Tuesday, February 26, 2013

ON GENERAL PRINCIPLES

Over the past 45 years there have been thousands of times where I have been asked for my professional opinion on some proposed business or investment opportunity.  Usually there are three factors or classes of information that go into the opinion.  The first class of data is the technical data such as rate of return, risk, location, nature of the investment, dollars needed, expertise needed, etc.
The second class of information is the character of the investor.  This one may surprise you.  Any particular investment may be fine for one person and not good for another.  There have been hundreds of times when I have seen a perfectly good technical decision go bad because the personality of the investor did not fit the investment.  For example, the investment in mutual funds by an investor who could not stand to see his investment lose value and therefore sold at the worst time.  Or the real estate investor who absolutely hates dealing with renters and becomes a nervous wreck worrying about the property.  So I always try to make sure the business or investment decision matches the person.
The third class of information is the “general principles” class.  These would be things like, is the dollar amount needed just too much of the persons assets, or is there enough diversification in their investments, or is this kind of asset just too hard to deal with?  These general principles are the hardest to convince a client to apply.  When the other factors look good it is hard to say no just because, for example, you have too many of your eggs in one basket.  But oh, how many times I wish they would have listened. 
So when looking for an advisor, look for someone wise enough to apply all three types of information to your decision and then, may I say it, listen to their advice.
Loren L McCann, CPA, MS(Tax)

Thursday, February 21, 2013

SOMETHING MY MOTHER DIDN’T TEACH ME

My mother taught me many useful things; treat people kindly, do your share of the work (like washing the dishes), be organized.  But one of the things my mother did not teach me was “do not go into business with family members”.  In the 45 years that I have been in business and advising others I have to admit that I have seen a few successes in family business.  At the same time I have seen a hundred failures.  Surprisingly, the failures usually are the result of loving our family members and believing that love cures all ills.  I always advise that before entering any business, especially a family business, you need to write up a detailed operating agreement.  The agreement should cover things like who is putting up the money and how much, who is doing the work, how are decisions made, and how will things be divided up when the business ends.  The problem with family businesses is that if we do not spell out everything in advance, we not only lose a business deal when things end, we may also lose the family member.  So even though I am not your mother, take this advice and prepare a very detailed operating agreement before entering into any business, but especially before going into business with a family member.
Loren L McCann, CPA, MS(Tax)

Tuesday, February 12, 2013

I QUIT…BUT HOW WILL I EAT?

Retirement can be a scary concept.  What are you going to spend your time on (hopefully not television)?  Is there some way you can give back to the community now that you don’t have to spend all day making a living?  Can you quit all at once, or do you need to cut back slowly, both for financial reasons and emotional reasons? 
Here is how we can help you make those decisions, and I hate to even mention it.  Brace yourself….you need to do some BUDGETING.  To most of us budgeting is that dreaded word we don’t speak in mixed company.  However much we may dislike the exercise, retirement is one time when we had better not ignore the discipline.  It does not have to be a formal monthly budget, although that might be best.  It could be as informal as a one-time worksheet of expected income and expense after retirement.  We have some simple retirement planning worksheets on our website under “Financial Tools…Retirement” (http://www.sutton-mccann.com/Financial-Tools).  We encourage you to look over these worksheets and let them help you make your decisions.  We are here to help you too, so let us know when you first start thinking that retirement is coming along.  There are some financial decisions that need to start being considered a couple of years before you actually retire so don’t put off your planning too long, give us a call.
Loren L McCann, CPA, MS (Tax)

Tuesday, February 5, 2013

Filing Season Blues

You may have heard that the IRS cannot accept personal tax returns for processing until the end of January, and those are only the simple returns.  Many of the more complex forms will not be able to be processed until much later than January.  If you have a simple return and are expecting a refund, or if you are one of those people who just likes to get the tax filing over and done with, it is not the IRS (or heaven forbid, your tax preparer) that is to blame.  Congress is responsible for waiting too long to act.  Our tax law is so complex that changes require huge re-programming efforts by the IRS and private tax preparation companies.  So if you are annoyed at being delayed this year, please let your representatives in Congress know about it.  Your communication with your Congressional representatives really does make a difference.  You are one in a district of hundreds of thousands, but your Congress person may only receive a few hundred letters per month so your letter may add a significant impact to the concern you are writing about.  Let’s try to influence Congress to act more responsibly by passing their law changes earlier in the year.  We can be part of the solution if we act on this.

Friday, February 1, 2013

Need News?

Have you signed up for our free monthly newsletter yet? If not, go to http://www.sutton-mccann.com/Monthly-Newsletter and enter your email address. It is that easy. While there, you can check out some of the past issues. Soon you could be receiving a newsletter packed with tax tips and news.