Monthly Archives: December 2011

Hole In My Pocket

Q:  I have to admit that I am a person who tends to let my money burn a hole in my pocket.  Sometimes it gets down to the wire and I find that I have to pray that I have enough to pay my bills.  I’d really like to stop living like this but have no idea where to begin.  Any suggestions?

 A:   Living paycheck to paycheck is by no means fun.  Yet the simple practice of budgeting can help one get their finances in line and stop the endless cycle of waiting for that next check to come.  In a day and age where it appears that even the government can’t budget correctly, the following tips will help ensure that you get it right.

Adopt the correct attitude toward budgeting.  Understand that you are trying to free up your time from paying bills and worrying about money.  A budget isn’t a straightjacket for your finances.  It’s a tool that will allow you to see where your money is going, where it could be used more effectively, and alert you to when all is not well.  Using a budget will help you get your financial life under control and begin to realize some of the dreams that you have.  It will take discipline to stay within the guidelines of any budget.  However, if you take the attitude that a budget is a waste of time or some type of constraint, you will more than likely not stick to it. 

Build your budget.   Some people take the approach of building what is referred to as an expense side budget; one that only looks at what one spends.  A more realistic budget is one that encompasses both income and expenses.  This budget allows a person to see how much they bring in and spend during the same period.  If you see that you are overspending routinely you can be sure that you are either eating up your savings or you are creating debt.  If you see that you are spending less than you earn you should be able to see the results in your bank account or in the form of assets that you’ve purchased.  Either way, an income and expense budget will allow you to adequately adjust your spending habits based on the trends you see.

To start you will have to summarize your sources of income and expenses. The things that should be included in income include your after-tax take home pay, interest and dividends, social security benefits, and any other sources that provide you with funds.  Your expenses should include things like your housing cost, utilities, insurance, savings, food and personal items, transportation, entertainment, and charitable contributions.  Once you’ve listed your income and expense items you should subtotal each category and see where you stand.  The budget may indicate that you have a lot more money available than you tend to feel you do.  So what’s the problem?

Perform the reality check.  Illustrated below is an average expense side budget.  The percentages indicate how much each category makes up of the total money spent in a given month.

Personal Savings          10%
Housing expenses, utilities, and food  30-35%
Installment debt and credit cards         15%
Transportation and vehicle maintenance          10%
Charitable organizations          10%
Insurance         5%
Entertainment  5%
Personal care and clothing       5%
Investments     5%
TOTAL            100%
Compare your budget to the one above to see where there are differences.  You may see that you are spending more on housing than the average person or that a majority of your money goes to a category that isn’t even listed above.  Whatever the case may be, wherever your budget is out of line could indicate the source of your money problems.  It is also important to note that you could just be overspending the money that you should be saving.  If this is the case, start a savings plan to keep more of your money with you and of the pockets of the big corporations.

Periodically review and adjust your budget.  Did you recently receive a promotion that translated into a bigger paycheck?  Did you finally pay off that car note?  Just get married or bring a new child into this world?  All of the above are good reasons to revisit your budget and make adjustments.  None of us remain the same for too long and neither should your budget.  Whenever there is a change you should assess the area(s) that will be impacted and make the necessary changes to your income, spending, or both.  For instance, if you were making $2,000 a month you may have been socking away $200 a month into your personal savings.  With your new promotion you now make $2,500 a month and that means that you should be saving $250 a month.  Just because your income changes doesn’t mean that you have to change your budget.  Yet to make sure you are staying in line and well on your way to where you want to go, it’s advisable that you do.

Hey, Who Is That Guy?

Businesses are funny entities.  They make the products we purchase, seduce and entice us with their ads and even influence the world we live in.  But behind these often ambiguous enterprises are real life people like you and I.  They have lives, families, hobbies, interests, opinions and the like.  Yet, most customers never get to really meet these individuals who, in reality, are the life source of the company.  With that being said, I figured it would be nice to share some interesting facts about the guy who primarily runs this blog thingy.

So in short, my name is Jared R. Rogers.  I’m the guy at the helm of Wilson Rogers and have been for quite some time.  It is true that I am a Financier by trade and have been involved in many facets of the profession (Public Accounting, Industry Accounting, Operational Analysis, etc.) for over 13 years now.  Yet, I am far more than just a “numbers guy” and if you had a chat with me at length, you’d probably wonder just what I am doing in the accounting field.  So how about a quick round of 10 questions?

1.   Just how did you wind up in Finance?

Back in High School I had an interest in going into law enforcement.  But the idea of facing the thugs and hooligans of Chicago’s mean city streets didn’t really appeal to me.  Thus, I thought that working for the Illinois State Police or FBI was actually a better option.  Problem with the FBI is that in order to be an agent, you had to have a college degree in one of five fields (Accounting being one) AND you had to have two years of work experience.  Thus, when it was time for me to graduate, I decided to go and work for the Accounting firm KPMG, LLP.  Needless to say, I never went back and applied for that FBI gig!

2. You’ve been in the profession for over 13 years?

September 13th 1999; that was my first day in Corporate America.  Ironically, the picture below is me headed off to my first day as taken by my mom – yeah, my parents were gracious enough to let me live at home my 1st year after college (that was before I bought an apartment building at 23 and became a slumlord).

I worked in the audit practice of KPMG for about 3 years and during that time passed the CPA exam.  Eventually, I decided that 50-60 hour work weeks weren’t worth my health and decided to get a “normal” job.  From there I went to the tool manufacturer Robert Bosch (they make Bosch/Skil/Dremel) and got a gig in the accounting department.  Over the course of two years I decided that accounting was kind of boring and that the “sexy side” of the business (Finance) was where I wanted to be.

So with that, I began pursuing my MBA and in the process switched jobs to PepsiCo.  I worked at PepsiCo for about 4 years and in the process got to work as a Financial Analyst for Gatorade.  It was here that I got to work on some pretty cool things, saw the importance/value of all functions within a company (e.g. Sales, Marketing, R&D, etc) and really figured out that my mind is actually more oriented towards business as a whole versus just accounting.  After PepsiCo I moved to Hyatt where I assumed management roles within the BU Finance function and Corporate Planning & Analysis (FP&A) team.

3.  So just how did you start doing taxes?

Well, being an accounting major, I was not going to pay someone to do my taxes.  Thus my start in taxes began with me doing my own.  Owning an apartment building led me to learn the intricacies of some of the more complex individual tax matters.  I’ve always been a proponent of giving back, and during the time when I was working for KPMG, I began to participate in the IRS’ VITA program. After a few seasons of working with VITA (and the typical “hey, you’re a CPA, I have a tax question for you”) I decided that doing taxes on the side might be a cool way to pass the time during the winter.  So from there, things just started to grow and I’ve been involved in the tax world ever since.

 4.   If you find accounting boring, finance sexy and you have a business oriented mind, why do you do taxes again?

As I mentioned above, I’m not your typical accountant.  When I say that accounting is boring, I mean that the process of recording entries and preparing financial reports is not exciting.  Most of the information is historical in nature (meaning it’s already happened) and it is very routine in nature.  Finance and business tend to be more dynamic and really benefit from forward looking analysis.  I mean, if you are stuck in the desert, trying to figure your way out of the place is far more exciting than looking at the  footsteps you’ve created  in the sand right?  Thus, taxes are intriguing to me because there is a fair amount of ambiguity and getting it right can sometimes be a challenge.

5.  You left KPMG because of your health?

The short answer is yes.  At the time I hadn’t learned to manage stress appropriately and my body manifested this as mild high blood pressure.  I take my health pretty seriously so I decided that my personal wellbeing was worth more than the paycheck I was making.  With that, I decided to move on, which gave me more time to participate in activities and just love life in general.

 6. What are these said activities?

They have varied over the years, but typically involve me being active or using my mind.  I played football in High School so I’ve lifted weights for many years.  During this time I also rode as a bike messenger which really kept me fit.  I’m also a big fan of electronic music (hey Chicago is the House Capitol of the US in my opinion) and used to DJ when in college.  While I no longer DJ, I love to hear a good mix during my training and workouts.

In my initial years of corporate work, I had less time to be active so I wrote a book just for kicks.  I also became interested in motorcycles as it was a natural extension of my love of bikes.  Best trip?  Chicago to LA and back during a summer road trip on my Honda Shadow!

But all of that not being active caught up with me and at one point my weight topped out at 218 lbs (I played football at like 165 lbs).  So in 2007 I started racing bikes for these guys.  I can honestly say that the past 5 seasons have been a blast especially this most recent one.  This is from one of my more memorable races this summer:

In addition to the above, I also enjoy swimming and yoga as I find they balance my body out given all the time I spend on the bike.

7.  So your weight has obviously gone down right?

Yes, but it wasn’t without a lot of hard work.  See, when your body is used to being active, it takes a lot to get it to shed pounds because it’s adapted to the workload.  Well, that and when you like to eat like a horse and love sweets like I do!  Combine that with the fact that bike racing is REALLY hard, it became obvious to me that I would not do too well weighing what I did.  So over time, I began to modify my already 90% healthy diet and started working out even more.  With that, the pounds started to come off.  With a little more focus on my offseason training and shifting to a Vegetarian diet, my weight is down to within 10lbs of where I want it to be.

 8. Wait, you don’t eat meat?

When a car pulls up to me on my bike in the dead of winter, inevitably the driver looks at me as if I was the escaped Bronx Zoo Cobra!  The same reaction is usually what I get when people hear that I am a Vegetarian.  I haven’t “knowingly” eaten meat since mid-2010 (I’m sure someone may have slipped me a Mickey or two) and while I can’t say that I will never eat it again, I can say that I have no intentions to do so in my foreseeable future.  Over the years, I had refined my eating to mostly turkey, chicken, fish.  However, it was after reading an article about the treatment of animals going to the slaughterhouse as well as the health benefits of eating a meat-free diet (and the impact on athletic performance) that finally pushed me down this path.

When I was younger I wanted to be a veterinarian before I wanted to work for the FBI.  I also wanted to race in NASCAR which may explain why I love racing bikes?  Anyway, I have always had a love for animals and raising them for food just kind of feels wrong and wasteful.  By wasteful I mean, we feed a cow tons of grain (to make it weigh a few tons), use gallons of diesel fuel to truck it to a slaughterhouse, use tons of water and electricity to process and package it so we can have a burger.  Why not save all the middle men and just give me the chickpeas in the form of some tasty olive hummus?

9. So sustainability isn’t new to you?

Nope.  Back when I was little I remember that I had to earn my extra money.  My sister and I would go to the local train tracks and pick up all the aluminum cans that people tossed from their cars.  My father would then take us to the recycling center and we’d cash the cans in.  Thus, I think I’ve always been conscious of wasting things in this world and doing what we can to minimize our impact on what we take.  The same goes for business.  One of my roles at PepsiCo was within the Process & Control Development group.  This team’s job was to figure out how things worked and figure out how to do them better and more responsibly.  So, I’m a big proponent of helping businesses do things better, faster, cleaner and more efficiently than their competitors.

 10. I thought accountants lived in black and white.  Where do you think your open mind comes from?

I went to Catholic school from grammar to high school.  I attended a liberal arts college.  My parents always encouraged my sister and I to do whatever we wanted to in this world, so long as it was legal and didn’t hurt anyone else.  Based on this foundation, I had a lot of exposure to many things in life.  And because I had all of this exposure, I think I came to my own conclusion that there are many options when it comes to things in this world.  You don’t have to be a Catholic, you can follow the teachings of many of the other religions of this world or you can follow none of them at all.  But at the end of the day, we all tend to believe in treating people well and trying to do what is right.  So with that said, I tend to place less importance on individual beliefs so long as we believe in the same general things.

However, when it comes to the land of taxes, there is no such thing as having an open mind.  You either do it right or you cause yourself a lot of grief.  Personally, I can do without the drama in my life!

Well, I know this was a long post, but hopefully you’ve gathered a little more about the man behind the curtain.  Yes, I live and breathe in the world of finance, but I am also a regular person.  I love interacting with people, helping out those in need, trying to keep this bag of bones in shape and keeping the old mind active.  While I am far from perfect, I strive to do the best I can each day and hopefully make someone’s day a little brighter.  Until we chat again.

5 Business Startup Fundamentals

Q:  I am interested in starting a computer consulting business, but don’t really know where to start.  What path would you recommend?

 A:  Starting a business will be one of the toughest and most fulfilling experiences of your life. We have been involved in the launch of several businesses over the years; some successful and others not. Additionally, we have been through all the trials and tribulations of owning a business. Here are five basic fundamentals which are essential to success when starting a business:

Stop procrastinating – just do it!  The first thing you must do is to put your thoughts to pen and start to make it all happen.  Simply talking about what you want to do is not going to make it reality.  So, once you’ve decided what you want to do, use your most valuable tool, research, to help you iron things out. Learn everything you can about the product you want to sell of the service you intend to offer before you do anything.  However, when you’ve gotten yourself 90% of the way there, stop procrastinating and start the ball in motion.  You’ll never be 100% prepared and you can figure out the remaining 10% on the job.

Ask for help.  Many people highly recommend the Service Corps of Retired Executives (SCORE), which is a volunteer organization that helps new entrepreneurs with advice regarding starting a business, from business plans and modeling to funding. Another good resource is the Small Business Administration (SBA).  One can often find a local office in their neighborhood and an extremely vast amount of valuable information can be found on their website

 Build the plan or plan to fail.  Put your thoughts about starting your business on paper. Our businesses wouldn’t exist without a business plan. Jen Diebel, a partner in NetworkNetPlay, a Phoenix venture, stresses, “we believe the business planning process is essential. The structure of a business plan helps assure that we haven’t missed any of the key elements that could affect the success of our company in the short or long-term. It limits risks.”

Take the money and run.  When starting a business there are basically three ways that it can be funded: from your own money, venture capital, and/or from loans. To obtain funding you must be able to show how money is made and spent. Understandably, it can be difficult to pinpoint cash flow details with accuracy when writing a business plan for a new business. Thus, calculate them to the best of your ability. Your business plan serves several purposes, not the least of which is to show lenders how they will be paid back if they grant your business a loan. Investors, who take on greater risk with start-up ventures, are looking for higher returns than they can get by investing in a more established company.

 Love what you do.  Business is not only about money; it is also about your passion. Starting a business takes a great deal of energy and the journey can be a long and trying one.  If you don’t love what you do, the journey may prove to be more than you can bear or even want to.  However, the most important reason to love what you do is this – customers.  When you are passionate about the product you make or the service you provide, it shows.  This passion will resonate with your customer and will shine through in all that you do.  So whether it be selling to customers, presenting to bankers, or just getting the product in the stores, you will do it with enthusiasm – and all around you will be able to key into just how much you care about what you do or sell.

 Obviously every situation is different, and there is a lot of information to be gathered and work that must be done when starting a business. The five steps listed above are pretty basic, but they were fundamental to getting our company up and running successfully many years ago and we’re sure they will help you as well.

I Need A Taxman!

Q: I’ve prepared my return in the past, but my tax situation has been getting more complicated each year.  I’m thinking of going to a tax preparer this year, but I’m not sure just how to pick the right person.  Any advice?

~ Taxed to The Max

A: A few weeks ago there was an article in the LA Times on this exact topic.  We sent it out into the twittersphere but promised to follow up with a blog post a little later.  Why the follow up you ask?  Well, let’s just say that a little more information is warranted as picking your tax guy/gal could be more involved than you initially think.

When it comes to preparing that ‘ol 1040, you can go a number of routes.  You can go the DIY route (which is okay if you have a simple return, have the time to do your taxes and are pretty confident interpreting the IRS code) or you can outsource it.  But who you outsource it to could be the difference between a $25 back alley shop and a $3,000 Attorney.

In the article, the following types of preparers were discussed:

  • Storefront preparers
  • Financial Planners
  • Enrolled Agents (EAs)
  • Attorneys
  • Accountants/CPAs

We won’t rehash what each has to offer in this post.  What we will highlight are the recent changes to the paid preparer environment.  When it comes to taxes, it really boils down to one thing, paying what you owe.  Pay too much (by not claiming all of your entitled deductions, exemptions, etc.) and you just gave the US Government free money.  Don’t pay the right amount (unintentionally or deliberately) and they will come and check you into your very own private suite; equipped with locking bars and a jump suit. 

Unfortunately, accurately paying what you “owe” requires you to have a degree in astrophysics, psychology, classical literature and differential equations.  And that is just to figure out what page of the Code the rules are on for your situation!  But in all seriousness, figuring out what applies to your situation can be complicated stuff at times.  Well, too often people were not getting it right, including your friendly paid preparer.  So what recently happened is the IRS began regulating preparers by instituting some changes for anyone who prepares a return for money.  These changes included:

  • Registration and obtaining a Preparer Tax Identification Number (PTIN)
  • Testing
  • Certification
  • Continuing education

What the above essentially did was ensure that those who prepare returns have a basic understanding of the rules, what documentation/proof should be obtained and just what is not allowed.  For example, if you have a dog and pay for veterinary (medical) care, can you deduct the expenses when you claim them as a dependent?  The answer is of course no (you can’t claim your pet as a dependent), but stuff like that use to happen back in the day before the IRS started requiring that all dependents have a SSN.  Thus, the regulation requirements help ensure that if you are using someone to make certain you pay what you owe, that they know just what they are doing.

