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Tax-Time Levity: 10 Ridiculous Deduction Attempts

hyder / March 26, 2012 / No comments

The perennial nature of tax time does nothing to assuage the overall stress, anxiety, frustration, procrastination and general loathing associated with the chore of preparing your income taxes. For those who prepare their own taxes, the strain can seem particularly acute, yet even ensuring you’ve provided all the necessary documentation to a paid tax preparer can be stressful.

This year, countless Americans will labor over mountains of paperwork, hunt for rogue receipts, itemize ad nauseum, and search for every possible deduction to ensure they don’t overpay even a single dime to Uncle Sam’s outstretched hand. And when it comes to deductions, you might be surprised at the creativity — or plain stupidity — of your fellow taxpayers. So, as the dark cloud of the April 17th deadline looms, I thought I’d attempt a little humor by relaying a few anecdotes of ridiculous and outlandish deductions desperate taxpayers have attempted to declare that shockingly, didn’t pass the proverbial IRS muster.

Fur to Foster Conversation
One businessman thought he could get away with deducting the mink coat in which he draped his wife when entertaining or speaking to clients. His rationale? This cunning guy claimed that his wife’s lavish coat served as a delightful icebreaker and conversation piece. Too bad he got skunked by the IRS.

Drug and Prostitution Expenses
Shocking though it may be, it turns out that you cannot deduct expenses for careers that are, well, illegal. For those who declare “prostitution” as their profession, the IRS won’t be footing the bill for the fancy lingerie or condoms the job requires. The same is true of marijuana growers and dealers, some of whom have tried writing off the cost of everything from potting soil to the plastic baggies in which they package their “product.”

The Doctor’s System
Sure, doctors require all sorts of high-tech and serious-sounding tools and gadgets to practice medicine, but what exactly is a “time monitoring system”? When one CPA reviewed the taxes of a physician who was being audited came across this rather large deduction, he had the same question. When he asked the doc to explain this mysterious “time monitoring system,” he was treated to a display of the doctor’s blinged out Rolex.

Watch for the Fallout
During the height of the Cold War, one patriot followed the cue of other frightened Americans and constructed a nuclear fallout shelter on his property. Granted, those things aren’t cheap, but none of his other fallout-fearing peers tried to take it as a tax deduction. So just how did he list his new shelter? As “preventative medicine,” of course!

All for Education
One creative Spanish teacher ordered the Spanish-language subscription from his cable provider and, of course, purchased a new television on which to watch his favorite Spanish-language shows. Since he was an educator — and an educator specializing in Spanish, no less — he thought it only appropriate that the IRS reimburse him for these “teaching expenses.” How do you say “Nice try” in Spanish?

Up in Smoke
This one has to be my personal favorite. A failing and frustrated furniture store owner decided the best way to get out of business was to hire someone to burn it down. And as it turns out, this man was very diligent when listing the expenses he incurred in this calamity. Not only did he accurately report the loss of his building, as well as his payout of $500,000 in insurance money, he also listed a $10,000 deduction as a “consulting fee.” As it turns out, no matter how much you consult with an arsonist, the whole thing is illegal. Imagine that. Both business owner and arsonist/consultant ended up in prison.

 

Photo courtesy of http://www.genuinejobs.com
Category: Baby Boomers, Taxes / Tags: , , ,

Should You Put Your Kids’ Education ahead of Your Retirement?

hyder / March 19, 2012 / 2 comments

If you’re like most parents, you want nothing more than to provide your children with a college education. Some have been saving since before their children were even born, but more often than not, a substantial number of parents find themselves in the uncomfortable position where their kids are fast approaching college age, but they themselves are staring their retirement years right in the face. So the question becomes: Should you sacrifice your retirement savings to put your kids through school?

