How to save up on the exorbitant heating bills?

energy billHere comes the winter in another 3 months (I live in Boston now), and as the snow begins to fall and the air gets cold, every breath you take seems to come out in clouds from a smoke spewing chimney.  All you wish to do is crank up the heater, swaddle up in your favourite sweater and sleep. Yet, you cannot sleep all day nor do you want to keep the heater running all day. For the longer it runs, the deeper it burns your pockets. In other words, the heating system may warm you up, but it burns you with the bills.

In a typical American home, heating and cooling bills account for 56% (more than half) of utilities. This certainly does not give you a “cheering point “in face of ever rising utilities’ prices. Yet, you cannot avoid these expenses, unless you are one of those polar bears that hibernate through the   winter or you are one of the X-Men mutants with the power to withstand any temperature. So, I thought I would make a list of ideas during summer so you can get yourself prep up for the winter.

  • BUNDLE UP IN WARM CLOTHES – Return of the Ages!

Are you staying indoors for only a short while? Then, put to good use those mittens /sweater that you bought. Cover up yourself with sufficient warm clothes. Every time you feel a chill, you need not go and put on the heater.

  • INVEST IN AN INFRARED HEATER.

As technology grows, products have become small, convenient and more economical. IR heaters have many pros to its credit. It is low priced, requires no fuel, heats up instantly and does not harm your health. Unlike other conventional heaters or fireplaces that need gas or wood to function, infrared heaters are the best sources to heat up the small surface areas by radiating heat from its heated surface to nearby areas within a room.

  •  AVOID UNNECESSARY HEATING.

Keep in mind that it is you who has to be warm, not the entire house. So you can avoid loss of heat by closing off the thermostat in unused bedrooms, guest rooms or storage rooms.

  •  MIND YOUR THERMOSTAT.

According to Bill Prindle (Former Deputy Director of American Council for an Energy Efficient Economy), for every degree you set back your thermostat, you cut down 3% on your heating bill. So turn it down when you are going out or getting into bed and you can save nearly 14% on the bill.

  •  INVEST IN A SMART THERMOSTAT

Internet and technology has made life very easy and manageable. If you are one of those who forget to turn down your thermostat as you leave, buy a smart thermostat. They are programmed to work automatically or you can operate them even from your laptop/desktop/mobile phone through internet.

  •  USE FANS WISELY.

The exhaust fan in your kitchen may help to keep off cooking smoke off your face, but use it sparingly on cold days. The exhaust fan pulls out all the hot air in the house and expels it promptly. On the other hand, the ceiling fan helps to retain the hot air. It pushes down hot air and circulates it.

  •  FIND YOUR HEAT ROBBERS.

Most often, heat gets lost unintentionally through leaks. Heat generated through our heaters and furnaces slips out through the door and window gaps. So, be sure to caulk your windows regularly. You can install door sweeps to plug the gap under the doors.

  •  USE LED HOLIDAY LIGHTS.

The winter not only brings in chill and snow but also the celebratory days in Christmas and New Year. Use LED lights to decorate your home. They use 75% less energy and save up to 25% as compared to incandescent lighting. Also they last longer.

  • CHECK AND MAINTAIN THE HEATING SYSTEM.

There is no worse thing like bad maintenance which can play havoc with your life and finances. Either DIY or hiring a technician or using an AMC, always maintain regular checks on your heating system. If you neglect doing so, not only will you be forced to shell out piles of money later but you also put yours’ and your family safety at risk.

As an honest citizen and taxpayer, you are honour bound to make these bill payments, but you can also save a lot by keeping a constant check on your consumption. Keep in mind the above points and you can end up enjoying a truly warm, safe and joyful holidays.

Have the US investors learnt the lessons in detecting financial fraud post Enron? – Clues to find them in companies’ balance sheet

Detecting a financial fraud is not simple for investors to do it. But that doesn’t mean that cooking up books cannot be detected. After all, the Enron fraud was detected by news reporters by due diligence process. It didn’t need any professionally qualified accountants. I am not undermining the value of professional expertise. All that I am saying is, it is not impossible for a common man investor to be aware of these frauds. This does require some technical knowledge, what is going to be highlighted here.

The Association of Certified Fraud Examiners (ACFE) defines fraud as, “Deception or misrepresentation that an individual or entity makes, knowing that the misrepresentation could result in some unauthorized benefit to the individual or to the entity or some other party.”

