Why is communication so important when it comes to finances? Because finances are the number one reason for divorce in this country and because the divorce rate is over 50% at this point. Granted, this is not the only reason people get divorced, but I know, even the best of marriages can feel some strain because of money. The reason I chose communication to discuss today is because I am starting to put together a program that will outline steps people can take for their own economic recovery. It starts with coming to terms with your current situation. I think we have all been there at some point in our lives, whether it involved a relationship we realized just was not working for us anymore or our finances have spiraled out of control. Coming to terms with your situation acts as a catalyst towards healing. Please enjoy my blog post from earlier in the week where I share my own personal family story in regards to this (link below).

The next step is to start communicating. If you have a significant other in your life, that is who you need to communicate to first. When you pledged your love for one another, you made the commitment “For richer, for poorer”. You have chosen to walk through this life together…NOT ALONE. So, please do not feel like you need to take this burden on all by yourself.

If you do not have a significant other, find someone very close to you that you feel can be your pillar of strength. No, maybe they are not going through what you are going through, but they can be there to help you get through this. This could be your mom or dad, your children (if they are adult children only please), your dearest friends, a neighbor. You get the idea. This is someone you feel comfortable bearing your soul to. Someone you would trust your life to. Someone you know will not go blabbing your business all over the neighborhood.

If you have no one in your life you feel that comfortable with, seek out a professional. You could find yourself a good CPA (hey, I might know one of those ;0)), a financial advisor, an attorney. Make sure you check out their credentials, their resume and most importantly that you feel comfortable with them.

You have to understand, first that you are not alone. Even when economic times are good, people struggle financially. There is always a way out. It may not be pleasant to go through, but the sooner you do it and the more conscious you are when you go, the better. And, as my mother always says, “This too shall pass.” I promise.

Not only are you not alone, you don’t have to go through it alone. Being a CPA and my husband being in construction, I naturally took over the business and household finances when we moved in together. It got to the point where I was resentful of having that enormous burden on my shoulders. He was frustrated because he did not know what was going on. We now sit down weekly and go through everything. I still do the work because that is what I do for a living and it makes the most sense for us. However, he is fully aware of our financial situation and what is going on. I am hoping to get to the point where if something happens to me, he will be able to take over. I have to admit, we are still working on that one.

Same thing with Lindsay, my employee. It is very important that I keep her in the loop as well. It is a wonderful motivating factor for her. She sees what needs to be done and she takes care of it. You will not always feel comfortable sharing financial information with employees, but there may be a couple key employees where it makes sense. That will have to be a personal decision for you.

The point is, if money is the root of all evil, I feel communication is its kryptonite.

When I was eleven years old, my father had to have surgery for a malignant brain tumor. Considering my age, I did not understand the enormity of the situation. But, I distinctly remember asking my dad years later when I was in high school this question, “How did you go into the operating room that day knowing your brain was going to be exposed to the elements?” I mean, the thought of him having to anticipate that literally makes my stomach turn today. I remember the day as if it was yesterday. My brother and I usually rode our bikes to school, but that day my dad drove us to school. Then, it was off to the hospital for him. To have to go about your daily life with that agonizing thought?!

I will never forget his response. “I went into that operating room assuming I was not going to come out alive. I had come to terms with death and I was at peace with it.” He still had the will to live. He had two young children and a wife to live for, and he fought. He survived and is still living a full life. But, coming to terms with your situation and reality can bring an enormous sense of peace.

I remember the day some time ago that I had to come to terms with my personal financial situation. Granted, my situation was no where near as grave as my father’s health crisis, but I did learn a lesson from it. That moment that I realized that things could not keep going the way they were going. We were definitely on a crash course with reality if things did not change…and quickly. That was scary.

But, then, I came to terms with my situation. I made peace with it. Fear was holding me back and trying to get me to keep doing what I was used to doing. However, that was clearly not serving me well anymore. Once I came to terms, I felt so empowered! There was this enormous sense of relief around me. I no longer had to keep trying to make it all work knowing it did not. I could be real now. I didn’t need to keep up with anyone or put on a show.

Peace was all around me. No matter what happened, I was at peace with it. I knew we could get out of it. But, things were going to change…and that was okay.

Coming to terms with your situation can be freeing and enlightening. Are you putting on a facade? Are you trying to make something work that just clearly isn’t going to? Do you keep burying your head in the sand? It’s okay, the first step is coming to terms.

