We’ve all heard about the dangers of credit cards. We all know someone (or are someone) who has gotten in debt a little too deep because of them.  Most debt counselor’s advice is to simply quit using them or cut them up and pay off the balance. Then when you’re out of debt, and can use credit responsibly, you can have your cards back. But my question is; when is it responsible to use credit? Most financial advisors, both Christian and non-Christian seem to agree that credit is a tool and when used responsibly it can help to increase your net worth. But that doesn’t seem to be working for most people. In fact, I think it’s clear that credit has financially bankrupted more people than it has helped.

I think that one of the major problems is that unlike other tools that we use, most people are not taught how to use credit wisely. Sure parents tell their children to beware the dangers of credit cards and warn them about instant gratification but they never teach them what situations it is ok to use credit in. There are plenty of thumb rules that attempt to answer this questions such as, “only use credit cards in an emergency”, or “credit is only ok to use if you’re buying something that will increase in value”. Unfortunately, these are only thumb rules, and pretty unstable at that. What constitutes an emergency? Does someone have to be at risk of losing a limb or is it ok to use financing if the sale on the TV that you really wanted is going to end soon. And how do you know if what you’re buying is going to increase in value? Over the last year we saw foreclosures across the country and people walking away from their houses because they owed more than the house was worth. Were their mortgages a good use of credit?

We see credit or debt discussed several times in the bible. But what we as Christians often forget, is that there are two sides to credit. There is a borrower, and a lender. Our lifestyles and roles as consumers have trained us to be borrowers without reminding us what a blessing it is to be a lender. I don’t mean to be a lender for profit, the way the banks and credit card companies do. But to be a lender to someone in need. Remember that God told Israel that he would bless them and make them lenders to many nations and borrowers from none (Deuteronomy 15:6). How can we reach out to those in need if everything we own is already owned by someone else? The purpose of credit is not to allow us to purchase what we want or when we want it. For Christians, the purpose of credit is to serve as a way to help others. We should be the lenders, not the borrowers. God desires us trust him for our needs and to be lenders or even givers to others in need (Matt 5:42; 6:31-32).

So, I would say that “yes”, credit is a tool. But not a tool like a hammer with which you may bruise your finger if you make a mistake. But more like a chainsaw, in the sense that if you use it incorrectly you may never recover. The sad part is, most people are holding it on the wrong end and will end up hurting themselves.

Supporting Verses about Debt

Others were saying, “We are mortgaging our fields, our vineyards and our homes to get grain during the famine.” Still others were saying, “We have had to borrow Money to pay the king’s tax on our fields and vineyards… We have to subject our sons and daughters to slavery. Some of our daughters have already been enslaved, but we are powerless, because our fields and our vineyards belong to others.”

- Nehemiah 5:3-5

A man lacking in judgment strikes hands in pledge and puts up security for his neighbor.

-Proverbs 17:18

Give to the one who asks you, and do not turn away from the one who wants to borrow from you.

-Matthew 5:42

Do not be a man who strikes hands in pledge or puts up security for debts;

If you lack the means to pay, your very bed will be snatched from under you.

-Proverbs 22:26-27

The wicked borrow and do not repay, but the righteous give generously;

-Psalms 37:21

The rich rule over the poor, and the borrower is servant to the lender.

-Proverbs 22:7

Let no debt remain outstanding, except the continuing debt to love one another, for he who loves his fellowman has fulfilled the law.

-Romans 13:8

As stewards, we ultimately answer only to our master. It does not matter what the world or even what other Christians think of our stewardship. Our goal should be to be welcomed into the joy of our master as a good and faithful servant. To hear the words “Well done”. Not “well thought” or “well believed” but “well done”. Every decision that we make should be based on its effect on this one final result.