But such misrepresentations are difficult to trace and the investor needs to be wary of the complexity. So during initial investigation, it is sometimes advisable to lookout for these red flags. It is necessary to understand the four basic types of financial statement frauds.

They are:

  1. Booking fictitious sales that have not happened in reality.
  2. Recording expenses in an improper way.
  3. Liabilities that are not directly disclosed in the statements.
  4. Making disclosures that are not suited for the context.

These frauds when committed means that, the books of accounts are no longer transparent and reliable for the users of financial statements and the whole purpose of financial statements is defeated.

Look out for the cash flows in the company. If revenue recognition and cash flows do not match over a period of time, then the prospective investor has a good reason to further probe the authenticity of the sales booked. This is because sales are quite easy to manipulate but to show actual cash flow due to the sales is not very easy.

It is also advisable to follow the buildup of fixed assets in the books.

Sudden accumulation of fixed assets could mean that operating expenses are being capitalized instead of being recognized as an expense. Capitalization of expenses is allowable only when the expense leads to addition in value of existing assets. If not so, merely capitalizing expenses would just mean that the asset value in the balance sheet is being inflated without a tangible creation in actual.

The business model of the corporation can also speak a lot about the management of funds within the business. Sometimes it is noticed that when the industry is showing weakness, the corporation might be showing huge growth and unrealistic developments. This is an indication that the books are getting cooked up and need further investigation and analysis.

Ratios calculated and shown by management is also a way to check for authenticity. Sometimes some ratios are adjusted in order to show comfortable debt coverage. As the users of the financial statements are mainly the creditors and stakeholders, comfortable debt coverage and adequate cash flow for statutory requirements is a must in all situations.

Any manipulation in financial statements shows that the internal control is weak. This brings up the need to look out for the internal audit reports. The internal auditors are supposed to be independent of the management and are expected to provide a fair and unbiased report on the internal matters of the corporation. The internal audit report submitted for inspection to the final auditors is a pre cursor for the statutory auditors to ensure that a true and fair view of the state of affairs of the business.

This brings us to the statutory auditor’s report that is the final certification of the corporation in the end of the year. If the auditors have qualified the report and certified the accounts subject to any opinions, then the users of financial statements should probably look out for these opinions expressed in the books of accounts.

When the complexity of these financial frauds are increased, forensic accounting practices are weighed to be much better option to discover the same. Though the common investor may not have all the technical knowledge to understand such accounting, forensic audit procedures and reports are always available for the public perusal to gain idea about how these frauds are committed and discovered.

Share your thoughts to me on this topic. More discussion can help you bring clarity in this front.

CFP vs CPA vs CMA vs CFA – what’s the difference and similarities you need to know before you choose?

Are you looking to set up a good career for yourself? Would you like to be a professional or consultant whom people would look up to for financial advice? Would you want to get into a career which is honorable and at the same time fetches you a great income? Getting into accounting is the best key to be a professional consultant or advisor. Many experts and statisticians have projected that employment in the field of accounting is expected to grow at around 15 to 17 percent over the next decade. Further, jobs relating to accounting are known to fetch greater income than most of the professional careers out there in the US market.

Now that you have learnt accounting career is a better one to get into, you aren’t yet done with your decision making process. There is an array of accounting career program that are intellectually customized in order to have specialized experts who certify in different fields. We will discuss in this write up, the four main accounting careers namely Certified Management Accountant (CMA), Chartered Financial Analyst (CFA), Certified Public Accountant (CPA) and Certified Financial Planner (CFP). And insight into the purpose, portfolio, advantages & disadvantages, similarities & differences etc. of all these four professions can give you a great guidance on which one to suit your interest, abilities and needs. Here is all that you need to know.

Chartered Financial Analyst (CFA)

By becoming a Chartered Financial Analyst (CFA), one becomes expert in different investment portfolios like shares, bonds, security analysis and other financial advisory matters. It is considered the toughest course due to rigid course structures and there by high failure rates. There are three exams conducted which has a duration of six hours. And additionally, anyone willing to take up this course must have four years work experience specifically in investment management area.

Although it is considered as the toughest course, many people prefer this since you are considered intellectually sound if you complete the course due to its challenging nature and secondly, the opportunities for building a great career with more than expected range of income is also phenomenal if you are a CFA. This is mainly due to the fact that investment in shares and bonds involve huge risk and people look for professionals for expert predictions on matters like where to invest and so on. Moreover, the speculation involved in investments and uncertainty that makes a popper rich and a rich man a popper in just matter of seconds makes a Charted Financial Analyst high on demand.

