The Money Bucket

Don't feel bad if this is you because it happens to most people. You finally commit yourself to save money by putting it in the "money bucket" (your savings account). You know, it's the one you signed up for when you got your checking account. Maybe a New Year's resolution or a nice big tax return inspires you to begin, but for some reason, the pattern doesn't last long. Soon your money bucket springs a leak & becomes a fund to tap into when unexpected expenses arise. Soon those unexpected expenses become regular ones.

Why does your money bucket leak?

It leaks because it's a flawed system! Your savings & checking accounts are linked. When the bank sets you up with an automatic savings plan (ASP), they say they want to help you save. That's partially true because they do want all your money (more on that later), yet easy access to your funds sets you up to fail at saving. ASPs are a great idea, because your savings grow while you sleep. One of my favorite quotes from Ronco's rotisserie cooker is, "Set it & forget it," but most people don't follow through with the second part. They set it and spend it.

Your savings account becomes an extension of your checking account. When an unplanned expense arises, it's too easy to dip into savings to cover costs. By socking away a little at a time, I've saved hundreds, even thousands in the past, only to spend it on the latest electronic wonder or a vacation I couldn't afford. Hey, I didn't call it VacationTax.com for nothing! Think about a time you committed to saving. Maybe you had a goal or a big purchase you were planning for. What did you end up spending the money on? Where is it now?

Of the countless reasons people stop saving, two stand out as regular causes of the leaky bucket:

1. Lack of a savings plan
2. For those who do plan, failure to stick to budgeted expenses.

Without a plan it's easy to get discouraged. What are you saving for? Retirement? You may want to re-think your strategy...here's why: My first ASP set up by my bank (when I was 16 years old) automatically transferred $25 from my checking account to my savings account on the 15th of each month. Why did the banker set me up with this? Not to help me save for retirement, a car, college or anything at all. He was helping me get a free savings account. That's right, my banker, my trusted advisor in his suit & tie, wasn't really advising me at all. Bankers are there to open accounts. I was saving, but how much could I possibly save at $300 per year.

Before long, I was transferring money back to my checking account to cover teenage expenses. I saw the meager savings totals & questioned the point of it all. Whenever I got a lump sum of money, I was quick to spend it because I had no base savings to add it to. I really have no one to blame but myself for this start in life, but I guess no matter how many times we're shown something, we still do need to make our own mistakes to learn our lessons. Back then I thought it was all about wearing name brand clothes & driving new cars. Now I know that I can own these things, with a sound financial plan.

What are you saving for? I know I asked this two paragraphs ago, but some people simply save for the sake of saving. Let's say you've gotten past step one & figured out a budget to save 100 per month or up to 25% of your income. What inspires you to stick to it? What happens if your neighbor gets the latest model of this or that, the new housing development in that nicer part of town finally opens their beautifully decorated models or word gets around your family that you have a little money put away, and someone needs just a little help to get by. Well nothing kills a savings plan faster than a new car or other loan payment or a family emergency. Soon you're back in "paycheck-to-paycheck" mode struggling to get by.

With knowledge, support & discipline, anyone can attain financial freedom (yes even working for the man). First, educate yourself on ways to save money, either by cutting expenses or, heck, why not by increasing your income? Look for budgeting books at your library. By the way, libraries are perfect for cutting costs! Research the web, but don't spend any money there. Beware that advertising supports most sites, so you could easily click your way in debt looking for financial freedom! A favorite free budgeting site I use, Mint.com, lets you plan & monitor your spending. It's a good start for support, but you need people behind you as well. Be sure your family is on board & stick with advisors who look out for your best interests - not those of the bank or insurance company! Finally, the key to it all is discipline. Remember, YOU have the ultimate say of what you spend your money on.

Now you know how & why your money bucket leaks. Next you'll learn about expenses that are both under & out of your control, as well as how to manage both.

Yes You Can Retire Early Working For The Man

The other day I read a newspaper article about a 60 some year old lady going through a world of trouble because of her increasing health insurance costs. On her fixed income from Social Security & other sources, any change means giving up something in life. She already gave up going out for dinner & movies as well as so many other "luxuries" you & I may take for granted. She didn't have much left to sacrifice! I rarely read the newspaper to avoid sad stories like this. I know it's supposed to call you to action & fight the big evil insurance companies, but I looked at it a different way.

I don't subscribe to the paper. I read the article at my mother's house, so I immediately thought of my own mom. Last week she moved another step closer to 60, but she already retired a few years ago. No she didn't leave work for some injury or layoff or anything like that. Her passive income allowed her to cover her expenses, so she figured it was a good time to leave. Before you think she was blessed to work in some high paying career, I want to let you know she worked for 30+years as a grocery checker.

Don't get me wrong; I have tons of respect for that position. My grandfather was a butcher, my uncle delivered cookies & my dad sold anything from Dolly Madison cakes (remember those) to linoleum & carpet. I come from a line of worker bees, but these jobs, with all their little rewards & perks here & there (think free cookies), are monotonous, labor intensive jobs. They all performed well on the clock, but while many of their coworkers lived paycheck to paycheck, they were planning for their future.

