Here lies the issue at hand. If you have a new car, we all know that as soon as you drive it off the lot you will suffer 20-30% depreciation on the value of your new vehicle. Thus one of the reasons you will find the strategy to buy a two year old vehicle in several of my books. I like new cars and I have new cars, but I also use leases to my advantage, and I also buy used as well.

So back to my buddy, he was in an accident where someone hit his new truck. Insurance will cover the damages but what about the fact that his new truck now has a negative carfax, a history of repair and accident that will affect the long term value of the truck even after it is fixed. That is unfortunate and in most cases people just take it for what it is and move on. Later down the road a few years when they try to sell the vehicle the accident comes back to haunt them and the seller of the vehicle will suffer monetary loss because of the previous accident. The accident simply lowers the long term value. So what can you do?

Well you can buy Gap Insurance which will cover the difference in your new vehicle when you drive it off the lot and remain in effect until your car is worth the same or lower than your loan payoff thus the “GAP” or you can file a diminished value claim against your insurance company. I would suggest that if you buy a new vehicle that you look into gap insurance, some policies have it included and others you will need to add it on. Keep in mind that you can get Gap insurance at many places not just thru your insurance company and certainly don’t take the Gap offered by your dealership when you buy your new vehicle. There are also alternatives to Gap insurance such as new car payoff options etc, you can discuss with your auto insurance company.

Since my buddy is filing a diminished value claim let’s look at what and how the claim works.
Let’s say you are like my buddy and were in a recent accident with your vehicle. – The first thing you are going to do is file a claim with your insurance company for the damage to the vehicle – The initial claim will only cover your damages minus your deductable of course – But what about your Diminished Value, this is going to be what your new vehicle is worth if you sold it now with the repaired damage vs selling the same new vehicle now with no damage. You need to be familiar with the three (3) types of Diminished Value . . .

1.   Immediate Diminished Value is the difference in resale value of a vehicle immediately before damage has occurred and immediately after damage has occurred (prior to repair). Most jurisdictions (courts) will use this standard as the primary measure of damage when courts are employed to seek reimbursement for damage from a negligent party. As courts are rarely the chosen venue for recovery of property damage, the standard of “Immediate Diminished Value” is rarely employed in resolving Diminished Value Claims . . .

2.   Inherent Diminished Value assumes optimal repair quality has been achieved and is defined as the amount by which the resale value of a repaired vehicle has been reduced simply because the subject vehicle now has a significant damage history. “Inherent Diminished Value” is the most widely recognized and accepted form of Diminished Value. It is also the basis upon which any supplemental form of Diminished Value would be added. A common “Supplemental” form of Diminished Value is “Repair Related Diminished Value” . . .

3.   Repair Related Diminished Value includes any additional amounts by which the resale value of a subject vehicle may be further reduced because of less-than-optimal repairs. This could include anything from minor cosmetic imperfections to major structural defects.

Determining diminished value takes basic common sense, the newer your vehicle the more likely the value would be diminished if it were in an accident. If you find yourself in a position that you think you may be looking at a diminished value situation, you will need to find a D/V appraiser, this type of appraiser has really taken off recently but you will need to be careful as some of them are not as professional as others, you may just want to ask your insurance company for the name of one that they recommend.

Do not fall prey to contingency type diminished value companies. These companies will tout that they can get you money from the insurance company for the vehicles diminished value on a contingency basis, meaning that they take their money out of the claim when paid by your insurance company. There are numerous scams out their reported with this type of business activity so just avoid them.
If for some reason you have difficulty with trying to collect on a diminished value claim from your insurance company you may need to find an attorney to assist you with the claim, in most cases your attorney fees can also be incorporated into the claim.

If you don’t receive your diminished value claim or as much as you feel you should have you still can recoup some of the loss on your taxes, Please take note that in no way do I offer tax advice, nor am I a tax attorney, please seek professional tax advice when doing your taxes.

IF you itemize your deductions, you can use Line # 19 of Form 1040 – Schedule “A” to deduct your unrecovered Diminished Value. If you have an unrecovered Diminished Value of say $ 1,500 and a tax rate of 20%, you can Reduce Your Tax Obligation by almost $ 300.00.

Yet another financial strategy that can be used to help you and your family achieve the financial success you deserve.

Happy Investing!

