Most people dream about being wealthy or play the lottery in hopes of winning millions, but few people actually have a strategy to achieve their dreams of wealth.

I hear many reasons why someone doesn’t have a wealth strategy:

• They don’t really know what a wealth strategy is.
• They don’t know how to get started.
• They think they need to wait to get started because they don’t have any money.
• They think they need to get out of debt before starting their wealth strategy.

A wealth strategy is a plan of action intended to achieve specific wealth goals. The fact is, everyone needs a wealth strategy, regardless of goals, age, wealth, income or debt.

The First Step to Creating a Wealth Strategy
The first step to creating a successful wealth strategy is knowing where you are going. I call this Your Wealth Vision. Your wealth vision is your picture of your ultimate lifestyle. Where do you live? How do you spend your time? What are the possibilities? Now, we can all close our eyes for a few seconds and imagine the lifestyle of our dreams. But to truly define your wealth vision means being very detailed and specific.

For example, in just a few seconds time, we may imagine our ultimate lifestyle to include traveling. In those few seconds, we may imagine the excitement that goes with traveling, and a snapshot of a place we’d like to go, but the details probably aren’t more specific than that.

This is much different than someone who takes the time to specifically define how they see traveling in their wealth vision. For example,

• How often will they travel?
• Who will they travel with?
• Where will they travel to?
• How long will each trip be?
• Will they fly coach or first class?
• Will they stay at a hotel, rent a home or buy a home?
• What activities will they do when they travel?

The more detailed and specific the wealth vision, the more likely it is to be reached.

Avoid This Mistake When Creating Your Wealth Strategy
Many people skip this first step. I think it’s because many people think that their wealth vision is simply to have lots and lots of money, so defining it is a waste of time. Plus, they are eager to move on to the next step. But, this first step is critical because you can’t get to where you’re going if you don’t know where it is you’re headed.

Once your wealth vision is defined, key pieces of your wealth strategy can come together. For example, when you know your wealth vision, you can determine your target cash flow and your target net worth. These targets can be used to develop investment criteria so your investments work toward your wealth vision and not against it.

Your Wealth Vision
Really think about your wealth vision and the specific details. Then, put it in writing. This is the first step I always take with any wealth strategy I create.

One of the most common scenarios I come across is the struggle many people have to create permanent wealth.  And most times it is not for lack of hard work.  When I dig into the situation, I find that many of the people fit into the following:

– They spend most of their time at work.

– They go to work in hopes they can “get ahead.”

– They spend 8, 10, or even 12 hours each day working hard for money.

– They spent anywhere from 12 to 20 years or more in school preparing for their profession.

And yet, the bottom line is they are not ahead at all.  

They may have a few dollars set aside for a rainy day, and have an investment here and there, but they aren’t creating any permanent wealth or making significant strides towards their dreams …even though they are working hard enough that they deserve to create some wealth.

Why Everyone Needs a Wealth Strategy
A wealth strategy puts you on the right path to building wealth – one that creates permanent wealth.  This is the purpose of a wealth strategy – it connects the action needed today in order to achieve the desired results in the future.  

Wealth creation is not solely about hard work. It’s also a matter of knowing how to make money. A wealth strategy is heavily focused on increasing your knowledge about how to make money in assets that will work for you.

What Action Will You Take?
Taking action is great, but it needs to be the right action – otherwise the results will be disappointing.  The wrong action is what creates the scenario shared at the beginning.

If you did something every day that positively impacted your wealth, how much wealth could you build in the next 30 days? In the next 60 days? In the next year?

Set aside an hour to identify the action you should take.  And if you aren’t sure what action you should take, then your first action should be to develop your wealth strategy.

Even if you are not ready to retire yet, it’s never too early to start thinking about your retirement years. Here are some simple ways you can start making strides toward preparing for retirement, even if it is far down the road.

1. Don’t rely solely on Social Security. Since social security won’t be sufficient to pay for life’s necessities – look for other options (investing) to help cover essential costs.  The present day retirees 2 greatest financial concerns are covering health care costs and running out of money before running out of breath.

2. Control spending.  If you’re living beyond your means before retiring, you are likely to continue in retirement until you don’t have enough to cover your needs.

3. Get a handle on procrastination and inconsistency. These are two of the biggest enemies of financial success.  Get started saving today and do it on a consistent basis.  Use payroll deductions and programmed bank withdrawals.  Investing whether the market is up or down is important.

4. Plan for healthcare. The Employee Benefit Research Institute estimates that the average couple can expect to spend $261,000 of their own money to achieve a 90% certainty of meeting their health care needs.  In addition to Medicare, have a supplemental policy and long term care might be a good idea.  Insurance may seem expensive, but not having it could be more expensive.

