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I can’t tell a ninja no, seriously ninja’s are scary and I just can’t say no to a guy with ninja stars and swords. The ninja who runs Punch Debt in the Face put out a challenge to write a letter to yourself ten years from now. The idea is to make you truly think about where you want to be ten years from now, put it in writing… to yourself, and then check back on it ten years from now. To read more about where the idea came from check out his post from yesterday entitled “a letter to myself” where he talks about a letter he was “forced” to write before graduating high school.  I hated these kind of exercises and I can assure you my answer would have been a lot like his, although I didn’t get to go anywhere near San Diego.

The fact is we all want to lie about where we think we will be and what we really want. If we don’t lie we cover it up with half truths and humor like the Ninja did. It is hard to own up to where you think you should be in the future, take a few minutes and write a letter to yourself, ten years from now. It is like the question at a job interview, “where do you see yourself ten years from now” only you can answer it honestly.

Here is mine:

Dear Kyle,

Ten years is a long time to look ahead, so much can happen either good or bad. With an emphasis on the good there are so many things you hoped to accomplish. I realize you most likely haven’t done them all but I hope that the things WE cared about got done. Money is not an obsession and hopefully is still not your ultimate focus.

I hope that you have continued to embrace the things in your life that truly matter like your wife and two children. In an effort to provide for those kids I hope you have amassed a decent amount of money to ASSIST in paying for their education. While I think it is important to have kids go to college, I think it is equally important for kids to understand that failure is expensive and affects their bottom line directly.

Ten years ago you dreamed of retiring “early” I want you to realize that dream is most likely not going to be your reality. What you should be doing now is something that excites you everyday. There is no reason you should dreading waking up, unless you are hungover, to go to work. Your job should be your passion and something you could see yourself continuing to do even when others have “retired.” As PF textbook as that sounds I hope it is where you find yourself.

I have no expectations of your current wealth or income levels. Honestly I don’t care. The most important things to you were the happiness of yourself and your family. They are what really matters in your life, not the number of greenbacks in your wallet or stocks in your portfolio. Never lose sight of things that really matter in your life. Your friends, your family, and yourself. Do not allow money, or the pursuit of money, to get in the way of those bonds.

You should now be completely debt free, including your mortgage. There should be no more bonds of debt servitude in your life. This accomplishment is the fourth greatest one in our life, behind children and marriage.  Hopefully you took several of your friends out to dinner to celebrate.

Our retirement accounts should be sizeable for your age but not outlandishly large. Because you do what you love you have been able to enjoy life in the now without as much worry for the future. This is the benefit of knowing you will continue to work for years to come. No concerns of whether your retirement income can support you because you still have a working income. This is your life, enjoy it now AND in the future.

Sincerely,

You

You will notice that my letter is not predominantly money related. I have a certain ideal of where I want to be and it doesn’t include me pinching pennies and saving them in my tower like Scrooge McDuck. I want to provide for my future and my children’s future but not at the sacrifice of OUR ability to live today and now. What would your letter look like? Is it all about the benjamins? If it is then I would ask that you take another look and decide where you really should be.

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How long you should keep your tax returns, and supporting documentation, is an issue of much debate in the personal finance world. Some people say seven years, some people say keep it forever, and some people say it isn’t worth the space. Ok well most people probably don’t say it isn’t worth the space but really how long are we supposed to keep this crap for. I just looked in my cabinet and I have returns from 2000-2008, that is eight years. Of course further inspection shows I really only have all the documents since about 2002 or 2003 and just returns through 2000. Looking at this mess I wondered how long do I need to keep this crap. Seriously that is all it is to me is stuff that should be shredded and recycled. Giant wastes of paper sitting in a drawer taking up space. Unfortunately the IRS doesn’t agree with my assessment so lets look at what they have to say about the matter.

Maximum Retention

According to the IRS the maximum amount of time you should hang on to any tax related document is, well forever actually. If you file a “Fraudulent return” or don’t file a return the IRS says you need to keep you records indefinitely. That means forever folks. Of course if you are filing fraudulent returns it probably isn’t going to help if you kept the records to prove it was fraudulent.