 So, if you decide it’s time to begin employing the services of a professional, make sure that you do a little tire kicking before you just hand over your financial life to someone.  At a minimum here are some questions you should ask every preparer when you first meet:

  • How long have you been preparing returns?

You want someone who has been in the business for a while and knows that they are doing.  While there isn’t necessarily coloration between years in the business and competency, the longer the person has been doing it, the more likely it is that they know the fundamentals of accurate return preparation.

  • What is your experience with my return?

Using a preparer who hasn’t dealt with your situation could be a recipe for disaster.  Tax preparation is just like riding a bike, the more you do it the better you become.  Seek a preparer who has experience with your situation and your wallet will thank you.

  • How do you keep abreast of tax law changes?

Tax laws change faster than the weather in Chicago.  What applied five years ago (heck even last year) may be totally null and void this year.  If your preparer doesn’t keep up with the changes then you are running the risk of things being reported incorrectly to the IRS.  Want to know what happens when you report wrong?  Neither do we!

  • What stance do you take when preparing returns?

Some preparers are aggressive while others are conservative.  It’s best you know their approach BEFORE they do your return.  The responsibility for an accurately prepared return actually resides with the taxpayer, not the preparer.  If something is wrong, the IRS will contact you first.  Thus, make sure you know if your preparer is the type to push the envelope when flying in the gray area or if they tend to play it safe.  Nothing is worse than paying for your return and then finding out a year later that the IRS doesn’t agree with the stance that was taken and they want their money back (penalties and interest tacked on of course).

  • What is your audit rate and can you represent me if I get audited?

The IRS audits a subset of returns every year.  If you prepare returns long enough, some of your clients will eventually get selected.  In general, a preparer’s audit rate should be low.  However, if it is abnormally high, it may be a signal that they aren’t preparing returns correctly or they are being overly aggressive (or even fraudulent).  Most preparers can’t practice before the IRS (only EAs, Attorneys and CPAs can) so its good to know if your preparer can just in case you do get selected for an audit.  If they can’t, that just means that you’ll be the one who will have to present and defend your position to the IRS.

  • How is the price of my return determined?

Some preparers charge by the hour, some by the number of forms you file and others just charge a flat fee.  Ensure that you know their billing method up front to avoid any surprises at the end.  For example, if you walk into one office with a cereal box of receipts it could cost you nothing, whereas at another office it could be $500 of time spent sorting and classifying the expenses.

The above questions are only a smattering of things that come to mind when selecting a preparer.  In the next few weeks we’ll try to post some more topics and insights under the “tax talk” category to help you get prepared for the upcoming season.  Until then, stay warm and start getting those documents pulled together!

Welcome To The Neighborhood!

The traditional adage for retailers is that success depends on three factors: location, location, location.  The less obvious adage is that an unfavorable lease can kill a fledgling business faster than almost any other decision.  But the right location is more than its geography.  For service businesses, population plus image may be crucial.  However, for a manufacturer, cost of land, availability of labor and proximity to freeways and railroads may be important.

When we decided we wanted to open our retail office, there were many things on our short list.  Decent square footage, visibility on a major thoroughfare, nice neighborhood, sizable population e-filing their tax returns, etc.  But just like a person trying to find their dream home, it took a lot of searching to find what we were looking for.

Well after two months of visiting many neighborhoods, attending numerous showings, picking one spot and going through the process of lease negotiations, we are happy to announce that we finally have new digs for 2012!  As you can see from the pics below, there is a lot of work to be done this month to get ready for our January opening:

But we’re pretty confident that we’ll be ready to hit the gound running when the IRS flips the switch the second week of January.  Now we just need to focus on getting the electric transferred to us, the internet installed, picking out some furniture, getting our new business license for the location…

So just where is our new office?  2055 W. 95th Street in the lovely Beverly Hills (Beverly) area.  Why did we locate here?  This location met all of our criteria above not to mention it’s pretty accessible from both Chicago and the suburbs serviced by I-294.  So no matter where you are traveling from, you can get to our office pretty easily.  Plus, how can one resist an accountant who has a Beverly Hills address?