If you’re not planning on retiring for many years to come, you don’t have to have every retirement detail in place yet, but it’s never too early to start thinking about some of these issues and beginning to make some initial plans.

Practice 1: View every day as an opportunity to reduce your taxes

When you are making money, there is an opportunity to reduce your taxes. When you are spending money, there is an opportunity to reduce your taxes. When you have a new investment, there is an opportunity to reduce your taxes. When you make a new deal for your business, whether it’s with a vendor, a customer or an employee, there is an opportunity to reduce your taxes.

Making it a habit to look at every day as an opportunity to reduce your taxes will create the right habits to actually reduce your taxes.

Practice 2: Don’t put off until tomorrow what you can do today.

It is crazy to put off anything you can do today to reduce your taxes. Every day you delay your tax planning represents money you are unnecessarily giving to the government that you could be putting in your pocket.

Do something today to help your tax strategy!

For example, spend 15 minutes scanning and filing your receipts. Those who stay organized throughout the year are better able to capture all of their expenses, whereas those who only do it once a year usually miss several expenses.

Practice 3: Track where your cash goes. 

Little expenses can add up to big tax savings. Track where your cash goes. Cash is one of the biggest offenders when it comes to missed deductions – business lunches, tips, other incidentals. It’s easy to spend cash, and then forget where it was spent. This means the deduction gets missed.

A few dollars here and there adds up. Let’s say a person spends $20 cash every day on business expenses. That’s over $7,000 a year in missed expenses that can result in an overpayment of taxes of over $2,500.

Practice 4: Stick to your tax strategy.

Most tax advice is geared towards those who are not business owners or investors which is why you want to make sure you stick to your tax strategy.

Business owners and investors have much better opportunities available to them in the tax law to reduce their taxes. Often times, the tax saving opportunities available to business owners and investors create permanent tax savings (this means the tax is eliminated) while the tax saving opportunities available to the general population create temporary tax savings (this means the tax is just deferred until a later year).

Practice 5: Stick to your wealth strategy.

I regularly have people share with me that they bought or invested in something for tax benefits and then ask me if that was a good idea. I always answer the same way.  If it is part of your wealth strategy, yes!  If you have not considered how it fits in your wealth tax strategy yet, you definitely want to do that first.
 If you want to learn more about how to take advantage of these tax strategies; sign up on our email list or call us for an appointment to get started today

Clients have been have been asking for investment services! We heard you.

Vanderbilt CPA Group now has an independent professional in our office location who can provide these services. It is a natural fit as many investment choices often are related to tax and accounting matters. Many of you already know Bill Kossen from our office; he will now be providing investment services to clients.

Transamerica Financial Advisor’s Registered Representative, William R. Kossen, welcomes the opportunity to review/discuss investment opportunities that make sense to you. “I enjoy helping my clients prepare for the future by getting to know them and their needs. I enjoy working with Vanderbilt CPA Group because they work hard to take care of their clients’ complete financial needs.”

Request your free investment (portfolio) review today as an annual financial check-up. Are your retirement investments doing as you expected? It could be costing you valuable retirement income.

Bill Kossen is a Registered Representative and Investment Advisor with, and Securities offered through Transamerica Financial Advisors, Inc. (TFA) member FINRA, SIPC. Non-securities products and services are not offered through TFA. Vanderbilt CPA Group is not affiliated with TFA. Neither TFA nor its representatives provide tax or accounting advice. Persons who provide such advice do so in a capacity other than as a representative of TFA.

To schedule an appointment, contact William R. Kossen or Janice S. Vanderbilt at 616.954.9254

We are just over halfway through 2014 and that means it is time for a mid-year tax strategy check up.

Mid-year is a critical time when it comes to tax planning. Enough of the year has gone by that you have a good idea of how the year has been and there is still time to make changes. Below is a checklist I like to share every year. It covers the actions you can do mid-year to make sure your tax strategy is on track.

Check Up Point #1
Do you need to add an entity or change how an entity is taxed in your tax strategy?

Entities are one of the greatest tools to reduce taxes. Knowing the right time to add an entity and knowing the right entity to add can save as much as $10,000 per year in taxes. However, the entity needs to be in place in order for the tax savings to occur.

When I create a tax strategy with a client, it’s not uncommon for an entity to be created knowing that once it reaches a certain level of income, an election will be made to change how the entity is taxed. Missing this election or not making it at the ideal time can be a very costly tax mistake.

Now is the time to look at adding an entity or changing how one of your existing entities is taxed. Waiting any longer could minimize the tax savings for this year.

Check Up Point #2
Are your entities paying you the optimal amounts to minimize your taxes in your tax strategy?