I woke up about 4:00 this morning to the sound of rain on my window. I was having a difficult time falling back to sleep, but I didn’t mind, I love listening to the rain. Living in California, we don’t get nearly as much as the rest of you throughout the country, so I love it when it is here. Plus, is there anything better than snuggling up in a warm bed listening to the rain? Okay, maybe there is, but it is certainly one of my favorite things to do. But, I digress, the reason I am so focused on the rain is because as I was laying there I thought about how cleansing the rain is. Doesn’t everything just seem cleaner (cars excluded) after the rain? Very purifying. That is when I decided to come clean about how I successfully maneuvered my family through a one third decrease in our income over the last two years. It has been a very painful, eye opening and cleansing process, but I am very proud now.

Yesterday I ran through my families estimated taxes, just wanted to make sure we didn’t owe the IRS anything before the 15th of January. When I pulled the numbers together, I had to show my husband because I almost fell out of my chair when I saw them. Our income was the lowest since before I started my practice in 2003. No wonder last year was so painful, we have two more children since then! I’ll explain more about why I was so proud later.

Some of you may know that my husband is an electrical contractor and he has his own business which he runs on the side. I have my own practice as a CPA. For the last five and half years we have been on the self employed financial roller coaster. With the economy the way it was last year, my husbands side business became almost non-existent. My practice definitely took a hit as well as the fact I hired a part-time employee. So, how did it all fall nicely into place?

• The Purge – It all started in the summer of 2008. The poop was hitting the fan financially. That is when I started to realize we had completely over extended ourselves. That is when I accepted the fact that my very own actions had gotten us in some hot water. It was ugly. It was painful. But, once it was out, there was nothing left to fear. All my dirty laundry was out there for everyone to see and I was okay with that because now, maybe I can help others.
• The Plan – Once all of the ugly stuff was out there, my husband and I made a plan. I bit the bullet and sold my one year old full size SUV for $7,000 less than I owed on it. Not to mention the $30,000 in depreciation it took in just over one year. Tell me that didn’t hurt! But, the fact of the matter was, I could not afford the $726 per month payments, so I had to make it work. We went through our financials and cut back wherever we saw necessary.
• The Forgiveness - I cannot tell you how many times I have woken up in the middle of the night and lay there beating myself up about the decisions I had made in the past. But, there came a point where I realized that was not serving any purpose. As my husband always says, “It is what it is.” I can’t change the past, I can only change how I choose to move forward in the future and beating myself up is just not smart. So, I moved on and started to look ahead instead of in the rear view mirror.
• The Execution – No, I swear no one was executed in this process! This is the execution of the plan. My husband and I started to keep meticulous tabs on our financials. Being a CPA, I have always kept close tabs, but I am talking about having a weekly budget and following it. Saying no to things if we could not afford it. Absolutely refusing to break out the credit cards for anything. And, slowly paying down the debt we had accumulated. We got rid of our pest control, our pool guy and our housekeeper. We started shopping only at Walmart and Costco. We cut our monthly budget by almost $5,000. Was it easy? No. But, we did it and it was not nearly as bad as you would think it was.
• The Proud Moment – Yesterday when I finished the numbers and saw how much our income had gone down, I felt a little deflated. But, then again, I think almost everyone is feeling that way right now. However, when I realized what we had accomplished, I was almost giddy. With our income as low as it was, this is the most in control I have felt with our finances since becoming self employed. I have plenty of savings, our debt is being paid down and we are not using any credit.

Should I have been more careful to begin with…yes. But, I have learned some valuable lessons and I don’t mind airing my dirty laundry if it means you learning something. I hope this gives you the momentum you need to finally take your financial life by the horns.

According to www.dictionary.com, want is defined as “to feel a need or desire for; wish for.” Whereas, need is defined as “a requirement, necessary duty, or obligation.” I know that may seem obvious, but it is amazing how frequently people get those two things mixed up. Unfortunately, this may very well be one of the main contributing factors to the economic situation we are currently in as a country. And, trust me, I am not immune to this either. I think we have all been there.

The reason I wanted to write about this to you today is because I want to stop this cycle we are in. I want to help you put procedures in place so you can decipher a want versus a need. When times get tough, you have to cut expenses somewhere, this will help you decide where.