James Dicks

Some people don’t seem to have this instinct at all, and this doesn’t bode well for the long-term health of the American economy. Just in the last two years people have started to really slow their spending down and foremost their spending on credit. It may have a negative effect on things for now, but in the long run we will be far better off.

(We have the lowest savings rate of any developed nation, which is a worrisome thing.) But the rest of us experience this self-protective instinct to put something aside for a rainy day. For some people, this means setting aside a small amount of money for less fortunate times. For still another group, the fear becomes extreme—even irrational—and leads to the unnecessary hoarding (and often counting) of money.

For me having to review this lesson is key; even writing it makes me think. My first time out I made lots of money, but I was over leveraged and in the end lost everything and had to start over again. The second time around I was not as over leveraged and saved money for a rainy day, problem is it seems as though it has been raining for a long time. However saving money for the rainy days has proven to be very wise. The next time around, I plan on having zero leverage, and living completely debt free. That is really the key to success, eliminate the credit and live on what you make and save, use a debit card instead of a credit card.

Let’s acknowledge first that saving money for the future is important. Having said that, the inevitable question that follows is, how much is enough? Setting aside a little money isn’t difficult, but since small amounts can seem so insignificant, it’s easy to lose the discipline to continue. But it is that very discipline that makes saving work. Well, discipline combined with the almost magical power of compound interest.

Compound interest is the key to building wealth. Simply put, it means investing some money, earning interest on your investment, and then leaving both the interest and the principal in place so that you begin to earn interest on your interest (as well as on your principal).

In other words, first your original money earns money, and then the money your money has earned earns more money. This goes on year after year. After years of compounded growth, the annual earnings reach an acceptable level. Eventually, if you’re original investment was large enough, if your rates of interest were competitive, and if you wait long enough, your nest egg will grow large enough to produce an acceptable outside income.

I can assure you that those of you that are a little older know exactly what I am talking about. There is a life time line where you got have more more more. I have had all the cars from a Cavalier to a convertible Murciélago Lamborghini, Bentley GT, big and fast boats etc. Now I am more focused on what counts most to me. How do you really know what is important to you? Simple, focus and take a few moments to work thru this and other mental exercises to help you laser in on those really important things. I can tell you this to accomplish your goals you must be willing to give up the not so important things, be willing to sacrifice to accomplish your truly important goals.

What 10 things would you do if you had unlimited time and money? Give yourself a few moments to come up with 10 answers, but not ones that are too long. Please write them down, either here or on a separate sheet of paper, seriously you need to do this, write it down, if you just do it on paper you won’t be able to burn the image in your subconscious which is the key to positive imaging, making the dreams become reality. Well, what did you find out about yourself? One thing many people discover, as a result of this exercise, is that listing 10 items is not as easy as they assumed it would be—even with unlimited time and money. If you found that to be true—if numbers 9 and 10 came hard— then you need to dream more. Have at it! You are now free to dream.

1. YOUR MISSION TO WEALTH TO-DO LIST 1. DEVISE A PLAN FIRST, AND THE STRATEGIES WILL FOLLOW. -You must come up with your plan first. Hildebrant’s principle applies here: “If you don’t know where you’re going, any road will get you there.” Wandering aimlessly will get you nowhere fast.

2. TRUST YOUR MENTORS.- To get the most out of this exercise, you must put your trust in people you don’t know. So I ask you to suspend disbelief. I ask you to think of me as someone you know and trust as you progress through my blogs. (There’s no downside and plenty of upside.)

3. CHANGE YOUR MINDSET.- Accumulating wealth is as much about mindset as it is about net worth. It may sound simple or even naive, but without the proper mindset, you almost certainly will not achieve your financial goals. If you do somehow achieve them, they’re likely to come undone quickly.

4. DARE TO DREAM. Dreaming is one of the first steps on the journey to financial independence. Think of Roger Bannister’s four-minute mile. Think of John F. Kennedy’s challenge to Americans to get to the moon before the end of the decade. You must first envision the future before it can become a reality. That may sound like another simplification (and indeed, it’s only part of the story), but that’s exactly what worked for me.

