was an organization looking into this phenomena (there isn’t really but you get the point).

• Paradigm Shifts- “There are facts, and people’s interpretation of facts”

What’s Your Money Paradigm?
To further illustrate, consider Steven Covey’s example of  a “Paradigm Shift” from his book “7 Habits of Highly Effective People”. Covey tells a story about an experience he had on a quiet Sunday morning New York subway ride. When a man and his children entered the subway car, the children became loud, rambunctious, and disturbing to everyone in the car. It was obvious that everyone in the car was disturbed by these children, and even more irritating that that the man didn’t seem to want to do anything to attempt to calm his children down. Covey explains to the man that his children were disturbing a lot of people and asked politely to try and control them. The man, seemingly oblivious to the situation replied “Oh, you’re right. I guess I should do something about it. We just came from the hospital where their mother died about an hour ago.”

The moral of this story is, one’s perception and opinion of facts are based on our own interpretation of events, coupled with our common sense, personal experiences, and knowledge of a particular subject (knowledge is a dangerous thing). Our opinion may not always lead us to the correct conclusion. This is the case with money too.

Why do People Make Dumb Mistakes? 

No matter how many times we experience volatility in the markets, people still run for the hills at the first sign of trouble. Even though “buy low, sell high” has been drilled into our heads at nausea, people are still human and will run for the exists when someone yells “fire”. This is human nature. There is an entire field of study in people’s reactions to money called “behavioral finance”. How about another example?

Ever held a stock that kept going down? Remember the Internet bubble? You held on to the stock because you thought it would come back right? The stock was originally $75/share, but now it trades at $10/share. You held on because you think that the real value is $75/share. That’s called “anchoring”. A popular example of this is the price marked on a car at the dealership. You determine how good of a deal you got by how much you were able to knock the salesman down, having never known what the “real value” of the car was. When it comes to the price of the stock, the “real” value is generally determined based on the fundamentals of the company, and comparable investments, not what the price of the stock was in the past. The fact is that the information changed. The price it is, or was, could have been an overreaction or not. The fact that the stock is a fraction of what it once was, likely has nothing to do with the current attractiveness or value of the investment.

So now you still have that stock in your portfolio right? Studies have shown that people have a tendency to hang on to “losers” (perhaps not just investments?) because they are biased toward inaction. If you sell and the stock goes back up, you have made a BAD decision. If you do nothing, your inaction feels less painful somehow even though the results are still just as bad.

Why I’m Here

There are things you think you think you know that you don’t. There are many more areas where you have absolutely no knowledge of something that is important and you never knew about the issue, or how important the issue was to you. I’m here to help educate you about money and understand what’s important from my perspective. Enjoy!

What is the Best Way to Reduce Your Federal Income Tax?

As a CERTIFIED FINANCIAL PLANNER™ , this is a subject that I get asked frequently. There is no one best answer to this question, however there are a number of places you can look to take advantage of tax breaks the government makes available. My first suggestion is “don’t let the tax dog wag the lifestyle tail”.

Before You Start:

• Review your “life plan”

Starting a business is one of the best ways to avoid (not evade) taxes if there is something that you have a genuine passion for. Starting a business is a major undertaking, however if you have interests in certain areas, think along the lines of how you could make a career of it . If you like photography, start a photography business. Fishing, how about a charter? Following your own interests will be your best guide as to the type of business you create.

As an individual, you might say that you earn money, pay taxes, and live on what’s left. A business earns money, takes deductions, then pays taxes on what’s left. Big distinction! The type of business (S corp, C corp, etc.) will dictate the specifics on business tax deductions.

In addition to deductions for running the business, you might be entitled to establish a retirement plan or pension plan for your business. Retirement plans are deducted from your income and are a deduction for the business. Depending on what type of plan you establish, contribution limits for retirement plans range from $44k to almost $200k per year! Deductions for retirement plan contributions could provide a major source of tax savings and be a good step toward securing a better retirement nest egg for yourself.

