Time saving ideas that pay off in tax planning, investments, technology and daily routines

Ben Franklin taught us that “time is money”. In addition, we all know that we have limited time, so every instant is important to us. In fact, each minute involves a choice about how you spend that time.
However, the best use is often hard to sort out. Moreover, tracking time minute by minutes can cloud the real issue, which is what the best use of your time may be.

Tracking your time: However, as a starting point, Laura Vanderkam suggests keeping a journal of how you spend each day. This can show you how much time you spend, say, checking your e-mail every 15 minutes. If you can evaluate your habits with some clear-headed objectivity, you may find ways to spend your time better.

What is your time worth? Here is a financial perspective on the use of your time. Ms. Vanderkam “what is your Minimum Wage” as way to have you test your use of time financially. Her example is the difference between buying and making your own tortillas. When she factored in the time spent against any cost savings, she arrived at a wage of $1.40 per hour. So, was that a good decision for the use of your time? Maybe if your tortillas taste so much better… but often, tortillas are tortillas.

Here are two more taken from my experience: driving an extra 25 miles to save ten cents per gallon on gas probably nets out to the same total expenditure, after factoring in the gas used to get there, let alone the time. Replacing the brakes or McPherson struts on your car may seem to save money. However, when you factor in six hours or more spent, and the clean up, you have a fairly low minimum wage calculation. It is often better hire an expert and spend time with family.

Dangers of Technology: Another author suggests three time wasters from new technology: texting, remote access and last minute preparation. Geoffrey James finds that each of these appears to save time, but embodies significant risks. For texting, the response is immediate and you have a full record of the communication. That may not be to your advantage in business or personal relationships. Remote access may mean you are never really on vacation, never really relax and recharge, so return in less than par shape. Easy access to information makes last minute work tempting. So much can be reviewed easily. However, this process is usually rushed, and rarely forms permanent memories like long-term studies. Therefore, technology in general can be good, but there are some technologies, or at least the ways in which we use them, that do not save you time and make you more productive.

Now, some ideas that payoff
One time saving idea that pays is gathering your tax information as it comes, saving you from hunting for it last minute. Also, saving each year’s information in an organized manner will save time if ever questions arise or, worse, you have an audit to counter. Finally, if you let your tax preparer know about any changes during the year, you have a chance to react and adjust your tax planning, rather than being told what you should have done when it is too.

The same holds true for evaluating any other financial change. Address it at the time, and save the documentation. For example, when you get a new document, you can now scan and save files on your computer (but be sure to have backups). This way, your information is more easily retrieved and searchable, so you can find the correct item quickly.

Investing: This is an area where too much attention is not the best use of your time but also risks making investment errors. Please see our comments at Faults of the individual investor…. Too much attention can lead you to override your long-term plan so spend the time on other matters. Your portfolio will be better off.

If you create or update your estate plan, be sure to change your beneficiary designations right away. You may even choose to fund trusts you have created, saving time for your executor (or the attorney she hires). See Estate planning overview…

If you have suggestions, or questions, let us know.

Tax Strategies Now save taxes later – year end planning

Now is the time to begin planning for 2009 taxes – and for 2010 tax strategies.

As with past years, the goal is to pay the least amount for 2009 and 2010 together. To do this, the common wisdom is to push income into 2010 and accelerate deductions into 2009. This is especially true if rates will go up in the future.

However, if you will be in the AMT for either year, or if one year with have especially large deductions or income, then the strategies change.

Also, there are some special considerations for planning this year:

* There are certain benefits only available in 2009 or 2010 such as the conversion to a Roth IRA with no income cap and the first time home buyer credit;
* Tax rates after 2010 are likely to go up as reductions in rates from the Bush tax laws end after 2010;
* You may have capital losses to shelter capital gains so you want to use them well;
* Furthermore, there may be taxes to pay for health care law and the stimulus package;
* Make sure you use your Flex account funds and any frequent flyer miles that will expire; and
* Finally, some features may be extended, such as the $8,000 first time home buyer credit.

Sitting down to review 2009 and 2010 could save you money. Also, the work you do now will help on what you owe for 2009 as well as the tax preparation.

There is a very good article with details on this from Kiplinger’s Tax Newsletter that I can forward to you if you wish – Let me know

Thanks,

Steven

Let us know if you have questions or comments. Thanks,

Steven