C.S. Lewis says this brilliantly in his essay “The Worlds Last Night”

We have all encountered judgments or verdicts on ourselves in this life. Every now and then we discover what our fellow creatures really think of us. I don’t of course mean what they tell us to our faces: that we usually have to discount. I am thinking of what we sometimes overhear by accident or of the opinions about us which our neighbors or employees or subordinates unknowingly reveal in their actions: and of the terrible, or lovely, judgments artlessly betrayed by children or even animals. Such discoveries can be the bitterest or sweetest experiences we have. But of course both the bitter and the sweet are limited by our doubt as to the wisdom of those who judge. We always hope that those who so clearly think us cowards or bullies are ignorant and malicious: we always fear that those who trust us or admire us are misled by partiality. I suppose the experience of the Final Judgment (which may break in upon us and any moment) will be like these little experiences, but magnified to the Nth.

For it will be infallible judgment. If it is favorable we shall  have no fear, if unfavorable, no hope, that it is wrong. We shall not only believe, we shall know, know beyond doubt in every fibre of our appalled or delighted being, that as the Judge has said, so we are: neither more nor less nor other. We shall perhaps even realize that in some dim fashion we could have known it all along. We shall know and all creation will know too: our ancestors, our parents, our wives or husbands, our children. The unanswerable and (by then) self-evident truth about each will be known to all…

We can perhaps, train ourselves to ask more and more often how the thing which we are saying or doing (or failing to do) at each  moment will look whan the irresistible light streams in upon it’ that light which is so different from the light of this world- and yet, even now we know just enough of it to take it into account. Women sometimes have the problem of trying to judge by artificial light how a dress will look by daylight. That is very like the problem of all of us: to dress our souls not for the electric lights of the presents world but for the daylight of the next. The good dress is the one that will face that light. For that light will last longer.

In this series we have taken a few small steps towards being stewards of the Lords possessions but they have been just that, small steps. True stewardship is not confined to keeping a budget or maintaining files, these are just tools that will make tracking and managing the assets that the Lord has entrusted to us a little easier and a little more accurate. True stewardship extends beyond the world of finance and into every area of our lives. It requires a change in our world view which will be reflected as a change in our actions. We must learn to see our possessions, our abilities, our time and even the bodies we live in, not as something that we are entitled to but as something we have been entrusted with for a purpose and as something that we will be held accountable for.

Nothing in all creation is hidden from God’s sight. Everything is uncovered and laid bare before the eyes of him to whom we must give an account.

Hebrews 3:13

So we make it our goal to please him, whether we are at home in the body or away from it. For we must all appear before the judgment seat of Christ, that each one may receive what is due him for the things done while in the body, whether good or bad.

2 Corinthians 5:9-10

We must also be careful that we do not forget who we serve and unknowingly end up serving money instead of the Lord. Our first priority is to serving God, whether while rich or poor. Do not let the living standards of the world draw you away from your true goal.

But godliness with contentment is great gain. For we brought nothing into the world, and we can take nothing out of it. But if we have food and clothing, we will be content with that. People who want to get rich fall into temptation and a trap and into many foolish and harmful desires that plunge men into ruin and destruction. For the love of money is a root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many griefs.

1 Timothy 6:6-10

Paul relates our training as stewards to an Olympic athlete training for the games. If a marathon runner was to take his time training and just do a little jogging a few times a week between other activities he would never become a world class athlete and wouldn’t stand a chance at winning an Olympic medal. Olympians make training their first priority. They study how their body works and train day and night to find their weaknesses and overcome them. They have a purpose. And they do it all for a medal that will eventually rust or be destroyed. We are told to train the same way as servants of Christ. But the crown that we will receive will not perish but be eternal.

Do you not know that in a race all the runners run, but only one gets the prize? Run in such a way as to get the prize. Everyone who competes in the games goes into strict training. They do it to get a crown that will not last; but we do it to get a crown that will last forever. Therefore I do not run like a man running aimlessly; I do not fight like a man bearing the air. No, I beat my body and make it my slave so that after I have preached to others, I myself will not be disqualified for the prize.

