Self-Development

Just When I Thought I Was So Smart . . .

As a professional, it’s always wise to project a good image of yourself, especially that you are intelligent. However, sometimes or many times we do things that really humble us and hopefully help us to not be so prideful. Here are a few things that I have done recently and not so recently:

GPS: My GPS on my phone showed that it would take about 2 hours to get back home, which I thought was due to traffic and was normal, even though I was about 35 minutes away. For some reason the GPS kept on taking me through side streets with lights, which seemed to appear every 200 feet. Finally, after about 20 minutes I pulled over and took a good look at the directions and realized that I was taking the bike route. Yes, it took me 20 minutes to pull over.  I think that my pride ran away at that moment.

App and phone purchases: If you know anything about children and video games then you know that you can make in-app purchases within the games to obtain more virtual money, coins, or gems. There weren’t the proper safeguards in place on their tablets and in a blink a lot purchases were made. A lot of purchases were made. Did I mention that a lot of purchases were made? We were able to get some refunds, but let’s just say that where this is a will there is a way, especially when your children then ask if they can borrow your phone and decide to go on a shopping spree at Amazon. I really don’t need a PS4.

Per diem: When I started my practice years ago during the recession it took time to acquire clients, which is normal and expected. In the meantime I could have worked per diem at another firm at least for that first year or so. However, I had such a bad experience with the previous firm that I worked for as an employee that I told myself I would never again work for anyone else. The extra cash made working per diem would have been nice and would have made the transition from employee to practitioner easier and less stressful financially.  Eventually, I did work per diem after about a year or so at a few different firms, and I met some really good people.

There are many more that I’ll keep to myself, but we all need to be humbled from time to time.

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This Will Kill the Economy Long-Term

There are many factors that can help an economy to grow, including productivity gains, wage growth, sound governmental policies, healthy banking systems, etc. A lack of all of these items will hurt economic growth, and there is one more often overlooked item that can and will devastate an economy over the long haul.

It’s probably not what you think, but I’ll give you a hint: think Japan. What is a major issue that is facing Japan? Low birth rates and a disproportionate amount of older persons compared to younger persons. Why does this matter?

Minimum: Statistically, a country needs approximately 2.1 births to have a stable population. If you want to bury yourself in statistics, then you can read reports from the U.N. or The World Bank. Although there are lower mortality rates than in the past, fewer births will mean a declining population and a disproportionate amount of older persons. By the way, the world’s population is expected to stabilize and/or decline by the end of this century.

Disproportion of elderly: In Japan, the population of elderly persons is much higher than in the U.S. Unfortunately, with lower birth rates there are less younger people able to physically take care of the elderly and also financially. Systems like social security will not be able to continue in a healthy fashion if there are not enough younger people available to contribute towards the system.

Basic math: If there are less people available to purchase services and products then economic growth will stagnate or decline. This can be offset somewhat by productivity gains and wage increases to an extent. Also, there will not be enough candidates to fill employment opportunities at businesses, which will stifle growth further.  More people = growing economy.

Myths?: I believe it started back in the 1960’s with doomsday scenarios of overpopulation and a strain on the resources of the planet. It really hasn’t panned out, but there have also been other modern inventions and policies that have stifled population growth. There is one statistic that I’ve heard that states the entire world’s population can fit in the State of Texas comfortably. Even if this statistic is way off and it would take the entire United States, then that would leave the rest of the world wide open.

Solutions: There are a few solutions to address this problem. One is immigration from countries or regions with high birth rates, such as Africa to countries with low birth rates, such as Japan. This would take changes to immigration policies enacted by governments.  The other solution is to encourage families to have more children and not to wait too long to do so. What is the worst that can happen – you may need to buy a massive van to drive your family around?!

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Small Business, Large Profits

All small business owners want to increase sales, open new locations, obtain more customers, add employees and grow, grow, and grow some more. It sounds good, but is it really necessary? Is there an alternative?

Necessity: It is necessary to grow your business as the alternative isn’t too appealing. You have financial obligations and people that depend upon you, such as family, employees, and customers. So, yes, it is necessary, however, here is a different view on growth.