Look at the bills you pay monthly. Needs may be your rent or mortgage, electricity, water, sewer, garbage, gas, etc. Those are some of the pretty obvious ones. Wants may be cable, pest control, pool service, etc. Some of you may be screaming at your computer monitor right now. Yes, cable is a want… :0) You need a roof over your head, you need to stay warm in the winter and cool in the summer, you need gas in your car to get to work and pick up the kids. You do not need to have someone take care of your pool, go to one of the local pool supply stores and get a kit to do it yourself. You do not need cable, I know this may be hard, but with cable bills going through the roof, it is a choice you may have to make. You do not need pest control, you can go to your local hardware store to get the stuff you need to do it yourself. Just make sure to follow the directions exactly and take the appropriate precautions with handling the chemicals.

Sometimes your brain might try to fool you into thinking something is a need instead of a want. Don’t let it do that to you. Take 24 hours to think something over, write out the pro’s and con’s to the purchase, call a friend to discuss and see what they say. All of these things put space between you and the item. Quite frequently you will find you don’t “need” it as much as you originally thought you would. Try it and see!

From www.irs.gov, if you are a small business owner, whether you hire people as independent contractors or as employees will impact how much taxes you pay and the amount of taxes you withhold from their paychecks. Additionally, it will affect how much additional cost your business must bear, what documents and information they must provide to you, and what tax documents you must give to them.

Here are the top ten things every business owner should know about hiring people as independent contractors versus hiring them as employees.

1. Three characteristics are used by the IRS to determine the relationship between businesses and workers: Behavioral Control, Financial Control, and the Type of Relationship.
2. Behavioral Control covers facts that show whether the business has a right to direct or control how the work is done through instructions, training or other means.
3. Financial Control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker’s job.
4. The Type of Relationship factor relates to how the workers and the business owner perceive their relationship.
5. If you have the right to control or direct not only what is to be done, but also how it is to be done, then your workers are most likely employees.
6. If you can direct or control only the result of the work done — and not the means and methods of accomplishing the result — then your workers are probably independent contractors.
7. Employers who misclassify workers as independent contractors can end up with substantial tax bills. Additionally, they can face penalties for failing to pay employment taxes and for failing to file required tax forms.
8. Workers can avoid higher tax bills and lost benefits if they know their proper status.
9. Both employers and workers can ask the IRS to make a determination on whether a specific individual is an independent contractor or an employee by filing a Form SS-8 – Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding – with the IRS.
10. You can learn more about the critical determination of a worker’s status as an Independent Contractor or Employee at IRS.gov by selecting the Small Business link.  Additional resources include IRS Publication 15-A, Employer’s Supplemental Tax Guide, Publication 1779, Independent Contractor or Employee, and Publication 1976, Do You Qualify for Relief under Section 530? These publications and Form SS-8 are available on the IRS Web site or by calling the IRS at 800-829-3676 (800-TAX-FORM).

Yesterday I told you to take a vacation in order to survive the summer financially.  Hopefully you have discussed this with your family and have made the decision to go…somewhere.  Trust me I understand money can be a concern, so, today I have decided to give you some advice on how to go on vacation with a budget in place.

The first and most important thing you need to do is take a good look at your finances.  See where you can plug some holes to make it happen.  Once you do that, put a budget in place.  Recently my husband and I gave ourselves a $1,000 budget to go to San Diego for the weekend.  We are going this weekend for our 10^th wedding anniversary.  I will share with you later how it all goes. 

Here are some tips on how to get great travel deals.

Research Your Vacation Options – If money is a concern to begin with, I don’t want you to stress yourself out more with an expensive vacation.  Here you have a couple of options.  If you are a do-it-yourself kind of person, the internet is your best friend.  Surf the web to find the best deals around.  Depending on the economy, you will want to book your vacation way in advance, or the night before you leave.  With the economy in the state it is now, I have heard of a few people booking flights to Europe a few days before and getting screaming deals.  A friend of mine booked a weekend in San Francisco the day they left and were shocked at the enormous discount they were able to get because they were booking it on the spur of the moment. 

If you are more like me, you get a little overwhelmed researching all that information.  I am a big fan of travel agents.  If you find a good travel agent, you can call them with some ideas of where you want to go, when, for how long and give them your budget and you are set!  The best part is this service does not cost you a penny.  Travel agents do this for a living, so, they know the best places for the best prices.  It really is a win, win for everyone.