Don t skip this exercise. I actually sat down and did this when I was 15, as fate may have it; I found my list that I wrote some years back and realized that writing this down really helped and made the difference between success and failure. I actually wrote all my goals down, both short and long term, then I did the dreams as this exercise suggest. Over time my short term goals were all accomplished, my long term goals were really more short term and all accomplished, and my dreams became long term goals and then short term goals and then I achieved all the dreams that I had written down when I was 15. Two points here, one, do this, two update it yearly as your life’s values and what’s important changes and you want to be writing these changes down so that you can achieve them.

You need to be systematic and thorough in your approach to these eight principles. If you follow just some of them, you may still become financially free. (Yes, they are that powerful.) But your foundation for long-term success will be more solid if you internalize them all.

Let’s take another short step in your journey toward financial freedom. Yes, we’re going to do some more dreaming. If possible, you should find some quiet place where you can be by yourself and not have to worry about being self-conscious. But if you can’t, don’t worry about it. Just do the best you can. If you’re not happy about the results the first time, consider repeating the exercise again later in a more private place, and see if the results are the same.

So get comfortable and relaxed. Close your eyes for a moment, and allow yourself to dream. Let your mind roam as if you were a little kid in school, bored by some dull assignment. Give yourself permission to do what people have told you not to do your entire life: daydream.
Let your mind wander, and think happy thoughts—thoughts about things you would really like to do. Places where you’ve always wanted to travel. People you’d like to meet. Whatever comes to your mind, allow yourself to let go and dream, even if it is only for a few moments. Once you complete this brief exercise—and only after you have done this—continue on.

Did you do it? Great. I hope you enjoyed this moment with yourself. It’s a good start, and it’s something you should do more often. At first, your conscious brain—the scolding part, the part that Freud called the “superego”—will resist your attempts at daydreaming. And let’s face it, you’re out of practice. You haven’t done it since you were a kid, and even then, people were telling you it was a “waste of time.”

Nothing could be further from the truth. Dreaming puts you in touch with your inner self. It allows you to contemplate what is going on in your life, and what you want to do about it. It is a restful time—a time that allows you to recharge your batteries and rejuvenate yourself, mentally, physically, and spiritually. Entire civilizations in the East endorse meditation as a positive habit to develop.

I do, too—although I prefer to talk about dreaming, rather than meditating. I believe that a focused kind of meditation, a dreaming of your future, is critically important.

My Best
James Dicks

In order for life to work, we must all be different. We must have different dreams and different aspirations. But this very variety means that these dreams can all be fulfilled—assuming that each of us is honest with himself or herself and finds his or her true dream.
Not someone else’s dream—your dream.

Financial freedom is your dream. As long as you can dream, you can continue to succeed. Show me a person who has no dream, and I will show you someone who is poor. A millionaire dreams, and then sets out to make those dreams real. Once you stop dreaming, you stop the magic. That’s because you have created the world you wanted. You stop moving forward, because your dreams have ended. Either you are content to live with what you have or you are constantly frustrated because you don’t have enough—or you learn to dream again.

Think about this for a moment. Look around you at the people you know who, when measured in terms of financial prosperity, have a successful life. Inevitably, the ones who are the happiest are the ones who are still dreaming. Those who have stopped dreaming become overly concerned about the money they have. They begin to hoard their wealth in a way that restricts even their own pleasure.

It’s a sad predicament: to be snared by your failing or extinguished dreams. As my grandmother always said, “Be careful what you wish for, because you may get it.” In other words, be ready to handle the consequences of what you think you want, because you may indeed get it. Money without a plan is worthless. That is why the first step should be to create that plan.

You must be ready for your wealth before you get it. The plan you develop for financial success will be based on sound fundamentals, rather than on some pie-in-the-sky, get-richquick scheme. You can build the wealth you seek. It won’t come overnight, but once you master our method, you won’t care. You will be systematically working toward your long-term goal, while at the same time earning money and enjoying the journey. Isn’t that what you really want? Satisfaction today, and financial freedom tomorrow?

Don’t miss my next blog in which I will discuss the principles of wealth creation.

My Best
James Dicks

Follow up to previous blog post.

Once you have actually seen yourself spending and enjoying your newfound financial success, you can move on. Please don’t fudge—OK, let’s move on together. Let’s change your visual focus. Where do you live in your new life of prosperity? What does your house look like? How many bedrooms does it have? Can you see it? If you can see it, spend a few minutes creating details. If you can’t see it, spend a little more time with the exercise until you can.