During a conversation about this precise question, a wise insurance professional reminded us that while college-bound kids can always get financial aid, there is no such thing as “retirement aid.” And while it’s a nice wish, paying for a child’s education is not an obligation; and it’s certainly not worth taking out a second mortgage, cashing in a life insurance policy, or tapping into your IRA. Those funds can never be replaced, but your children will earn their own money. I can personally attest to this fact. My parents worked hard their whole lives, but simply couldn’t afford to contribute to my college education. While I could see that this pained them, I knew I could take care of myself. I reminded them that I would far prefer that they enjoy the fruits of their labors and live out their golden years without financial or emotional strain. So, I took out copious student loans to attend a private university where I pursued a double major, made the Dean’s list, and graduated with Honors — all while working 40 hours a week behind a bar, serving drinks to my more affluent classmates. I’m still paying those loans, but I’ll never regret the education I received — an education I earned myself.

While at university, I also noticed a powerful trend among my classmates, the majority of whom had their parents paying their way, and even supplementing their lifestyles with allowances and cars. These kids were no less intelligent than I, yet despite my over-burdened schedule, I was earning As while they were struggling to maintain a C average. It occurred to me that one of the reasons I felt so compelled to achieve was that it was my own money — money I was not about to go to waste. My education simply meant more to me, and my friends who were living off handouts were far less appreciative of their good fortune than I — and probably their parents — would ever have expected.

Anecdotes aside, the easy answer to this dilemma is to take care of yourself before you raid your retirement accounts and assets to fund your children’s education. They’ll certainly survive — and perhaps even thrive — knowing it’s something they’ve earned. Armed with an education, they’ll enter the workforce and establish their own retirement funds. With lifespans steadily increasing, your retirement could conceivably last upwards of 30 years, so ensuring you have the funds to support a long retirement means you won’t become a “burden” to your children, relying on them for shelter, money or care. And if this were to happen, what was all your sacrifice for in the first place?

Keep your nest egg, encourage your children to achieve, and with a solid planning strategy and a bit of luck, you’ll lead a long, happy retirement — one that allows you to spend time doing what you love with those you love, like those grandchildren you’re probably looking forward to spoiling!

Photo courtesy of http://www.cnbc.com
Category: budget, Investing, Retirement / Tags: , , , , ,

When Should You Start Taking Social Security?

hyder / March 12, 2012 / No comments

The time when you feel as though you’ve been working for as long as you can remember and are longing for the respite the proverbial golden years will provide is nigh. You know you’re eligible for Social Security (SS) benefits, and you’re thinking about when you should start taking the income you’ve worked so hard to earn. But when you go to weigh your Social Security options — depending on a number of factors, of course — you may decide that you can survive the workforce for a few more years if it means getting a bigger monthly benefit.

Your Options
The earlier you begin taking Social Security benefits, the smaller your  monthly payouts will be. Conversely, the longer you wait, the higher the monthly benefit will be. If you defer your benefits until the maximum age of age 70, your monthly benefit could be as much as double what your “full retirement age” payout would provide. No mater your choice, you’ll receive the same amount of money from the Social Security Administration (SSA) — if you take your funds early, they’ll need to last longer; if you take a later withdrawal, the money you would have earned has simply accrued to a higher amount, due to your older age.

What Is Your Full Retirement Age?
While you can start withdrawing SS benefits as early as age 62, if you were born before 1937, your “full retirement age,” as determined by the SSA  is age 65. If your born after January first of 1938, your full benefit age is 67.

How Much Can I Save by Delaying Retirement?
You can earn quite a bit more per month by taking your benefits later — even if by just a few years — than your full retirement age. This is because the government affords you what’s called delayed retirement credits, allowing older beneficiaries to increase their benefit payouts. Depending on your year of birth, you accrue a sizable yearly rate of increase in your benefit amounts. So, if you were born in 1935-1936, your increase is valued at 6.0 percent. If your birthday was in 1941 or 1942, you’ll receive a yearly increase of 7.5 percent. If you were born in or later than 1943, every year you defer payment earns you an increase of 8 percent annually.