If starting a business isn’t your cup of tea,  home mortgage interest allows for a hefty deduction. Currently the government allows homeowners to deduct “qualified residence interest” of up to $1,000,000 of “acquisition debt” and up to $100,000 of home equity debt.

The Alternativee Minimum Tax (AMT) has been affecting average taxpayers more and more over the years.  The AMT can severely limit your ability to take certain kinds of deductions and it is important to work with a qualified tax professional or financial planner who can advise you on your individual situation before you implement a new strategy.

Opportunity abounds for people to save money on taxes. The right strategy will depend on your goals, opportunities, and stage of life.

Account Aggrigation- Quicken, Yodlee, or other?

Technology canbe a wonderful thing. There are more and more ways of aggregating your consumer online billing accounts together, but which one?

I tried Yodlee through Yahoo Finance a while back. I found the program to be quite quirky and not robust enough for my needs. I recall that many of the businesses that I was a customer of were not on their list.

For my personal use, I use Quicken. I think it has more functions and is more widely utilized by financial institutions. As a customer, I like the ability to download their “QFX” file and have it open directly into the Quicken software. In addition, Quicken integrates directly with Turbo Tax making end of year tax preparation easier. While Quicken in my view is far ahead of Yodlee’s capabilities, it takes a significant amount of time to master the capabilities of the program. As a CERTIFIED FINANCIAL PLANNER™, I understand all of the financial concepts in Quicken, but I feel like I need a “Certificate in Quicken Planning” in order to use the thing.

Learning From Warren Buffett-Good For the Heart, Good For The Tax Return

 The Associated Press recently reported that Warren Buffett Wants Charities to Use His Fortune Within 10 Years After His Estate Is Closed.

Warren Buffett is arguably one of the greatest investors of all time. We should all be so fortunate to be in his position. Warren Buffett is not only a smart investor and generous philanthropist, he no doubt has achieved significant tax benefits from his donations.

If I were in his shoes, I would want to create a lasting charitable legacy that carried on after my death. I find no greater satisfaction in knowing that my money went to worthy causes and helped in contributing to make the world a better place.

I’m sure most people who had Warren Buffett’s money would answer the same way. The fact is, people who have significant wealth over the current Unified Credit Amount (for gift and estate tax purposes) are subject to onerous estate taxes (45% Federal, plus any applicable state death taxes) at the time of their death. People in this position who take the time to plan their estates properly, can realize significant tax deductions by making charitable contributions. Vehicles like Charitable Remainder Trusts can provide a tax deduction for the charitable contribution, remove assets from one’s estate so that they are not subject to estate taxes, and provide the donor with an income stream in return for the contribution. In my opinion, these kinds of trusts are particularly useful when one has highly appreciated assets (like real estate or low basis stock positions) which would be subject to capital gains tax if sold outside the protection of a trust of this type. In some cases, the donor can actually wind up with MORE, by actually gifting the asset away! This should not be construed as legal advice (I’m not an attorney and not qualified to give legal advice), but a wake up call to people that if done properly, people can have their cake and eat it too in many cases. When considering a charitable gift of this nature, I would say that it is helpful to determine how much money one needs in order to live the lifestyle they desire, how much estate taxes they could potentially be subject to, what steps could be taken to reduce their taxable estate, and what legacy objectives could be realized as part of this process.

Warren Buffett’s desire to have the charitable organizations spend his assets within 10 years of his death reflect a trend among large donors called “Strategic Philanthropy” where donors want to have more control of what happens to the money that they donate. Realizing that in some cases, only a very small percentage of a donor’s contribution goes to the actual cause intended, many wealthy individuals have opted to create their own private foundations instead. This can allow the donor to take a salary (within limits) from the foundation, employ family members for pay (within limits) and create a lasting legacy that carries on after the donor’s death. People are advised to speak to a qualified estate attorney for legal advice.

In my opinion, the bottom line is that while many people know “giving to charity is good” they don’t know about the financial benefits that can come from “doing good”. I’ll bet Warren knows…