The James Dicks Blog

Well, here we go again. April 15 is right around the corner which means it’s time to get your 2009 income tax done. Hopefully you’ve been working on your documentation throughout the past year but if you’re like most people, you only begin when you have to begin – which means you’re probably scrambling today. So, between now and April 15, I want to present you with some information that just may help your planning as you prepare to accurately fill in the blanks on your 2009 tax forms.

First, I urge everyone to use the long form when filing your return. One of the key errors made by people who pay too much in their annual tax bill is that they ultimately decide that the amount of time spent each year preparing their tax returns is more important than saving money for themselves and their families. They may not be consciously doing so but that is exactly what is happening. Our American society always seems to believe that faster is always better and for many events, that’s true. But, that may not be true when it comes to your tax strategy. The IRS gives precise guidance to those who are considering using the “EZ” form and the IRS website gives strict guidance to those who are considering using this form (www.irs.gov/taxtopics/tc352.html).

It’s very common for those using the “EZ” form to leave money “on the table,” whether directly or indirectly. When the IRS developed the short forms (1040A and 1040EZ), they did so as a method of making it easier for you to easily complete what most people consider a complicated task. Now I’m not a conspiracy theorist but I’m also not totally convinced that this was the real reason for creating these short forms. Rather I believe it was a masterful method of cutting back on the number of deductions that could be claimed each year against the government’s balance sheet.

I can’t deny that these forms are much easier to complete for those who fit the profile; but by doing so they end up paying the maximum amount of tax possible at particular income level. When an individual fills out the 1040 long form, they also open up all possible deductions that are available. The first time an individual fills out a long form, they usually quickly see the various deductions that they can’t take and this lesson will give them an opportunity to see where their tax planning might be lacking. One thing is for sure, you never pay more in taxes by using the long form. Once you become familiar with deductions that might be available to you, you will always pay less.

I would always recommend you take advantage of the knowledge of a tax professional, whenever possible. I’ll discuss that in my next article. But a professional will probably not miss the possible deductions that fit your personal situation. The IRS keeps track of the deductions that are most frequently overlooked by taxpayers and if you are a novice in developing an effective tax reduction strategy, then you’re probably completely unfamiliar with the numerous deductable opportunities that actually exist. A tax professional is constantly learning about the most current changes to the tax code and is, no doubt, up-to-date when it comes to the ever-changing tax laws.

By the way, the tax laws are still being developed for the 2009 reporting year because so many things have changed along with the new government in power in Washington DC. The stimulus package, the housing market, the Haitian disaster, and the rules of what is taxable and nontaxable as it pertains to unemployment benefits, have all contributed to creating questions in this year’s tax law. The estate-tax law is still out, and there have been reports that things have changed so much, so fast, that some of the forms needed aren’t even ready yet. This is going to be a very interesting tax season. Just make sure you’re prepared, learn all you can and make sure you are within the standards set forth by the tax code. Do it right the first time and meet all the deadlines on time but also make sure that you take advantage of every deduction you are qualified to take.

This may be a little off topic from most of my blogs, but after watching the most disturbing investigative news report I have seen in a long time, there was no way I was going to bed without writing about it. The story was on 20/20 last Friday night on ABC. It was about young children going to the dentist and being subjected to the most traumatic experiences you could ever imagine. The videos that they showed in this report were shocking, unacceptable and you can bet I will be with my kids next time they visit the dentist. These young kids were having in some cases up to 16 root canals in one sitting, the dentist turning up the radio so parents couldn’t hear them screaming, putting the kids on a restraining board so they couldn’t move while still carry out these procedures until the kids were beyond hysteria. I can hardly even write about it.

I will let you, if you dare, go to You Tube and search the 20/20 Small Smiles story which aired Friday night January 22, 2009. The clinic that the story focused on was called Small Smiles with locations all over the country. Apparently they just settled with the Justice department this week for $24 million, and have had numerous other settlements.