Someone once said that what the mind can see, the body can achieve. I believe it. I go a step further. I believe that the mind must see it before the body is able to work for it. Look at another realm of human endeavor: sports. When Roger Bannister broke the four-minute mile, he saw it long before he did it. Over and over in his mind, he later recalled, he visualized doing what had been deemed to be impossible. Interestingly enough, once Bannister did what no one else had ever done before, others quickly succeeded in doing it. Why? Because in minds all around the world, mental barriers had been broken. People understood that the impossible was now possible.

The same analogy applies to wealth creation. There is a process one must go through to achieve it. Bill Gates, in his best-selling book The Road Ahead, writes about his “play” with computers in high school. Even then, when computers were the size of large rooms and far less powerful than our miniature hand-held PDAs, he dreamed about what they would be able to achieve in the future.

His dream was so strong, in fact, that he feared missing out on the revolution he saw in his mind. He dropped out of Harvard University—dropped off the safe path he was on—to get a quicker start. There was simply no way that he was going to let the software revolution start without him.
Bill Gates saw the future of computers in his mind long before it became a reality. He saw a role for himself in that future. He dreamed the dream, developed plans to fulfill that dream, and then took action. This could be called the “science of success.”

It’s not restricted to Roger Bannister and Bill Gates. It’s something that each of you can participate in and benefit from. But before you can do it, you have to knock down the mental barriers to your financial success. You must learn to envision your achievements. Once you do, the achievements will follow. So far, so good? Are you beginning to see the mindset you need to have if you are to achieve financial freedom? Let’s go a little further.

What about a family? Will you have a spouse? Children? What will they be like? These are extremely important thoughts to consider and plan for. You must see it before it happens, but once you do; financial freedom will be more than one step closer.

All of the questions I have posed to you so far will become an important part of creating your dreams and ultimately achieving goals based on those dreams. Now that you see the process unfolding, you can also see how the end results will be different for everyone.

More to follow don’t miss reading the most important aspect of how this exercise can make such an impact on your financial life.

My Best
James Dicks

Remember, you may be down but you’re certainly not out by a long shot. Time to start the rebuilding process and the sooner the better. The faster you start, the more time you’ll have to put away the cash, the assets, the peace of mind before you really need it. But what to do first?
You might look back and try to remember where you started when you first left home or when you first got married. Chances are you began by putting away what you could in a bank savings account. That is probably a good place to start now.

Recently an economist said that average U.S. household wealth is down almost 20 percent from its pre-recessionary financial crest three years ago. There has been no reduction of U.S. household wealth in the last 50 years that has even come close to touching this loss. Many of those who supposedly know (government officials, economists and the like) are starting to believe that the “Great Recession” has probably seen its worse and investors are beginning to get restless about standing on the sidelines. But, many more are not yet interested in getting back in yet. There are fears that they might run into a second phase of this recession period and take another big hit. And others are getting nervous about the possibility of losing out on something big when things do begin to look clearer economically.

So what should we do? The answer to that question is very personal – it’s your money and that means its entirely your decision. But let me just throw out a few facts that may help you make some very important decisions.

Many people I talk to are ready to jump back into stocks. The negative or positive activity experienced by the stock market is normally guided by the strength or the weakness of the U.S. economy. When our economy begins to expand and the chances of inflation are relatively slim, the stock markets tend to thrive. Today, I don’t think we know the answer to either of those questions because growth and inflationary questions remain persistent today.

I don’t know about you, but I’ve been hearing lots of advertisements about investing in commodities these days, specifically gold. During periods of inflationary pressure, the commodity sector has been where many people go to find a financial refuge. Although gold has been showing some considerable strength, it has also shown itself to be rather stagnant over the last few months – not gain or losing much in the process. The Fed has stated this year that if inflation begins to show itself while our national economy continues to be on the mend, they will pull back some of the liquidity they’ve put out there in order to slow it down. This will indeed have a great impact on commodity pricing.

So where to go? Back to that savings account at the bank that hardly pays anything as far as interest is concerned. Or maybe its time to remain on the sidelines and get involved in CD’s or other interest rate vehicles. While these types of investments aren’t very lucrative, you can be sure of one thing…you’re probably not going to lose in the process either.

Are you in a mood to take a chance or are you in preservation mode right now? Remember the old adage – “You pay your money and you take your chances.” But the chances we are experiencing today are not like anything this generation has ever seen. Getting back in or staying on the sidelines is a decision that each one of us must make independently and not by the flipping of a coin. Get educated and make sure the decision you ultimately make is one you can personally live whether your investments go up or whether they go down.