The Real Deal

I am assuming you are all honest people and aren’t trying to cheat the system. There are several different scenarios that affect how long you should keep your records on hand. According to the IRS:

  • Keep all employment records for at least 4 years after the tax is due or paid, whichever is later
  • Keep records for 7 years if you file a claim for worthless securities or bad debt.
  • Keep records for 6 years if you fail to report income and it is more than 25% of your gross income shown on your return

So What Should You Do?

If you are filing returns and not doing it fraudulently the maximum amount of time the IRS thinks you should hold on to your documents is 7 years. Odds are that is going to be beyond what you need to do for most people so why not just stick with it and hold them for 7 years. That way if the IRS comes knocking on your door you are covered back through 7 years. At the very least keep your records for 4 years to meet the requirements for employment records.

I would love to hear from everyone on how many years of records they currently have and if they think they would pass an audit, leave me a comment and let me know.

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Tax season is upon us, today I gave away four gift cards for TurboTax Deluxe to four of my readers and that got me thinking about my own taxes. How organized are you for your current, and prior, years tax returns. The 1099’s, 1098’s, W2’s and everything else should be trickling in by now and you need to have a system in place to keep track of these extremely important documents. I refinanced this year so I have gotten 3 1098’s for mortgage interest paid, both my wife and I work so that is 2 W2’s, we have IRA’s, 401k’s, blogging income, and kids. All of these things relate to taxes and all of the documents need to be in order and accessible to complete my return.

How I Do It

The system I have developed is a fairly simple hanging file folder with separate manila folders for each tax year. On the outside of the manila folder you should write down each of the interest earning banks, mortgage companies, affiliate marketers, and  investment accounts that owe you some type of tax related document. As each document comes in you place it in the folder and check off that you received the document. This way you know what is still outstanding and what has been received. All of your documentation is in one easy to find location and you don’t have to worry about tearing the house apart later to find it or wondering what you still need to file.

Why It is Important

Organization is important for everything you do in life but especially for your taxes. Keeping everything together will make it easy for you to jump online and complete your tax return in no time flat. Once you complete your return everything is easily returned to the file and kept until it is no longer needed. If you came into my home right now and asked me for my 2006 tax return and supporting documentation I could whip it out for you in less than 1 minute, could you do the same thing? The IRS probably isn’t going to wait around for you to reproduce copies of things you should already have so get organized now while you have the time.

Don’t Cheat the System

I know there are people out there who think, hey they didn’t send me a 1099M so I don’t have to claim that income, WRONG! If you earned it you have to claim it, by keeping track of who owes you something you will know what didn’t come in. They don’t actually have to issue you a 1099M if you didn’t earn more than $600 during the year. That doesn’t make you any less accountable for your taxable burden. I made $400 in 2008 as a guide for the text service ChaCha I didn’t get a 1099 but I still claimed the income, my wife didn’t think I should. The fact of the matter is twofold, 1.) it is the honest thing to do don’t cheat the system 2.) if you get audited and the IRS discovers this “unclaimed” income you could be in a world of hurt after interest and fines are assessed. Just do what is right and claim everything you make regardless of if it is documented or not.

Additional Tax Resources

10 Oddball Tax Deductions

The 11 Most Overlooked Tax Deductions

TurboTax TaxCaster (forecast your return)

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Christmas is December 25th – EVERY YEAR!

December 15, 2009
Thumbnail image for Christmas is December 25th – EVERY YEAR!

I love Christmas because it give me a chance to decorate my house and take time off of work. This is also one of those times of the year that has historically pissed me off. As you know I used to work as a debt collector for a mortgage company. The most popular excuse for […]

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It’s All About Teamwork

September 24, 2009

In case you missed it somewhere, football is a team sport.  The quarterback cannot win the game on his own, he needs the defense, the offensive line, the receivers, running backs, and special teams to get the job done. Teams have to be cohesive and they have to work together for anything to happen. In […]

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