If you cannot delay your retirement until age 70, remember than if you were born after 1937 (making your full retirement age 67), and you elect to start taking SS benefits at age 62, your monthly benefit is cut by more than 30 percent. If you can wait to age 66, however, you’ll only lose about 6.7 percent of your benefit.

Important Factors to Consider
According to the SSA, you should ask yourself the following questions when determining when you plan to begin drawing benefits:

  • Are you still employed? If so, could you see yourself working a few years more, or are you ready to get the heck out of there?
  • How is your health? There’s no point in continuing to try and work if you’ve somehow become physically disabled, but if you still feel well, some extra time at work could be well worth it.
  • Does your family have a history of longevity? Taking family history into consideration is important, but you’re really just making an educated guess with all these methods.
  • Will you still have health insurance if you retire early? You won’t be eligible for Medicare until you’re 65, so if you want to stop working at age 62, be sure to consider how you’ll cover your health care expenses in the interim.
  • What other retirement assets to you have? If you’ve been planing for awhile and have an annuity, pension, or 401(k) to supplement your income, taking an early Social Security benefit may be your best choice.
  • Will any other family members qualify with you on your record?

Your Social Security needs are a great thing to discuss with your advisor or planner, as he or she may have some valuable insight on the matter based on what they know about your particular circumstances. And of course, you can also learn more about Social Security by visiting the website, www.SSS.gov.

Category: Baby Boomers, Investing, Retirement / Tags: , , , ,

Tax Organization Tips for Small Businesses

hyder / March 5, 2012 / No comments

If tax season were like Christmas, you’d definitely file doing your taxes under “last-minute shopping.”  Not only is it time to prepare last year’s taxes, but it’s also important to get this year’s taxes rolling as well.  Compiling tax data last minute can be stressful and confusing.  And trying to throw together important information regarding the success of your business under pressure will surely lead to costly mistakes.  Here’s a list of helpful organization tools that can cut your tax preparation time in half:

  • Don’t store all your tax records in one file.  Keeping your tax records all in one place can lead to lost items and mismanagement.  Try purchasing organizational containers like plastic tubs and label them with the tax year.  Items like vendor files, appointment books, bank records Insurance policies, capital asset files, investment accounts, real estate and capital improvement files are important tax documents that need to be filed together under the same tax year.

 

  • Track your mileage.  If you use your vehicle or cell phone for business you’ll want to track your usage accordingly.  While cell phones can be easily archived through your bill, your vehicle is different.  The IRS asks for your total mileage on the tax return, so try keeping a notebook in your vehicle and tracking your mileage for each trip.

 

  • Collect all of last year’s tax documents.  If you haven’t done this yet, create income tax files for last year and this year – and make them stand out.  Throughout the year as taxable transactions occur, collect all documents in the file.  Filing documents like third-party reporting documents such as 1099s, K-1s, W2s, 1098s, etc., and receipts for tax deductable transactions immediately when you receive them will make data compilation much easier.  After archiving these throughout the year you can simply grab the file, a back up of your QuickBooks data, and head out to your tax pro.

 

  • Go green!  Welcome to the 21st century!  Now welcome your bookkeeping system as well, and purchase up-to-date digital accounting software.  Most accounting software programs are easy enough for the non-accounting professional to use.  Now tax return preparation, financial and tax planning are simplified because of the comprehensive reports generated by a decent accounting program.  Imagine not having to peruse through your filing cabinet for hours at a time, and simply pulling it up on your computer instead.  Furthermore, these digital files are easily transferable and take up less space.  Although, beware of the caveat – computer crashes are not uncommon, and losing all your important files in a “virtual fire” can ruin you and your business.  Be sure to implement a routine backup plan where the files can be stored outside of your hard drive.

There are myriad tips that can help you and your business organize your taxes throughout the year, making last-minute tax preparation less of a headache.  If you have tips of your own that you’d like to share please let us know!