Let me share a dentist story with you that happened to me. I went to a dentist many years ago, the dentist told me I had 8 cavities and that I needed them filled. I can tell you one thing; this Marine doesn’t like going to the dentist or at least their practice. So I put the procedure off and told them I would be back later. I’m glad I did that because I went to a different dentist for a second opinion and, guess what, I had no cavities. This dentist was about to start drilling for no reason at all and worse yet, I had family members that weren’t as lucky as me and ended up getting the drill from this dentist, who ultimately lost his license.

So back to your kids; do not under any circumstance let your kids go back with the dentist without you. And if the dentist won’t allow you to go back, then FIND A NEW DENTIST! If you can’t bear to watch then something must be wrong. If all else fails get a second opinion. I am sorry if this is harsh or hard to read, especially if you are a parent of young kids like I am. But as I said in the beginning, no way was I going to sleep after seeing that report. Protect your children and their teeth.

All my best

James

I don’t know about you but, so far, this year has been very busy for me. Dealing with the current state of the economy, politics, trying to understand the new paradigm of American commerce, more politics, the housing dilemma, stocks go up big…then go down big, more politics…well, you get the message. From the moment we wake up in the morning until the time we go to bed at night, there seems to be some kind of controversy going on and, frankly, it’s getting tiresome. We struggle daily to make more money so we can buy more things and many times it appears that our 20th Century pursuit for a life of personal happiness and material comfort has become a real chore for us in the 21st Century.

Traditionally, Americans have tried to attain what became known as the American Dream through hard work and cautiousness as it pertained to their personal finances. This approach helped our grandfathers develop a solid financial foundation that insured a comfortable life and a tranquil retirement. But in the past few decades those values have been pushed to the sidelines in favor of a “get it now” financial attitude tied to a “get rich quick” philosophy. Our population seems to be constantly searching for instant riches through state sponsored lotteries, game shows, pro sports, show business or litigation. Many psychologists actually believe that the idea of quick riches has served to deteriorate our traditional American work ethic.

A few decades ago, the vision of the American Dream was essentially universal. You attained it by earning and saving enough money for an education for yourself and your children, a home in the suburbs, a dependable car, through a first-rate job to sustain the dream. But today it’s different for each one of us – today the dream is how you personally define it. For many of you, trading is a method of attaining the dream but remember that trading is not a get rich quick scheme but rather a technique of adding to your personal wealth in a methodic manner.

Trading will allow you to adjust your personal prosperity at your own pace based exclusively on your own parameters – things like risk tolerance and your specific financial goals. But never doubt that you will have to work industriously and deliberately in order to excel in your trading. It takes some planning, some preparation and some education. It also takes a calculated work ethic to attain a positive end result. There is no “get rich quick” plan – it’s going to take some time and you have to be prepared to expend the energy necessary to attain a successful final outcome. A winning trading experience represents how Americans used to reach for the dream – with a determined and unwavering resolve while developing a sense of self-reliance and confidence in their plan.

Ideally, we might all feel more secure and content if we could go back in time and live a less complicated life but that’s not going to happen. It is time to develop a new principled strategy that will insure growth in the short-term and in the long-term.

Today, American society seems to be extremely focused on the intrinsic power of the almighty dollar and, many times, totally discount the joy we can find in our lives for reasons other than material gain. We should remember that while money is an important aspect of life, it certainly isn’t something that genuinely brings joy – you can have lots of money and be totally miserable. I believe it’s time for us all to redirect our attention and values to the things that are truly important in life in an effort to not just attain, but enjoy, our personal American Dreams.

I wish everyone a very joyous and profitable 2010, but in order to make it profitable, you must start planning. I’m not going to tell you to make resolutions for the New Year (resolutions normally fall by the wayside very quickly anyway), but rather organize and design a positive strategy to actually change your habits and develop individual goals. This kind of action will better secure your success in obtaining meaningful returns in 2010 through a meaningful reorganization of your financial life.

Goal setting is the top priority. Determine specific and attainable goals, short and long term, and make sure you write them down. Physically writing them down gives them power. The act of writing and visualizing your goals makes it much more likely that you will actually achieve them.