1 Corinthians 9:24-27

Many people use money as a defense against chance. Remember that God knows our needs better than we do and he has promised that he will take care of them even if it is not in the lifestyle that we are accustomed to. Sometimes God calls us to leave our comfort zone and just put our faith in him.

And we know that God causes all things to work together for good for those who love God, to those who are called according to his purpose.

Romans 8:28

So do not worry, saying, ‘What shall we eat?’ or ‘What shall we drink?’ or ‘What shall we wear?’ For the pagans run after all these things, and your heavenly Father knows that you need them. But seek first his kingdom and his righteousness, and all these things will be given to you as well.

Matthew 6:31-33

I want to encourage you to continue your path of stewardship and take the time to learn what being a true steward entails. I will continue to post what little bits of insight that the spirit blesses me with but don’t take my word for it. Remember, you will be held accountable for your beliefs and your actions. Take everything you read here and test it against what the bible says. Even look up the verses for yourself and understand the context that they are written in. If you find something I have written that you think may not be correct, please post a comment and let me know.

As iron sharpens iron, so one man sharpens another.

Proverbs 27:17

Whoever loves discipline loves knowledge, but he who hates correction is stupid.

Proverbs 12:1

Why have a budget.

“Whoever can be trusted with very little can also be trusted with much, and whoever is dishonest with very little will also be dishonest with much. So if you have not been trustworthy in handling worldly wealth, who will trust you with true riches? And if you have not been trustworthy with someone else’s property, who will give you property of your own?

Luke 16:10-12

Now that we have systems in place to track our income and spending, we know how to estimate our net worth, and we have our files set up, it is time to tackle the almighty budget. This is the true crucible of personal finance. Not so much the development of the budget itself, but the responsibility and discipline required to face the real numbers and adjust your lifestyle accordingly.  If this is the first time you have created a budget you may be in for a little shock. Most people don’t realize how much money gets spent each month on impulse items, such as fast food and convenient store or vending machine snacks. But this is why having a budget is so important. Unchecked spending can only go on so long before it catches up to you. And when it does, it’s usually sneaks onto your credit card statements at exceptionally high interest rates. A well designed budget combined with the personal discipline required to keep it is the most powerful tool you will ever employ to your finances.

The goal of a budget is simple – to determine how much income you have available over a set time period, and to divide that income up in a way that all of your financial needs are met. Notice I said needs, not wants. HDTV, high speed internet, and a 10,000 minute per month family cell phone plan are not needs. Because each family is different, each budget will be different but there are some important steps that you can follow as a guideline.

1.       Determine what your needs are – Be honest with yourself. Do you really need three cars?  Could you downgrade your internet connection or even cancel it if it really came down to it? Do you need both a home phone and a cell phone? On the other hand, don’t forget about things that help you earn an income. If your job requires you to wear a suit, then dry cleaning may be considered a need. Don’t forget about utilities.

2.       Determine the cost of your needs – Don’t forget to budget for long term items. If a car is one of your needs, budget in the fuel and maintenance costs. Things like clothing and shoes will wear out and need to be replaced as well. These are the things that tend to break a budget if not planned for. Finding your yearly clothing need cost may take a while before you get an accurate number but it still needs to be estimated and budgeted.

3.       Determine your income – I listed this third because often people need to know what their needs are in order to adjust their income. By determining the cost of your needs first you can figure out if you need to work more, less or if you may need to consider changing jobs.

4.       Set your spending – Set an amount for each need that you have. Once that is covered you can start giving some money to your wants. When the money runs out, don’t budget anything else. If you haven’t met your needs then you may need to consider some lifestyle changes.

5.       Get a second opinion – If you’re sitting at your computer at three in the morning trying to put together a family budget on your own…STOP. Most individuals don’t know the true expenses of their family. Ask your wife how much she really needs for school supplies or how much lunch costs for your kids at school. You may not consider life insurance a need but ask your family how they feel first.

It’s simple for the most part but it’s important that you’re honest about the numbers and stop when the money runs out. Part of the reason for having a budget is to keep you from spending more than you have. Your Mint.com account has an excellent tool for setting and tracking your budget but you will still need to follow the above steps to ensure its accuracy.

Be sure not to forget about saving and giving.

“There is never enough left over to save, it has to be budgeted.”

I don’t remember who said that but he’s/she’s right.  The same is true for giving. Don’t forget, this is not our money we are managing, it’s Gods, and he is very clear about our need to give. While the amount of each is up to you these should be listed under your needs, not your wants. (A good rule of thumb for starting a budget is to give 10%, save 10% and live on 80%. Then work on increasing the saving and giving.)

This is just a quick guide to setting up your initial budget. In future posts we will discuss popular strategies and budgeting systems that can help you increase your long term control over your budget. Don’t forget that as your life changes your budget will need to be reviewed and updated

Be sure you know the condition of your flocks, give careful attention to your herds; for riches do not endure forever, and a crown is not secure for all generations.

Proverbs 27:23-24

Our goal of this series is to honor God by taking the first step towards responsible management of the material possessions that God has entrusted to us. In previous posts we discussed how Paul trained himself to serve God with the same intensity that an Olympic athlete trains for the games and how he encourages us to train in the same way because the crown that we receive for our stewardship will last forever.

Today we are going to get right to work setting up our long term filing system. This will work in conjunction with the simple filing system that we set up last week and will give us an organized method of storing vital paperwork.

For supplies we’re going to need file folders. Regular manila folders work great but if you have a few extra dollars I would recommend picking up a few of the thicker, multi-classification file folders. They will last a lot longer and it’s just easier when you can group similar classes of documents into one folder. You don’t necessarily need a file cabinet for this but if you have one sitting around the house I would recommend using it. Many office desks have a drawer or two that are set up for filing as well. If you are using a cabinet of some kind then you’ll probably need to pick up some hanging files in addition to the manila folders. If you don’t have a file cabinet, don’t sweat it, you can pick up an expanding file (or accordion file as they are sometimes called) that will fit all of our needs for around $10. I would also recommend picking up a two-hole punch and some two-hole fasteners like these although they really aren’t required.

How to organize folders

There are several different thoughts on how to label your folders, the most popular probably being the one-account-per-folder approach which means that each bill (telephone bill, electric bill, checking account) is placed in its own folder (along with previous statements). In recent years the tendency for companies to offer multiple utilities has made this difficult. I get my home phone, internet, and cell phone all on one bill which makes it all but impossible to separate them into their own folders. That’s why I prefer the one-company-per-folder approach.

The first thing you need to do is make a list of every company that you have accounts with. Don’t overlook the companies that auto-draft out of your checking account each month. Also, be sure to include things like charities which you’ll want to keep track of for taxes but that may not send you a statement every month.

Once you have your list. Start making files. Label each folder and, with the two-hole punch, install a fastener. Now, if you have paid bills still being stored in the simple file system that we developed last week, go ahead and hole-punch them and put them in their appropriate file. This should be done at least once a month.

Now we have our tracking system and out filing system in place. Next post we will talk about the final step. Making a budget.

There has been a lot of debate over the last few months on whether the new stimulus package is necessary or even moral. One of the biggest objections that I have heard is that people don’t want the government spending “their money” (that the government collected through taxes) on things that they don’t believe in or support. I fully understand this point of view and being fairly conservative would appreciate the government letting me support my own causes with the money I earn. But I was reading the Gospel of Matthew the other day and came upon chapter 22 where the Pharisees tried to trap Jesus in his words by asking if it was right to pay taxes to Cesar or not.

But Jesus, knowing their evil intent, said, “You hypocrites, why are you trying to trap me? Show me the coin used for paying the tax.” They brought him a denarius, and he asked them, “Whose portrait is this? And whose inscription?” “Caesar’s,” they replied. Then he said to them, “Give to Caesar what is Caesar’s, and to God what is God’s” (Mathew 22:18-21)

It reminded me again how little ownership we really have. As stewards, we understand that the possessions, talents, and gifts that we have are all given to us by God to manage. But we forget that the money we use on a daily basis is minted and given value by the government. In fact, according to Matthew 22, the government owns the money that we use every day. Now this obviously does not supersede Gods ownership of everything on earth but it does show us that the money that the government collects for taxes was never our money to begin with. Just as we are to give to the Lord from our first fruits, what is already his, Jesus tells us that we are to give to Caesar what is Caesars. It doesn’t matter if we agree with what the Government is doing with the money because it is theirs to do what they want with. The stewards that are in charge of it, will be judged accordingly just like in the parable of the talents. God will not hold us responsible for what is done with the taxes collected.

So while we may agree or disagree with the way the Government is spending tax dollars, we have to remember that it was never ours to begin with. We are fortunate enough to live in a time where we can choose who will be in charge of spending our money but that is the extent of our tax accountability. If there are any other opinions out there I would be glad to hear them.

Once upon a time…

A young man wanted to build a house. He had never built one before and didn’t know quite what to expect but he knew that this would be the house he lived in with his family for the rest of his life, and that it would continue to shelter his family after he was gone.  Because this was such an important undertaking he decided to get some advise.

First, he went to the lumberyard to ask the Lumberjack what he should build his house out of. The Lumberjack listened to what he needed in the new house and explained to him how lumber was the best choice for all his needs. He had a very compelling case. Lumber was strong, a natural insulator and cheap enough to be replaced as needed. A lumber house could meet all of his needs.

 His mind was pretty much made up but because this was such an important project he decided to go ahead and get a second opinion. So he went to the brickyard and told the Bricklayer what he needed in a house and asked what he should build it out of. The Bricklayer listened intently and considered the mans need. After a few moments, the Bricklayer explained how the only way the man would get everything he needed out of a house was to build it with brick. The man listened to his advice and saw that he had a very good point. Brick is very strong, waterproof, can endure the elements and lasts a very long time. A brick house could meet all of his needs.

His mind was made up but just to make sure, he thought he would get one more opinion. He went to the Masons shop and told him about his dilemma. The Mason listened intently to the mans story then told him that his best bet was to build his house from stone. It was long lasting, very very strong and always available. The man had finally made up his mind.

When the man went home that night he told his wife about his day. He was very proud of himself because he got the opinion of three professionals before making up his mind to build a house out of stone. His wife thought for a moment and asked him, “Dear, are you sure you spoke to the right professionals”? “What do you mean” he asked. She answered, “It seems to me that a bricklayer would be an expert on bricks, and a Mason on stone, but none of these professionals are true experts on building a house”. The man stopped and thought for a few moments about what his wife had said and then asked her, “But who would I ask about building a house”? “Why, an architect of course” his wife answered.

The man knew his wife was right and set off the next morning to see an Architect. The man explained everything he needed in a house and how he wanted the house to take care of his family after he was gone. The Architect listened intently and explained to him that for a house to do everything the man wanted it to, it would have to be built of wood, brick, stone, steel, aluminum and many other materials. He worked with the Architect to ensure that the final design met all of his requirements and the Architect offered his advise on several areas that the man had not considered. When all was said and done, the man not only had a very well thought out plan for a house that met all his needs, but he also had someone to go to when things in his life created changes in his plans.

Soon after, the man and his family built their new house with the help of the Architect. And they all lived happily ever after.

THE END

While this story was obviously fictional, the message is something that we can easily apply to our finances. When getting advise on financial matters, be sure to ask the right people. I have had many meetings with insurance agents, mortgage companies, investors, and tax accountants and all of them seem to know exactly what I need to make sure that my financial planning needs are met and that my family will be taken care of when I’m gone. However, I’ve found that the best financial plan incorporates more than just an insurance agent or mortgage broker can offer. A full financial plan requires a full financial architect. Someone who is knowedgable  in many, if not all areas of personal finance.