Category: budget, Taxes / Tags: , , , ,

Maximize Your Refund: 5 Big Deductions You May Be Overlooking

hyder / February 27, 2012 / No comments

If you’re like most Americans, when tax time rolls around and you start collecting paperwork like a raccoon building a nest, you start thinking about the deductions you can take to ensure you pay no more in taxes than you’re legally obliged to. And if you earn a refund, it makes uncovering every possible deduction that much more rewarding.

This year, make the most of your tax situation by remembering the following deductions that may be available to you.

Refinancing Points: With interest rates at near-historic lows, odds are good that you’ve refinanced your home a time or two over the last few years. If so, any points you paid to refinanced can be deducted for the life of the loan at a $10 per-month basis. While these deductions aren’t substantial, they do add up over time. For example, if you refinanced your house’s mortgage on July 1, 2011 for a 20-year term, six of 240 months will have gone by before year’s end. Therefore, if you paid $2,400 in points, that’s a $60 write-off. You can continue to take a $120 annual deduction until you’ve deducted all your points in full.

Health Insurance Premiums: If your medical expenses exceed 7.5 percent of your adjusted annual gross income, your health care premiums may be deductible. These health care deductions also can be granted to long-term care premiums (depending on your age) as well as Medicare premiums.

If you’re self-employed and have purchased individual health insurance, your premiums are 100 percent deductible. If this is the case, as long as you haven’t included these premiums in other itemized deductions, you don’t have to worry about meeting the 7.5 percent threshold or itemizing these costs.

Noncash Charitable Contributions: If you’ve donated clothing or furniture — in good condition, of course — to Goodwill, the Salvation Army or a similar organization, you can deduct the value of your donations. The trick is to remember to get a receipt whenever you make a donation. If you’ve neglected to get a receipt, you can still deduct these contributions, as long as you understand that if you’re audited and can’t produce a receipt, they won’t allow you to take the deduction. But since you’re unlikely to get audited, most experts agree that you can determine the fair market value of whatever you donated by going to a thrift store to learn the price of comparable items, or you can visit the Salvation Army’s regional websites to help determine the value of donated goods.

Higher Education Expenses: There are two ways to get some money back for your undergraduate or postgraduate education. If you earn less than $65,000 a year (or $130,000 if filing jointly), you may take as much as a $4,000 deduction for each year of your higher education. You may also qualify for a $2,500 credit under the American Opportunity Tax Credit for undergraduate work, or, if you’re working on a graduate degree, you may be eligible for the $2,000 Lifetime Learning Credit.

You cannot take both a deduction and a credit, so determine what’s available to you and go with the option that gives you the biggest tax break.

Energy Savings Home Improvement Credit: If you are an environmentally conscious homeowner, you may be eligible for savings under the Energy Savings Home Improvement Credit. If you perform home improvements such as installing skylights, windows, outside doors, high-efficiency water heaters, pigmented roofs, or central air conditioning, you can take a 10 percent credit for these costs, the cap on which may not exceed $500. If you add alternative energy sources such as wind turbines, geothermal heat pumps or solar water heaters to your home, you can take a 30 percent credit on the costs of these improvements, and there is no cap through 2016.

If you do just a bit more exploring, you may discover even more deductions you’ve never thought of before. Be sure to discuss maximizing your tax refund with your tax preparer, and encourage him or her to help you uncover as many deductions as possible. After all, you worked hard to earn your money, so the less of it you must give to the Internal Revenue Service, the better.