You must also understand your current financial situation. Add up your assets and your liabilities. Find out how much you owe on your home, your cars and your credit cards and conclude how best to whittle those liabilities down a bit during the year ahead. It’s always a good idea to get rid of debt, especially high interest debt. The beginning of the year is also a great time to establish any new insurance needs. Examine the validity of your current life, disability, home, health or auto policies and decide whether changes are required.

The best way to create a solid financial plan is to save, save, save. The general rule is to put away 5 percent to 10 percent of your take-home pay, if you can. Remember to pay yourself first and don’t wait for what’s left over after you pay your bills. If that’s your strategy, you’ll find it difficult to save anything. You should also be sure to set aside your savings in an interest-bearing account, such as a money market account, or in a tax-deferred account like an individual retirement plan (IRA). If your company offers a 401(k) plan, start contributing as soon as you possibly can, especially if the company matches your contributions. Once you’ve finished the basics, then you can start examining your portfolio and other investment opportunities.

Something else to pay close attention to is your tax strategy. When you receive your annual W-2s, make sure your monthly tax payments are being deducted at the proper level. The trick is to come as close to breaking even as possible on your federal tax returns. You should keep and invest your money throughout the year rather than allow the government to use your hard-earned cash.

There are an almost infinite number of financial topics to consider but the bottom line is getting the education you need to determine what you need to do to establish a positive financial position for 2010. Go to the library and check out books that deal with the financial issues you are most interested in (plus, you’re already saving money by checking the books out of the library rather than buying them). Subscribe to magazines, listen to radio, watch television programs that explain the financial news of the day and surf the Internet. There are so many top-notch areas where you can find the information you need to educate yourself about your financial situation. You might even take a course at the local community college or university. Remember, it doesn’t matter how old or young you are, now is the time to start improving your financial situation.

Again, I’d like to wish you a Happy New Year! You will increase the chances of experiencing a joyous and profitable 2010 if you constructively plan for your financial future.

Happy Investing!

Every year brings with it new challenges. The global economic situation I’m sure has thrown some new challenges at your investments, but as long as you take precautions prior to any calamitous events, your personal financial situation could remain balanced and relatively stable.
The trick is to prepare yourself and your investments for any future drastic market movements. Of course, it is impossible to exactly predict when or if the market will hit new highs or experience a sudden downturn. But if you create a personal financial plan in advance, you might be able to avoid making some basic mistakes, no matter which way the markets move.

The first is a plan I constantly preach, to set your goals, both short- and long-term objectives. Be extremely specific, write them down and post them someplace that will allow you to constantly see them, read them and study them. Follow the plan and try not to make emotional decisions.

Be prepared for anything. The chances of the markets going through a correction are very good. But you must also remember that the markets just might grow in value. Markets go up and down, and you need to be prepared for that. Some investors incorrectly believe they don’t need to do anything when the markets are strong and their portfolio is gaining in value.

Don’t forget to watch your asset allocation. Know what you are invested in and make sure that you examine where you money is invested a few times each year and determine whether or not it’s working for you. You can set a plan to rebalance every month or once a quarter, whatever makes you comfortable. Just don’t ignore your investments; keep your eye on the “ball.”

Make sure your plan also has diversification built in. I know you are sick and tired of me lecturing about that basic principle of investing, but I continue to hear stories from investors all over the country who keep getting burned because they don’t practice proper diversification. If just one segment of the market is providing all your gains, you could end up with an unbalanced portfolio that could possibly cost you in the long run.

Once you determine your investment style, institutionalize it to your personal trading method. When you find something that works for you, don’t let go of it. Try writing a journal to document your winning trades and, maybe even more important – your losing trades. Just like writing down your goals and ambitions, physically writing down the particulars about your winning and losing trades will burn the experiences into your mind permanently so you’ll know what to do, or what not to do, the next time.

The information available to us is almost infinite. Unlike other parts of the world, most of us in the United States have the Internet, libraries, book stores, magazines, workshops, college courses, television programs and radio shows that can teach us about the various strategies of investing. Find the plan that works best for you and make sure you feel comfortable with the manner in which you are involved in the investment community. If you need help, find an investment professional who can be a mentor and a guide. The more you learn, the better off you will become.

Happy Investing in 2010!