Focus on profitability: If you double your profit margin then this has the same impact as doubling the sales of your business. Even if you increase the profit margin by several percentage points then it has the same impact as increasing sales. It sounds too easy, but here are some ways to do this:

  1. Decrease the number of services/products. Spreading yourself too thin usually decreases your profitability because it is hard to do everything well.
  2. Service the proper clients by targeting a more defined niche.
  3. Use marketing methods that only target the customers that you want to serve.
  4. Plan ahead for large purchases or investments, including space requirements, people, vendors, equipment, and technology.
  5. Price your products and services properly.

The interesting fact is that when you are more profitable, then each additional dollar of business is worth more to you, which makes it easier to actually grow further.

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Should You Talk About Religion and Politics in a Business Setting?

We are taught that you should not speak about religion and politics because it causes tension, disagreement, and bad feelings. What about in a business setting at work with your boss, employees, co-workers, and clients/customers? The correct answer is . . . .

Maybe. Here are some examples of when and when not to speak about these emotionally charged topics:

When it’s not ok: First, take a look at yourself. If you are unable to speak about religion and politics without letting your emotions take control, without insults (I do not mean being politically correct), and being open to both learning from the other person and teaching the other person, then you need to first work on this before speaking about religion and politics. Similarly, are you able to speak to the other person and have a conversation, or do they just want to spew their beliefs without regard to having an actual discussion? Does the other person disagree with you regarding everything because they do not want to even hear facts or truths? If that is the case, then it is probably futile to speak with them about religion and politics and possibly any other topics as well.

When it’s ok: It’s okay when the exact opposite is true of when it’s not ok. When you are able to speak to people with charity then you are ready. When you are ready to have a dialogue and are open to learning the other’s position, even if you do not fully agree with them, then you are ready.  If you are passionate about your beliefs, then don’t beat people up to get your point across, even when you are 100% correct. Don’t be afraid to speak the truth, but also be sensitive to your timing. Lastly, you can communicate more by the way you live your life then with verbal communication.

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3 Ways to Turn Around a Struggling Business

After the Great Recession there are still some businesses that may be struggling and don’t know what to do about it. Here are a few ways to turn around a struggling business:

Upgrade: The rate of change nowadays seems to be accelerating at a pace that has not existed in the past. This includes technology, competition, lifestyles, behaviors, and preferences. Although business principals never change, everything else around us does. Questions to ask are:

  1. Is my service or product still relevant and in demand? A perfect example is Blockbuster and department stores.
  2. Are delivery methods of your product or service in sync with customer preferences, lifestyles, and behaviors? Another closely related question is, “How easy is it to do business with you?”
  3. Have demographics changed?

Your business may need to upgrade/change any of the following: location, technology, including website capabilities, payment processing, scheduling, and communications with customers, turnaround times, product and service offerings, the type of customer you are servicing, and so on.

Marketing: Marketing methods have changed dramatically over the last 10 years. Are you marketing your business to keep up with these changes? If you relied heavily on newspaper or phone book advertising in the past, then I would make a bet that it is not very effective anymore. Even businesses that serve very local customers need to have a strong Internet presence. The best products and services still need to get the word out. Rationally, they shouldn’t have to, but this is just not true.

Analyze and take action: Take a fresh look at your business and seriously consider hiring a consultant to point out your blind spots. Most likely you are not recognizing what needs to change or possibly you do but do not know how to go about making changes. The next step is to actually implement changes.

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5 Financial Truths

There is a lot of information out there about finances, and it’s hard to figure out what is exactly true or not true. Always seek the truth, especially from someone that is not trying to sell you something. Here are some examples:

College: We are led to believe that all of our children must go to college to be successful and make a lot of money. While I am a big believer in education and college, it is not the only route and it is not for everybody. With the high cost of college, the decision to attend college should not be automatic. There are alternatives, such as becoming a tradesman, learning a special skill that does not require college, starting a business, sales positions, military or government positions that do not require college, stay at home parent (yes, this is a vocation), etc.

Retirement savings: Saving for retirement is a good thing, however, it should be balanced with both short and mid-range needs. For example, if you allocate virtually all of your savings towards retirement accounts and ignore having a cash cushion, then your risk of financial catastrophe increases. If a financial crisis arises or a large purchase needs to be made, then you will have to withdraw from your retirement accounts, which is one of the worst financial decisions to make due to both income taxes and penalties on the withdrawals. Furthermore, if you do not have withholdings taken from your distributions, then you will probably end up with a tax problem once you file your return. The prudent action is to have a cash cushion of 3 to 6 months of expenses for emergencies and to save for mid-range goals, such as a house purchase.