Category: Baby Boomers, Retirement / Tags: , , , , ,

Stock Market 101

hyder / February 20, 2012 / One comment

Sure, the stock market is a list of corporations organized into confusing abbreviations and numbers, but it’s also an important piece of our economy’s puzzle.  Even if you’ve never traded a piece of stock in your life, you have a direct relationship with the stock market that allows you to be an important piece of the economic puzzle.  Have you filled up on gas lately?  Maybe stopped in at Starbucks for a latte and piece of coffee cake?  How about recalling the last episode of Lost, American Idol or CNN report?  All of these situations are examples of how we, as consumers, directly affect the stock market and our economy.  But how can we measure how our individual actions (like purchasing a latte) determine specific stock market repercussions?
Because everything feeds into the stock market, investors often become overwhelmed when trying to decipher all the various indicators and inputs.  Some have even attempted odd strategies in determining where business might be headed, such as counting cars in retailer parking lots and interviewing store management.  Regardless, the price of the securities themselves is what’s important to watch.  But what securities should be on your radar?

  • When it comes to the direction of equity markets on a moment-to-moment basis, a great indicator is the E-mini S&P 500 futures contract, electronically traded at the CME.
  • For those without access to real-time futures quotes, an acceptable proxy would be the S&P 500 itself, as represented by the SPDR S&P 500, which is an obligatory “must” monitor for anybody who owns stocks.
  • Keep a close eye on high-priced stocks that dominate the indices like Apple, IBM, Chevron and 3M, all which highly correlate to, and often lead, the broader market.

Equally as important as the stock market is the bond market, especially U.S. Treasurys, which can provide an immediate snapshot of the general market mood.  Due to the interconnectedness of global markets and persistent weakness in the U.S. dollar, investors are paying closer attention to currency markets, tracked easily through a number of currency ETFs.  The big players to watch in this category are McDonalds, Coca-Cola and Proctor & Gamble.   Finally, keep gold and precious metals in your sights – they may have been dormant a decade ago, but they’re the hot-money topic right now.
In addition to the stock market 101 listed above, I’ve also provided a short list of stock market lingo to help in understanding what those confusing stock brokers and newscasters are talking about.

  • Bearish: To believe the market will go down.
  • Bullish: To believe the market will go up.
  • Bottom Fishing: After a large sell-off or drop in the market, a slang term for picking oversold stocks.
  • Buy & Hold: When you buy a stock and completely forget about it indefinitely.
  • Castles in the Sky: When stock prices are extremely overvalued, and not justifiable by future increases in earnings.
  • Crash: A large sell-off (-10% or more) in the stock market in a single day.
  • Dovish: When the Federal Reserve Governors imply that interest rates may be going down soon.
  • Hawkish: When the Federal Reserve Governors imply that interest rates may be going up soon.
  • Rubber Band Effect: After a large sell-off in the market, there is a tendency for the market to bounce back right away.
Category: budget, Investing, Retirement / Tags: , , , , , , ,

2012 Retirement Planning Strategies Event

hyder / February 15, 2012 / No comments

What If Everything You Thought You Knew About Investing Was Wrong?
Tuesday February 28th and Thursday March 1st.  Please hurry, limited seats available for this highly sought after event.  Separating Myths from Truth: The Story of Investing Come visit with us for this educational event.If you are married, your spouse must attend. Please call 330.836.7800 and let us know you will be attending, we would love to have you.
Somewhere deep in your gut, you know you’ve been misled about your investments and retirement savings. The folks on Wall Street and those connected to the securities industry in general are making big profits by hiding the truth from you. Add to that the insidious alliance between Wall Street and the media and it’s no wonder you’re frustrated about your portfolio.
If you are one of the many Americans that are looking for answers about how the securities industry works, then this powerful, insightful event is a must attend. We will show you and your guests little known secrets about investing that these huge companies want to keep hidden from you.
Join us to learn:
•    Does Market Timing Really Work?

•    Can Anyone Really Pick the Best Stocks in Advance?

•    Does Your Funds Track Record Performance Really Help You Predict the Future Returns?

•    How much are You Really Paying for Professional Advice that You May Not Know About?

•    PLUS: The “big secret” of what’s killing the return in your portfolio?