How do you feel when you pay the bills?  Are you excited at the prospect of checking off some items on your to do list?  Are you subconsciously thanking your creditors for allowing you the opportunity to use their money for the month?  Or, are you completely overwhelmed with the task?  Do you procrastinate until you can procrastinate no more?  Are you overwhelmed and exhausted by the time the process is over? 

If you are miserable when you pay your bills, my guess is, your money is managing you.  You will not have financial freedom as long as that is the case.  I remember when I would pay my bills and I felt like a bird taking a bath.  There was money and paper flying everywhere, not sure where it was going, but it sure was not staying in my bank account.  Since then, I have put in some steps that take that feeling away.  They are:

• Have a specific place you pay the bills
• Make sure you have all the items you will need to take care of everything in one sitting -  If you have to get up to get something, chances are you will find another project to take your attention and the bills will not get paid. 
• Clear the space - You do not want it messy, that just adds to the confusion. 
• Select a day and time each week to pay your bills – If you put it on your calendar, you are more likely to keep the time carved out for that particular task.  If you try to squeeze it in somewhere else, it is much less likely to happen.
• Create a checklist – This way, you make sure you take care of all the things you need to do at one time.  Things like paying bills is obvious.  However, something you might forget to do is transfer money to savings or donate to your favorite charity. 

Hopefully some of these tips can help you create serenity while paying your bills.  I know that sounds like a dream, but you hold the key to making it a reality.

Why is it that when you see your neighbor driving a nicer car than you that you feel the need to get a car that is as nice or nicer?  Have you noticed that feeling more over the last several years?  I was sucked into that vortex.  I grew up in a family that was very money conscious.  We lived in a nice area, but had probably one of the smallest houses, just what we needed, nothing more, nothing less.  My parents drove nice cars, but nothing fancy.  They never had credit card debt, always paid cash for their cars and only bought cars when they needed them (what a concept!).  Since that was the way I grew up, that was the way I thought. 

Then…things changed.  I am not sure if it was just California or the United States, or the entire world, but things changed.  All of a sudden, sufficient was not good enough.  It was like we all caught this disease that made us think we needed and deserved more than we could afford (myself included).  When my husband and I decided to have children, we knew we needed a larger vehicle, so instead of buying a practical larger vehicle, we went for a full size SUV with navigation, DVD, fancy rims and tires.  Did we really need all that…no.  But, why shouldn’t I have the best?  Right?

I remember feeling pangs of jealousy if my friends had a bigger or nicer house than me.  Wanting a new car after buying the last one six months before because the new one had Blue Tooth technology that my current car did not have.  What did all this do for me (and probably the rest of America)?  It got us into a lot of trouble financially.  Why did I feel the need to have the name brand jeans from an upscale store, when I could go to a discount store and get the same ones for half the price?  I look back now and I don’t know what got into me.

One day, I literally just woke up.  I got it.  My material possessions did not define who I was as a person, nor did they define my family.  I don’t think my friends really care if I am wearing name brand clothes, and if they do, then they really are not true friends, are they? 

As a society, we seemed to get really attached to our material possessions and where that placed us in society.  I saw one of the heirs to the Johnson & Johnson fortune on Oprah several weeks ago and he noted that it was not “cool” any more to flaunt your wealth.  Thank goodness!  When you think about it, it is pretty sad that society got to the point where it was cool to basically rub in everyone’s face how “wealthy” they were.  Maybe we have turned the corner and America has learned a lesson.  What is that lesson?  There are a couple I would like to share with you that I have learned from personal experience.

• Material possessions do not define who you are.
• It is more important to have money in your savings account than material possessions.
• Take note of how your possessions make you feel.  (i.e. If you are buried under an enormous mortgage or car loan, consider selling the house/car.  You will be amazed at how much better you feel without the weight of that mortgage/car loan on your back.)
• Who cares what other people have, you need to look at what is right for you and your family.

Now, I am not saying everyone should go out and buy the most economical house, car, clothes, etc.  I just want people to start being conscious of needs versus wants and what fits into their budget.  If you do that, you should be on the right path in no time.

T. Harv Eker noted in his book “Secrets of the Millionaire Mind”, “Your life isn’t just about you. If you want to be rich in the truest sense of the word, you must contribute to other people’s lives.” Today’s article comes from www.irs.gov.

In this economy, I have found that the littlest things can make a big difference. They are: