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Charity, Mortgages & CPA PSA

February 28th, 2009 at 08:32 am

I've been listening to the radio. Occupies my brain during busy times. More productive than blogging (I know I have been quiet).

BUT, a few things...

Dave Ramsey I like more than I don't. I think if more people start out with his method they will prosper for the long run. But at some point you need other gurus and have to get over your fear of leveraging debt. Well, not that you have to, but you should if you want to be truly wealthy.

Anyway, but over time I have warmed up to him - his message is good. I mostly agree with his financial philosophy because it mostly lines up with my own.

I just get frustarted all these talks I hear about mortgage.

Okay, if we REALLY wanted to pay off our mortgage by now we probably could have. We saved most of our second income for the down payment on our home and such. IF we put off having kids, even though we live in California, we probably could have a paid off home in our early 30s.

But, where is the balance in that? Would I rather have a paid off home and still be childless today? Um, no? Should we put our entire life on hold for a paid off mortgage? Kind of ridiculous if you ask me.

Sometimes I listen and roll my eyes. "I live in California, how the hell would I pay off my home in 3 years?" I often think as I listen. But yeah, if I step back, truth is we could do it if it was a priority. It just isn't.

& people REALLY don't understand the time value of money. By the time we get to the point where we will pay off our mortgage, I don't expect it to amount to a hill of beans. We're like age 30 and our mortgage is only 10%(2 incomes) to 15% (on one income) of our gross income. I expect it to be about 5% of our income when we pay it off (probably less). That ain't going to make us financially free and rich. We will be able to save about 5% more of our income. Big whoop.

Saving 15% today would be nice, but I don't buy "Get rich quick" schemes. At what cost? Too much sacrifices now, for sure. & to retirement, etc.

If we did or didn't have a mortgage I don't think makes that much of a big deal to us. We worked hard to put a lot down, have a low fixed rate, and a modest/affordable mortgage. Literally one we could afford if we both ended up with only minimum wage job choices.

I think for me it mostly comes down to perspective. Our home costs are extraordinarily low for the area. That's good enough for me. Plenty of leverage to move ahead. & heck, that second income, when it arrives, will probably knock out the mortgage in no time. IT just doesn't have to be right now. But I think we will quite easily be mortgage free in our early 40s. Which is win-win if you ask me. Just because I am taking a breath to live my life (have children, etc.) doesn't mean I want to have a mortgage until I am 80. I don't even want to have a mortgage when I am 50. I think most people get so either/or they lose sight of middle ground. I prefer middle ground. Big Grin

I probably sound like a broken record too!

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I just have a tax preparer PSA.

Oh, it annoys me to no end the ignorance I hear in the media about taxes. I've heard some stupid things lately.

BUT I listen to this local mutual fund show every Saturday. I like the guy and I almost fell over the other day when he told a listener that they should fire their CPA because their CPA did not steer them from no-load funds.

Huh????

Okay, first of all, as a CPA I probably won't have a clue what you are invested in. Some 1099s are detailed and will list some of your investments that earn dividends, etc. Some show no detail. Most of the time I haven't a clue what my clients invest in - just what they earned.

Secondly, CPAs have NO Training in investing. I have said so much before. If not for my own personal interest in investing I would probably have no idea what a loaded mutual fund was. I certainly didn't my first few years as a CPA. I took ONE finance class in college. I don't remember anything about mutual funds (it wasn't covered).

Thirdly, CPAs should not be giving you investment advice. Huge red flag. Something we usually don't touch with a 10-foot pole. We often discourage our clients from investing in partnerships due to the often painful tax reporting, and I have had a couple of sucker clients I have advised against terrible investments like ponzi schemes. In cases where you just have to say something because it is so obviously a scam or something. But even then you do have to tread carefully. Our malpractice insurer would probably prefer we never utter a word about investments to any of our clients, ever. & fair enough, because we are not investing experts.

Now, if your tax preparer is a certified financial planner or something along those lines too, then good. But the line between the two is often blurred.

Anyway, if you think your tax preparer is evaluating your investment strategies, think again. You should probably talk to an financial planner or an investment professional if you want investment advice. Wink

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ETA: Oh boy - have I been living under a rock? I just heard about Obama's plan to "cut" the charity deduction. Didn't sound quite right to me so I did some digging to find the truth.

Um, okay, he is proposing to limit the charitable deduction so that you can only reduce taxes at the 28% rate or lower, and not taxes at the 35% rate. You can still deduct it if you are in the 35% tax bracket. It just lowers your taxes a little less than it did before. 7% less, to be precise.

I can assure you none of my clients would think twice about still giving to charity. It's still pretty much their only available large tax break, to speak of, besides funding retirement. My clients would still like the opportunity to give if every dollar reduces their tax bill by 28%. (In most cases 38% when you include the state taxes here).

Wow, don't you love political slinging? Much ado about nothing in my opinion. Perfect example of the tax ignorance I spoke of above. I think it could be a smart move actually, BUT maybe political suicide with the ignorant reactions. I wish anyone would go to the source before they freaked out though. All I see over the internet is "No more charitable deductions allowed because of Obama." & all the people outraged are the ones it doesn't affect anyway. Gotta love it!

2 Responses to “Charity, Mortgages & CPA PSA”

  1. Maismom Says:

    I agree about these people who have no clue about tax or financial statements, but listen to media and blindly believe it. In a post I read in other forum, the lady obviously didn't understand difference between capital gain tax and income tax. And you know what? I have a feeling she is one of those people who gets huge "tax return" due to low income Frown Sad.

  2. monkeymama Says:

    Yeah, & I just have to add, I totally understand charities being concerned. Not saying it won't affect them at all. But just blown SO out of proportion.

    I still have clients asking me if the government is privatizing their 401k, like tomorrow. !!!! Ugh. That was just a comment made by a private citizen at a hearing. I mean, come on!

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