Category: Retirement / Tags:

Insider Secrets to a Happy Retirement

hyder / February 13, 2012 / No comments

According to research by the Center for Retirement Research at Boston College, only 60% of current retirees say that their retirement is “very satisfying.”  The study also found that nearly one in five retirees say they are experiencing lower levels of overall well-being in retirement than they were before they retired.  So what’s causing these high levels of unhappiness in what’s supposed to be the golden years of your life?  The study found four major reasons for discontent among retirees with yep, you guessed it, money being number one.  Let’s take a look at the suggestions the study offers for what does – and doesn’t – please retirees.

  • Money.  Can money really buy you happiness?  Well, apparently in your retirement years it certainly can.  Your financial position — at least relative to other people your age — matters to your contentedness in retirement; retirees who said that their financial situation was better than most other people they knew were also happier.
  • Concern for others and the planet.  The study found that people who reported high levels of concern for the welfare of others and for the earth tended to be happier in retirement.  What were interesting about the findings of the study was those people who have what the researchers call “outward orientation” — they successfully engage with the world though friendships and activities — were much happier than those who had an “inward orientation” and thus were more isolated.
  • Health.  Not surprisingly, the number and severity of illnesses and disabilities you experience in retirement predicts happiness.  The study found that those who suffered from chronic, severe illnesses like cancer or multiple sclerosis tended to be less happy than those who were in better health.
  • Traditions.  Upholding traditions can raise a retiree’s happiness.  Not only do traditions such as holiday gatherings and regular family get-togethers help retirees stay content, but the study also found that conforming to social norms can have a factor on retiree’s happiness levels as well.  People with high levels of “enhancement,” which means they care a lot about status, power and what others thought of them, were less happy than those who had lower levels of “enhancement.”

With all the articles I’ve read about planning for retirement it’s refreshing to think less about financial planning and more about emotional planning.  While money still remains the retiree’s main concern, it’s important to look at other factors that determine a person’s happiness.  What’s interesting about these findings is that the three factors listed after money (concern for others and the earth, health and traditions) can be actively practiced through community and family engagement, as well as a healthy lifestyle.  Money, on the other hand, should be managed much more closely and by a professional to ensure successful retirement.

Category: Baby Boomers, budget, Investing, Retirement / Tags: , ,

Solutions to Your Biggest Money Problems

hyder / February 6, 2012 / 18 comments

No two individuals have the same financial woes.  Not only do financial situations vary in income, debt, spending and saving habits, but they also vary in the perspectives of those individuals and how they rank their specific money problems.  After researching a few polls on the most popular money problems, we’ve created a list of what financial issues most individuals worry about the most and what you can do about it.
I spend too much.  Without a doubt, the most worrisome financial problem people dwell over is the act of spending too much money, but why?  While credit cards play a big factor in their ease and accessibility of use, scientists have actually proven that spending money makes us happy.  Surprise?  Probably not.  Much like chocolate cake or kissing a loved one, the idea of spending money can release a feel-good chemical in our brains called dopamine.  Overspending can also stem from poor planning or lack of time.  So, how do you stop spending?  It’s not easy but doing things like changing your daily habits, only having one credit card and using more cash, unsubscribing from catalogs and finding other inexpensive ways to be happy will help you curb your spending problems.
I save too little.  You’re not alone!  According to the U.S. Department of Commerce, the average American household saves 0.4 percent of its disposable income, down from 2.4 percent in 1999. Some blame low interest rates; if you’re making very little in your savings account you have less incentive save.  Others blame spending too much.  It’s obvious – when you spend too much you can’t save what you should.  One nice way to make yourself save is to detail out a clear goal.  Additionally, you can set up automatic deductions from your paycheck, open a 401(k), and start an immediate savings account.
Gas prices are absurd.  Energy prices, in general, are on the rise, but gas prices specifically are up one-third in the past year.  And with our economy depending heavily on other world markets, it is clear that gas prices are not going to drop any time soon.  There are several alternatives to driving, like taking metro transit, walking, biking and carpooling.  But if you must drive, check out the cheapest gas prices online, remove heavy junk from your car, and be sure to check the oil, air filter and tire pressure on a regular basis.  If you can, investing in energy efficient will save you money in the long run.
I’m not sure how much to save for retirement.  The standard number for your retirement planning is 15% of your income each year.  However, each person’s financial picture is different, and there are many variables that need to be factored in.  You can either contact a retirement specialist, or check out the countless online calculators that will do the math for you.  Some tips for retirement planning include 401(k)’s, IRA’s, pension plans, investments and annuities.
I need a budget.  Are you constantly finding yourself out of cash?  Is your monthly cash cycle consistently inconsistent?  A budget is simply a plan on how to appropriately spend your money.  In order for it to work, though, you must realistic and stick to your plan.  Budgets are relatively easy to calculate.  Simply sit down and create a map of your monthly spending and saving habits.  Follow it accordingly and revisit it at the end of the month to determine what’s worked and what hasn’t.  Another tip is to sign up for an online money-tracking program.  You can even link your bank accounts and bills for deductions itemizations.
I need a financial plan.  Wait, didn’t we just talk about budgets?  A financial plan is much broader than a budget.  It’s a track to help you achieve those big things in life, like a house, vacation home or your child’s education.  It encompasses your savings, investments and even your insurance.  Creating a financial plan is much more complex than creating a budget.  Do some research and hire a financial planner.  The peace of mind in knowing your financial future is secure and protected is worth the time and effort in hiring and educator to coach you through your big life decisions.