Debts: Debt truly is a double-edged sword. There are some who advocate staying away from debts at all costs and others who encourage you to leverage yourself to make more money. The truth is that debt should be used wisely and sparingly, if necessary and as a last resort, and it should not cripple you. If you are able to avoid debt, then that is excellent, as debts increase your risk and they also encourage risky behavior and increased spending in many cases.  To prove this point, why do you think McDonald’s started to accept credit cards, why do auto loans have 7 year terms, and why can young adults take out massive loans for college?  It is to get you to spend more than you would have otherwise.  As you mature financially you should seek to decrease your debts.

Most people would not be able to afford a house without obtaining a mortgage, and if they waited to purchase a house and rented instead, then they would most likely be worse off financially over the long term. Also, some businesses may need to incur debts to purchase expensive equipment, inventory, or improvements that would not be possible if they did not incur debts. To emphasize, it should be used wisely and sparingly.

Expenses, income and savings: Most likely your expenses are way too high. If you are able to save 15- 20% of your income and have no debts then spend whatever you want. Otherwise, set aside money towards savings to steadily increase the percentage that you save each time you get paid. This way you will spend whatever is left over. If you are not able to do this then you need to take a serious look at decreasing your expenses and increasing your income. The truth is that it is really not that hard, but most people have a hard time doing this. As Yogi Berra said, “Baseball is ninety percent mental. The other half is physical.”

Home and health = wealth: In the quest for success, don’t ignore your most valued relationships or your health. Nothing can cripple your finances as quickly as health or family issues, such as divorce. With either of these issues your expenses increase exponentially while your income suffers at the same time. Make sure to prioritize.

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Where Are all of the Young CPA’s and Why Should You Care?

I was at another continuing professional education seminar recently, which is very often as CPA’s are required to have 120 hours of continuing education every three years. One of the observations that I make each and every time is that I am one of the youngest CPA’s in the entire room. This is true now and was true 10 plus years ago when I became a CPA. Unfortunately, I have been jumped past the young man status, so it has nothing to do with being a “young” CPA. Why does this matter and why should you care?

Some details: When looking around the room this time and every time, It appears that approximately 5% of the CPA’s are younger than 50 years old, with the majority being older than 60. Could it be that older CPA’s attend the seminars that I happen to attend or is this true throughout the profession. When digging deeper, I found out that according to the AICPA, approximately 75% of CPA’s are expected to retire in the next 15 years, so my observation applies throughout the entire profession, and not just Bergen County.

More accountants, less CPA’s and CPA firms: Studies are showing that although there are more accounting graduates, less are becoming CPA’s. There are numerous reasons why including greater education requirements, time requirements, and the expense of taking and studying for the exam. Also, although I do not have a statistic on the age of CPA’s that own small firms, I do not know, even casually, one CPA firm owner that is younger than me. Just to reiterate, I am not a spring chicken anymore.

Negative impact on clients: CPA’s are the main business and tax advisors to small business owners and many individuals, so who will fill this void? I can only make several guesses to the alternatives, which are not very good for clients. Alternatives include: using non-CPA business advisors and preparers (whom generally lack the education, expertise, and training of CPA’s), using larger firms (along with much higher prices and less attention to the “little” guys), and doing everything yourself (ie. QuickBooks, however you need to be an accountant to actually get the numbers correct, along with not receiving guidance that saves business owners more than they actually pay their CPA). Another negative aspect is that there will be less CPA’s to collaborate with as peers. As a side note, the CPA’s that I know have been the most generous, helpful, and supportive people to me professionally.

General trends: There has been a generally trend for less people to start their own businesses, which has been the case for decades, according to a 2017 report by the Kauffman Foundation, titled, “The Entrepreneurship Deficit.” Several reasons are cited, including demographic changes, technology, and geographic changes. It appears that the CPA profession is not immune to these general trends, and as a result there are less small CPA firm owners.

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Does Money Really Matter? 3 Different Views

People tend to fall into 3 different categories of how they view money, which ultimately impacts how they manage it. How important should it be to you?