Optimizing how you take money out of your entity is another effective way to reduce your taxes. The amount that is taken and how it is taken can have a huge impact on your taxes. It can also get the unwanted attention of the government.

Now is a good time of year to check in on how your entities are paying you because if changes need to be made, there is still time left in the year to make those changes without having to do one big adjustment at the end of the year.

Check Up Point #3
Is your documentation in place?

Documentation is a great way to successfully get through an audit. It is also a great way to increase your tax deductions because proper documentation leaves less room for deductions to get missed. Documentation includes keeping proper receipts, keeping mileage logs for your business vehicle and keeping hour logs if you claim real estate professional status.

Documentation is best when it is kept current. An auditor can usually tell when someone has gone back and created their documentation after-the-fact. Don’t get behind with your documentation – now is the time to get caught up.

Check Up Point #4
Have you been reimbursed for expenses you’ve paid personally?

Commingling business and personal funds is never a good idea. It can jeopardize the legal and tax status of your business.

To avoid commingling of funds, it’s best to pay business expenses with business funds and personal expenses with personal funds.

There is one exception to this and that is business expenses paid by you personally. It is a common business practice for a business to have a policy in place to reimburse employees or owners for certain expenses. Common examples include lunch with a client or travel for business purposes.

If you have paid for any business expenses personally and have not been reimbursed, it’s time to submit that expense report and get paid. These expenses are easy to forget about and that means the tax deduction could get missed.

And, if your business doesn’t have a policy in place to reimburse you for these expenses, it’s time to get that in place too.

Check Up Point #5
Is your bookkeeping up-to-date?

Have you noticed that each of the above is impacted by your bookkeeping? Bookkeeping is one of the most powerful tools in a tax strategy. Without up-to-date bookkeeping, it is impossible to determine if anything in your tax strategy needs to be adjusted in order to maximize tax savings.

How are you doing on these five points? By paying attention to each item on the checklist now, you will be better prepared at the end of the year.

The Limited Liability Company (LLC) is a terrific tax entity because of its flexibility, specifically being able to choose how it is taxed. 

An LLC can be taxed in many different ways

An LLC is not a tax entity, it is a legal entity. As such, an LLC can choose how it wants to be taxed.

An LLC can be taxed as:

– A sole proprietorship
– A partnership
– A C corporation
– An S corporation

Do you know how your LLC is taxed?

If your LLC did not make an election, then it is taxed as the “default classification.”

The default classifications are:

If your LLC has one member (owner), then it is disregarded for tax purposes. This means that all the LLC activity is reported by the owner and the LLC files no separate federal tax return. However, some states require disregarded LLCs to file a state tax return.

If your LLC has more than one member, then it is taxed as a partnership and files a partnership tax return.

Special rule:
If you and your spouse are the only owners and are in a community property state, then you can choose which of the two classifications you want to use.

If your LLC made an election, then your LLC is taxed as a C Corporation or an S Corporation. This election is typically recommended for operating businesses that are profitable.  This election is typically not recommended for LLCs that hold investments, such as stock or real estate. LLCs that hold investments are typically best left in their default classification. 

Understanding the fundamentals of entities, particularly LLCs, is a key part of building a successful tax strategy.

If you want to learn more about how to take advantage of these tax strategies, sign up for our updates or email us for an appointment to get started today

The Limited Liability Company (LLC) is a terrific tax entity because of its flexibility, specifically being able to choose how it is taxed. An LLC can be taxed in many different ways. An LLC is not a tax entity, it is a legal entity. As such, an LLC can choose how it wants to be taxed.

An LLC can be taxed as:

– A sole proprietorship
– A partnership
– A C corporation
– An S corporation

Do you know how your LLC is taxed? 

If your LLC did not make an election, then it is taxed as the “default classification.”

The default classifications are:

– If your LLC has one member (owner), then it is disregarded for tax purposes. This means that all the LLC activity is reported by the owner and the LLC files no separate federal tax return.

Important note: Some states require disregarded LLCs to file a state tax return.

– If your LLC has more than one member, then it is taxed as a partnership and files a partnership tax return.

Special rule:
If you and your spouse are the only owners and are in a community property state, then you can choose which of the two classifications you want to use.

If your LLC made an election, then your LLC is taxed as a C Corporation or an S Corporation. Do you need to make an election for your LLC to be taxed as a C Corporation or an S Corporation?

This election is typically recommended for operating businesses that are profitable.This election is typically not recommended for LLCs that hold investments, such as stock or real estate. LLCs that hold investments are typically best left in their default classification.

Understanding the fundamentals of entities, particularly LLCs, is a key part of building a wildly successful tax strategy.
If you want to learn more about how to take advantage of these tax strategies; sign up on our web site or email us for an appointment to get started today.