Category: budget, Investing, Retirement / Tags: , , , , , , ,

How to Save More than $100,000 Each Year

hyder / January 30, 2012 / No comments

No, I’m not talking about a brand new investment strategy or hot stock in the market right now, I’m talking about all those supposed “small purchases” we make each and every single day.  Have you ever asked yourself at the end of the day, “What did I buy today?”  Doubtful.  And if you did, you’d probably realize how much money you’re actually spending on the small, in most cases unnecessary or reducible purchases you make each day.  Well, no worries, we’ve decided to do the work for you.  You’ll be more than surprised to learn that you could be saving over $100,000 each year if you reduced the amount of small purchases you make.

With the help of Encore and the President of Orr Financial Group, we’ve figured out how much these “little things” are costing us.  Assuming that we buy these items five days per week for 40 weeks a year (or 200 out of 365 days per year), and we do  this over a 35-year career, we came up with the following calculations.  (What’s even crazier is that these prices don’t reflect inflation, meaning these impulse buys will most likely cost even more going into the future).

  • Latte ($3.95 each) = $27,650
  • Energy drink ($3.99 each) = $27,930
  • Muffin ($3 each) = $21,000
  • Lunch ($8 each) = $56,000
  • TOTAL: $132,580

With the implications that in order to solve this problem you’d reduce the amount of impulse buying and start consolidating your purchases, you’d be saving more than $100,000 each year.  But what if you took that money and invested it?  If you put your savings into a 401(k) or Roth IRA each year for the next 35 years (assuming a mere 3% annual rate of return), you’d end up with an extra $246,560.  If you assume an 11.5% annual rate of return, which is roughly what the S&P 500 yielded from 1970 to the present, you’d end up with more than $1.7 million in your retirement account, the report says.

With the understanding that this report goes to the extremes, it’s still important to understand the principle of the findings: many individuals throw away their money on unnecessary purchases – impulse buys that really add up.  What’s more, if the money that’s thrown away on these purchases was allocated towards an investment or savings account, it has the potential to grow exponentially over many years and provide an excellent retirement account for your future.  Regardless if you think this report pertains to you or not, it’s still important to monitor your spending.  Try writing down every single purchase made in a month, and at the end of that month, go back and review your findings, you may find yourself pretty surprised in the end.

Category: Baby Boomers, budget / Tags: , , , ,
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