Love of money/materialism: Thus is the most extreme view whereas you practically worship money. Earning more and obtaining more just to earn more and have more. It can be a trap that creates a lack of satisfaction. Although it may at first seem hard to digest, poor people can worship money and wealthy people may not because it is not about the amount that you have.

Don’t care: Another extreme view is not to care at all about money, although this doesn’t seem as common. This can cause problems because you may not use your money wisely and will probably be rather reckless.

Balanced approach: Thus is where you view money for what it is; a resource that has been given to us to use wisely. But what exactly is the wise use of money? It is taking care of your family, the poor, investing and saving wisely, spending within your means, and not being too emotionally wrapped up with money. It may mean owning a 5,000 square foot house or it may mean renting a small apartment; shopping at Wal-Mart or Neiman Marcus. Confusing, isn’t it?

Just realize what the purpose of money is and don’t let anyone tell you how much or how little you need. Learn, seek advice, and try not to get stressed out over it.

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Why Everyone Should Start and Run a Business Even if it’s Just Part-Time and Temporary

Why should everyone start a business? Because it will completely change the way you see the world, view people, money, and everything else. Not to mention that it will humble you.

Just to be clear, not everyone should be a business owner full-time or for the long-haul. However, by starting a part-time business or even operating it full-time it will change the following:

Appreciation: You will appreciate the skills of business owners that you know, including friends, family, local restaurants and other business owners, or even your own boss/owner if you work for a small company. There are many, many skills that are required to run a successful business that can only be appreciated if you actually are a small business owner.

Humbling: Nobody likes rejection that I know of, but it is very common in business. A small business owner is usually the head salesman and must learn how to sell their products or services. As with any sales position, you’ll quickly realize that not everyone wants to buy what you’re selling, even if you believe that it is better than chocolate fudge brownies, if that is possible. Even if you are selling your products on the Internet and do not have to sell face to face, you may wonder why nobody is visiting your website or buying your products on Amazon. Don’t take it personally. You will also experience the ups and downs of a business vs. a steady paycheck from an employer.

Direct relationship between results and income: Unless you work as a commission-based sales person, there generally is not a short-term relationship between your income and your results. For a business owner, great results equal greater income. As an employee, compensation increases tend to happen over time and you are highly dependent upon your direct boss and the company’s performance.

Complaining: You will probably laugh when a friend complains how much they have to pay towards their health insurance, retirement benefits, and their company’s paid time-off policies. Guess who fully pays for these benefits when you own your own business?

Commitment: Having a small business means being committed. As with any endeavor that you seek to achieve positive results, a strong commitment will dramatically increase your chance of success. If you can commit to a business then you can commit to other important items.

 

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Don’t Use Your Employees and Employees Don’t Use Your Employers

When I was a kid, sometimes a friend would say, “Don’t be friends with so and so because they are users.” I have to admit that I really did not know what that meant back then, but since I now have the Internet nowadays, I was able to look it up. According to urbandictionary.com, a user is someone who takes advantage of another’s kindness or generosity. They pretend to be a friend but are only in it for what they can get out of it. A user takes and takes, rarely gives. When it comes to employers and employees it can easily happen, but here are 4 ways to avoid using each other:

Be honest: When an employee takes a job there should be honesty on both ends. First, the employer should set expectations about the responsibilities, compensation, work environment, hours, advancement opportunities, etc. Employees should be honest with their employers about their experience, their ability to perform their job functions, their availability, and their own expectations. If you do not tell your employer that you plan on moving out of state in 6 months, especially after your employer has spent time and money on your training, then that is lying by omission. The same holds true for an employer that plans on moving their location in the near future without informing a new employee. Be upfront and honest.

Don’t dawdle or overload: A business makes money when employees are productive and loses money when they dawdle. Keep this in mind as an employee. Alternatively, if an employer overloads their employees then this can lead to burnout.

Give, don’t just take: Employees should not focus solely on their own paychecks, but on the overall success of the business. Think about what you can give to make your job better and for the business that you work for to succeed. Most likely, unless you work for a user, you will be compensated for high achievement. Employers should compensate their employees fairly and reward them when they are helping the business to be more profitable.

Do a good job: Do an excellent job and take pride in what you are doing whether you are an employee or an employer.

Don’t be a user!

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