I haven't yet mentioned that my dad passed away nearly 20 years before my mom retired. Most of my financial knowledge comes from the 12 years or so I was lucky to have my dad around. He was a good dad, maybe not the best parent in the world, but he was practically a genius with money & investments. In this blog, I share knowledge & secrets of the very rich, but the realistic "retire early" ideas come from the foundation he laid that helped a widow & single mom retire ahead of schedule. That's really what you want, right? To have your passive income outweigh your expenses, so you can retire from the workforce forever - All while working for "The Man."

How can you eliminate your IRS tax debt?

Know three useful ways to get rid of your Internal Revenue Service tax dues.

When you have piled up a huge amount of IRS tax debt, it can really start giving you nightmares. Any problems with the Internal Revenue Service can cause anxieties. Moreover, the penalties levied by the IRS are huge. This is essentially problematic for individuals and small business owners who fail to pay their IRS taxes on time or deliberately carry outstanding balances each year. In these circumstances, the Internal Revenue Service has the authority to close your business, attach your home or other valuable properties or block your bank account. This government agency closely watches individuals and small businesses for indications of tax scams.

It is always that you go for the right type of tax debt management help to handle your problems. However, where can you find tax debt management assistance? This is one thing that worries the debtors. The IRS has come up with a range of plans for settling the tax difficulties of the borrowers. Given below are three of those plans that would help you eliminate your IRS tax debt:

1) Offer in compromise

Under this plan, the nonpayer can negotiate with the functionaries about the amount that is outstanding. Nonetheless, there are various requirements that you have to fulfill. Furthermore, this method is usually quite extensive and strenuous though it’s quite worthwhile for individuals who can fulfill the prerequisites. You can talk to various experts and decide whether you’re eligible for this plan.

2) Installment agreement

This is one of the popular plans provided by the IRS. This plan assists you in repaying your current dues through monthly installments. It has similarities with your credit card payments. The amount of payment would be determined by the Internal Revenue Service. In spite of the fact that your opinion might be taken on how much you can essentially manage, it is finally decided by the federal author. The amount is typically big.

3) Penalty abatement

When you have tax dues, the IRS would begin summing up penalties and interest. In this manner, they would continue including newer charges into your existing dues. Eventually, this amount would become a huge burden for you and you might feel that you can’t pay it off. If you can give genuine explanation to the IRS to convince them why you can’t pay it, they might offer some relief. There are some necessary formalities you need to undergo and you can substantially lower your obligation by up to 30%.

Neglecting your IRS tax debt is a blunder. Look for professional assistance to settle your IRS tax dues.

Money Traps

For most of us, the best way to accumulate wealth & attain financial freedom is (believe it or not) by working hard, saving what we earn & investing wisely. Yes you can get rich working for "The Man." People think you need to start your own business, win the lottery or luck into some inheritance to become financially secure. Not only is that not true, you could end up the opposite of rich if any of those happen to you...as long as you can avoid the "money traps."

I've met quite a few business owners, and the majority work tirelessly & continuously on & in their businesses. One of my closest friends invested his life savings into a few investments, including his own retail store. Business started out OK, but as the economy turned, he had to work more & more. Last year he had to lay off his one employee & now works full time at his shop. He works more than ever for less than ever & has lost the ability to nurture other investments. Financially free people don't need to work for their businesses. Their businesses work for them.

People think winning the lottery or gaining an inheritance brings financial freedom. How often have you heard the sad but classic tale of the lottery winner who lost his fortune on bad investment or ill planned purchase? Fast fame often accompanies fast riches. Friends & relatives find you before you realize how much money you have. They may even sincerely believe they have the answer to riches aside from a somewhat small investment from you. I don't want to focus too much on this path to riches because it's the least likely. My goal with even mentioning these is to make sure you invest as little as possible here. Building wealth on a budget takes every dollar you can get your hands on.

With knowledge, support & discipline, the rest of us have a chance for financial freedom too. The problem with those of us who are fortunate to save a little, something comes along to take it away. People approach us all the time with financial needs or investment ideas; however, we tend to notice them most often when we have a little to invest. Sometimes our own wants & needs come up. We easily become the proverbial fool who is soon parted with his money. Those who go into debt for these wants & needs suffer worse. Is instant gratification worth paying double or more?

I compare this to a leaky bucket. We think if we save our money in a bucket, we'll eventually add up enough to retire or be financially free, but the math doesn't add up. How can you save enough to be rich if A. your budget doesn't allow you to save even a few thousand dollars per year, or B. Whenever you manage to save a little, an expense seems to suck it all away? Don't give up on me yet! I know the picture seems bleak, but as we continue, you'll learn that you can debunk the myth that you can't get rich working for someone else. In fact, you'll learn that it's the most surefire way to do it!