Be sure you know what areas your financial advisor is fluent in before you trust your families future to his planning and advise. And beware of the roaming insurance agents who knock on your door and claim to be able to help you protect your families future. They may know their trade well and make a convincing case but be sure you get some advice from an architect before you make your final decision.

Over the last few months I have had several conversations about portfolio stratagies with both registered reps and individual investors. It seems to me that the overall concensus among reps is that buy-and-hold is the way to go. Their logic is simple. Over the long run the market ultimatly goes up. Over the last 20 years the average has been around 12% a year and close to 7% per year sense the American markets have started. Most reps hold on to the belief that if you just hold on to the stocks that you own they will eventually increase in value. Actively managing these stocks (buying and selling based on the market) could cause you to miss the best trading days of the year.

On the other hand, proponents of Active Management claim that they don’t have centuries to invest. Most people invest for less than 30 years, and they can’t afford to retire when the markets are down 10-20%. So they watch the market and make trades based on signals. If they miss the best trading days of the year, that’s OK, they also miss the worst. The down side to this approach is that the investor needs to make a higher percentage on the stock to offset the trading fees.

Buy-and-Hold is the traditional favorite of the professionals but I’m wondering if the current market conditions are making them change their mind. In order to recover from a 50% loss (which is what many investors experienced this year) you need to make 100% on what you have left. At the market average of (roughly) 7%, this would take 10 years. Now consider the number of people that will retire in the next 10 years. Do you think it is still better for them to buy-and-hold their investments (even if they’re in conservative portfolios) or would it be better for them to cash out with what they have and wait for the market to start recovering?

“We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.”

                                                                   -Preamble of the U.S. Constitution

 I had a discussion recently about the Obama stimulus bill that is currently awaiting approval in the U.S. Senate. While there is a lot of debate about whether this bill will truly stimulate the economy the way that it was originally intended to, I believe there is a more moral issue with the bill.  You can read in the preamble of the U.S. Constitution that our founding fathers were not establishing America solely for their own prosperity, but for their posterity, meaning their descendents. Much of their comfort was sacrificed in this process. It brought war onto American soil, took fathers and sons away from their families, many not to return, and essentially stopped trade into and out of the colonies, thus damaging their economy. But this was the price that Americans paid to ensure that the freedom that the founding fathers had dreamed of was able to be passed on to their children and grandchildren. In fact, it was so important to them that when the constitution was written, they included their descendants in the reason for its drafting.

Today, over two hundred years later, we have become the most prosperous country in the history of the world. We have the fastest growing economy, one of the strongest militaries, and the income level at our poverty line is in the top 15% of the world richest people¹ .  Now we are in the middle of what the media is calling an economic crisis and are considering passing a stimulus package that we believe will help pull us out. Without debating the effectiveness of the bill, we have to ask; is this what America has become about? This bill will allow the printing of hundreds of billions of dollars and put America into unimaginable debt. This debt will not be paid off in our lifetime but will pass on to our children and to their children.  Have we become so spoiled that we are willing to mortgage our children’s future because we can’t afford cable television or a new cell phone?  We have become so comfortable in our lifestyle that surviving on unemployment or having to drive an older paid-off car has become an economic crisis.

Our forefathers were willing to weather the storm and endure the hardships so that we might have a chance at the prosperity that we now have.  Is it really worth indebting our children so that our generation can remain as prosperous as we are? Or is it time to weather our own storm to ensure that our posterity is born with the same opportunities that we were given? 