The topic of money never remains fixed. Tax laws are always changing, and as we’ve seen recently, the laws pertaining to credit changed and were updated, plus there are always new and different investment opportunities that are developed and must be considered. These are just a few examples; I could list many more, but you get the point. Your financial education on the subject of money will never be finished so just adjust your thinking accordingly. One of the things I suggest is to spend some time researching financial papers and periodicals. So congratulations, if you are reading this, you have already started. Keep it up.

Additionally, there are lots of other methods in becoming a student of money. Many local community colleges offer courses in basic money management, which are normally taught by Certified Financial Planners and other similarly credentialed financial professionals. These classes can be an excellent resource for you. The only caution I’ll offer you about these courses is that sometimes the instructor may use the class as a platform to give out his opinions on how to invest, or even as a means of adding clients to his list of customers. So, you’ll want to pay close attention to the information, and be sure to “weed out” those bits of information that seem to be less than standardized financial knowledge and more financial propaganda or a sales pitch. Something to consider as your wealth builds, you will actually have to spend more time, not less, watching your money. Hey, this is a good problem to have, but it is an issue nevertheless.

You probably spent a lot of time and effort gathering the money you have available to you. So it goes without saying that you must watch out for the scam artists. We’re all familiar with these folks; people who just seem to represent the lowest echelon of human existence. And I’m not only speaking of hardened criminals, but people who live in such a way that their lives are centered on the acquisition of negative energy using risky tactics. Behavioral science has shown us that when honorable people are brought together with those who are less than admirable for an extended period of time, it is very likely that the decent folks will more than likely drop to the level of their counterparts than the other way around. There are a variety of theories as to why this is the case, but chief among them is that it simply requires less effort to fall down than to rise up. The activities in which the less honorable folks are frequently engaged are admittedly very appealing at an instinctive level. So just remember what you were told as a kid – “If it sounds too good to be true, it probably is.” Be careful!

One thing is for sure, it’s going to take a lot of hard work and self-control to build a solid financial future for you and your family. There’s not just one method of doing so but there are certain constants that apply to all of us. One of them is that you will have to commit yourself to getting the education you need and then taking the time to do so. Once you realize that there are hundreds of factors that must be studied, considered and applied every day, you will be well on your way. Start your research today. If there’s one thing that we all should have learned in the past couple of years, the financial stature of our lives depends on the decisions we make today. Poor choices create unfortunate situations when times get tough. Start creating an economically sound plan that will guide you to a more solid financial life for your future.

When AIG first went to the “well” for money from the federal goverment, the Associated Press reported that the Obama administration’s pay czar, Kenneth Fienberg, said bonus payments totaling $100 million to AIG employees from the same unit that prompted a massive taxpayer bailout are “outrageous” but they were allowed under the law. He said the retention bonuses were contractual obligations agreed upon years ago, before American International Group Inc. received a $180 billion federal rescue at the height of the financial crisis in late 2008. In an interview on ABC, Feinberg said, “These are the old grandfathered payments. I do not for a minute ignore the outrage out there, which I share. But the fact of the matter is we’ve got to abide by the law.” Feinberg said he’s working to get back as much of the bonus money as possible. He said AIG employees have agreed to repay $39 million out of $45 million in previous bonuses to the U.S. Treasury.

Well now it’s too late to ask. If AIG employees got a bonus and the company still can’t get on their feet it’s time to eliminate the problem, just like everyone else and every other business in the world.

How about all the small businesses out there that are also having tough times. For the last year these small businesses have been eliminating overhead and cutting costs across the board, most small business owners tht are struggling have stopped paying their own paychecks in order to keep as many of their most loyal employees still on the books. No government support is in sight for them. Worse yet, it takes months and sometimes years to eliminate some of the most weighing liabilities only to wait even longer before the cash flow catches up.

As far as I am concerned, AIG had their chance. Yes, we will suffer for the downfall of AIG but it will get better and in the end we will be better. But we will have make some difficult decisions first. AIG is not the only insurance company out there. AIG has enough subsidiaries, and they can do what we all do, focus on the ones that are profitable and cut the ones that aren’t and that means if you can’t sell it — close it.

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.