How Warren Buffett did it!

Warren Buffett‘s Financial Wisdom
Billionaires aren’t hatched overnight.

But there will be another generation of such men and women in the next few decades — and chances are, they will tread the same path as those who have come before.

So let’s look at Warren Buffett’s path as an example, shall we?

1) Start with a meat and potatoes small business — and be your own boss.
Buffett made his fortune by doing things his way, not by following the crowd. In high school, Buffett and a pal bought a pinball machine to put inside a barbershop. With the money they earned, they bought more machines until they had eight different shops running their machines. When they sold the venture, Buffett used the proceeds to buy stock and start another small business. By age 26, he’d become his own boss and amassed $174,000 — or $1.4 million in today’s money.

LESSON: Don’t fall for the temptations of a huge, immediate windfall business. Cut your teeth on the side, with something basic, reliable and small.

2) Mind the foxes who steal from the vineyard: small expenses.
In the famous book, The Millionaire Next Door, authors Stanley and Danko report that millionaires live well below their means. They budget, plan investments, and allocate their time, energy, and money into building wealth instead of displaying high social status.

Warren Buffett’s companies are known for watching out for small expenses. Exercising vigilance over every expense can make your profits and your paycheck go much further.

LESSON: The next time you spot a sale or online deal, check in with yourself to see if that $50 is better saved or invested than spent. It might seem like you’re spending a relatively small amount of money, but it all adds up.

3) Debt kills.
Warren Buffett advises his people to limit what they borrow. Living on credit cards and loans won’t make you rich. Buffett never borrowed a significant amount of money, not even for investments or mortgages.

The Millionaire Next Door reports that millionaires’ parents did not provide “economic outpatient care”, and their own adult children are economically self-sufficient as well.

LESSON: If you do give your teenager a credit card, make sure to set firm limits and specify use ahead of time. If they abuse the privilege, they lose the card. Do the same for yourself.

4) Leap forward.
Very often those who supply the affluent become wealthy themselves.  In fact, one of the best ways to make money is to sell products or services to those who already have money. Many people don’t see these opportunities because they’re far too busy seeking money and security in the short term only.

Well, when Buffett began managing money in 1956 with $100,000 cobbled together from a handful of investors, he was dubbed an oddball. But he didn’t allow others’ opinions to keep him from leaping into a profitable venture. Over and above, I might add, others with greater private means.

Lastly, I will suggest this: Get professional advice on new ventures and ideas. We are here for far more than “just” tax planning. I and my team would love the opportunity to sit with you, and help you evaluate the direction of your financial life … and point you in a new direction, should it be necessary. Take advantage of our free report by clicking on the link to your right to help you save more taxes!

Small Business Jobs Act of 2010- Tax Ideas

On September 27, 2010 The Small Business Jobs Act of 2010 was signed.  Here is a quick rundown on some tax strategies to use for 2010. These are just some of the major items and various exceptions  come in to play. Please check with us to see how they would apply to you.

1.  Larger Section 179 Deductions. For 2010 and 2011, you may take the Section 179 expense deduction up to $500,000 if you place $2 million or less of such assets in service during the year.  This does not change the limits on sports utility vehicles which is $25,000.

2.  Real Property is temporarily included for the Section 179 deduction.  This means you can expense up to $250,000 for qualified leasehold improvements.

3.  Bonus Depreciation is extended for one more year.

4.  Deduction for Self Employed Health Insurance. For 2010 only, the new law allows self-employed taxpayers to deduct their qualified self-employed health insurance on Schedule C.  This is big as it becomes a deduction that will reduce your self-employment taxes.

5.  No Taxes on Sale of Qualified  Small- Business Stock.   If you buy or set up a new corporation with this type of Stock from now until the end of this calendar year and hold it for at least 5 years, you will not pay any taxes on the gain when you sell it.  Check with us on this as there are many rules you have to follow.

6.  Rollover to Roth. You know that there have been rules to convert part of your IRA into a Roth but this has been expanded to allow some employees to convert their 401K balances to Roth 401K accounts.   The plan you are in must offer a Roth option and the plan must allow an in-service distribution.  Again there are some additional tax strategies to check with this.

We have just hit a few of the items in this act.  Please contact us so we can see how to take advantage of these ideas for you. Warning, there are many exceptions to these laws  so you need to check with a tax professional that can help you.

Contact us, you have worked hard for your money, let us help you look at ways to keep it.

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• Economic, political climate make tax planning hard (seattletimes.nwsource.com)
• New tax breaks for the 2010 tax planning home stretch (iowabiz.com)