¹Based on single person income of $10,400, according to www.GlobalRichList.com

I’ve wanted to do a post on taxes for the last few weeks and I think this is a good time. I found an interesting article on cbsnews.com about whether you should hire a tax professional to prepare your taxes or if you should do it yourself. I’ve prepared my own taxes for the last five years and this is the second year that I’ve been offering my services to clients so I have a pretty good grasp of when things have gotten a little more complicated than the average non-financial-industry individual is comfortable handling.

Most people with a couple of free hours, and the desire to learn can prepare their own return. Using computer software like taxact.com or turbo tax only makes it easier. But taxes are not something that you want to learn through trial and error. If things get beyond your typical W-2’s and 1099’s you may want to consult an expert. The good news is, you probably know someone that does their own taxes and would be willing to answer your questions for free. Just make sure they know what they’re doing.

The article below gives a few examples of when it might be good to hire someone to do your tax preparation. While it’s not all encompassing, it’s a good start.

Do it Yourself or Hire a Tax Pro?

The IRS estimates that about half of all tax returns are prepared by a tax professional.

The most common reasons individuals cite for using a professional tax preparer are not having the time, willingness or ability to prepare their own. With times as tight as they are today, a lot of folks may be tempted to try to save a few bucks, forgoing the tax preparer’s fees, and prepare and file their own tax return.

But that may be penny wise and pound foolish.

Examples Of When To Consider Turning To A Professional Tax Preparer For Help:

·        Short Sale: If you sold a home through a short sale last year — a transaction in which the lender allowed you to sell the home for less than the mortgage balance and cancel the remainder of the debt — you will need to report the sale. A temporary tax law effective for such sales from 2007 through 2010 allows individuals in this situation to avoid reporting as income the amount of the debt that was cancelled. A tax pro can help to ensure you report this properly.

·        Rental Income: Many homeowners who cannot sell their homes have turned to renting their house, in the hope of waiting out the decline in home prices and selling later, when the market improves. If you’ve received rental income, you’ll need to report it on Schedule E, Supplemental Income or Loss (from rental real estate, etc). The rules for rental property deductions are complicated, especially when you lived in the house part of the year and rented it out for the remainder. To be deductible, some expenses must be apportioned over the rental period and other expenses — such as repairs — need to be classified as repairs or capital improvements, which affects how they can be deducted.

·        Recovery Rebate Credit: Last year, the government issued the “recovery rebate credit,” checks that totaled $600 per person, or $1200 for couples, or more. While eligibility for receiving the rebate check is based on your 2008 income tax return, since this was done last year, Congress based the initial round of checks on 2007 tax returns as a way to get the money into the hands of folks more quickly. Since the rebate was really a credit against your 2008 taxes, many folks who did not receive a rebate check in 2008 may be able to claim it when they file their 2008 tax returns. If, in 2008, you lost your job and will report lower income, had a child, graduated college and were no longer claimed as a dependent, or are a retiree who did not file a 2007 tax return, then you may be eligible to claim an additional “recovery rebate credit” on your 2008 taxes. See an experienced tax pro to help you figure this out.

·        Self Employed Income: If you are self employed, there are a lot of tax deductions and complicated tax issues to consider. While you can deduct business-related expenses, this is an area in which a lot of folks are likely to go too far, and the IRS is on the lookout for that. Also, computing and reporting the correct amount of self-employment taxes is tricky – just ask Mr. Geithner!. A tax pro with experience in reporting self-employment income and the unique and legitimate tax strategies of your specific work or situation can also help you maximize your tax savings.

·        Investment Sales: If you report sales of stocks or mutual funds in non-retirement accounts, you’ll have to compute the capital gains or losses from the sales. You’ll need to complete Schedule D – Capital Gains and Losses. But to calculate your gains or losses, you’ll need to figure out your cost basis, which includes what you originally paid plus any reinvested dividends. And if you sold shares of stocks or mutual funds you’ve owned for a long time, then you may have a hard time doing that, especially if you cannot locate all your records. A tax pro with experience in reporting investment income can help track down the information you need, or come up with a good faith estimate that the IRS will accept.