You can watch this video for more information on this.

Certified Financial Planner (CFP)

Planning your finance is an art by itself. It is not just the Return on investment that influences your investment decisions. There are whole set of features and attributes for a particular investment opportunity that needs to be closely studied before zeroing in on a particular financial decision. Further, apart from just studying the financial investment opportunity, an expert financial planner should be able to analyze all the permutations and combinations before finding the right distribution of your finances in different investment portfolios that would best suit your needs, risk taking abilities and at the same time fetch you the best return on your investment. A Certified Financial Planner does this for you.

This course involves undergoing six courses either online or through classroom sessions and finally passing a two days ten hour examination designed for this certification. But since a CFP course is an extra step ahead of CFA, if one possess a CFA certification already, then they might be exempted from the six preparatory courses that needs to be undertaken by the candidate.

Following video explains more about CFP.

Certified Public Accountant (CPA)

Certified Public Accountant is a dream faculty which many people try to attain. This is mainly due to the fact that the course gives you a complete insight on every genre of accounting and makes you an expert accountant. In short, becoming a CPA is a Gold echelon wherein people trust you to be proficient in the field of public accounting. When you are a Certified Public Accountant, you are more likely to work for corporate or businesses rather than individuals as in case of a CFA or CFP. This is due to the fact that when you are a Certified Public Accountant you eventually work with an elite and intellectual circle of qualified accountants whose intellectual base is so much trusted upon by corporate for taking advice and making filings on some highly confidential and critical matters like tax investments, companies’ financial decision making, expansion plans and so on.

Certified Management Accountant (CMA)

Certified Management Accountant is a step ahead of Certified Public Accountant wherein the expertise extends to advisory on important managerial decision making. In fact, many sole proprietors and business heads undergo this course in order to be experts in both numbers and managerial decision making abilities. In fact, many corporate look to cut off two professionals namely the Accountant and a management advisor into one who would be the Certified Management Accountant of the firm taking care of accounts, audit and advisory functions to the management.

Though, the course demands a lot of time commitment and also involves quite an amount of dollars for completion, the effort made never stays unpaid once you are into the job. This is because CMA is one of the highly paid cadres of accounting jobs today. To add on, it is a certification highly on demand in the recent years.

While choosing the right stream for yourself consider few important things like your ability to complete the course in the first attempt itself, you interest in the subject concerned and most importantly latest statistics on demands from corporate and businesses i.e. scope, pay and information projected opportunities available for the course you are choosing to go for.

Is your balance sheet analysis correct? Factors to look for before investing in equity

balancesheet analysisInvesting in equity is probably the best bet if you have a reasonable risk appetite and adequate staying power to continue with your investment. Investing in stocks is any day a great investment option as the returns are much higher than bank deposits. But investing in equity is an informed decision making. You need to put in a lot of thought before you buy stocks. Unless you are aware and have weighed all the future prospects of the growth of the stock, it could take you for a ride given that stock market is highly volatile and subject to bullish and bearish movements.

But then, you don’t have to be too afraid if you equip yourself rightly with the tools and techniques of analysis. Yes, you read it right, analysis is the key.  Equity investment is NOT speculation but a well analysed decision and there are ways of analysing and valuing the company to make the right choice to park your funds.
And what better way to do business valuation than a balance sheet analysis. The financial statements drafted and certified by the appropriate authority is the most authentic source of information available for you to know the financial details of the company.
But it is not as easy as it sounds. Reading a balance sheet does require technical expertise and some calculations to make sense out of the numbers provided to us. But just take a chill pill, because, you need not have to be a number cruncher to be able to do this. Sit down with a balance sheet and calculator and sincerely try to understand the statements. It will eventually start making sense to you. I am giving you some points to keep in mind, while doing the analysis, to ensure that your balance sheet analysis is adequate and serves the purpose for you.

1. Begin with the end in mind.

Now that’s Stephen Covey quote. But it is apt here! The purpose of balance sheet analysis is to be able to pick the right stock. Precisely, finding the intrinsic value of the shares of the company that are most likely to appreciate in the future and add to our capital investment. Therefore it’s imperative to pick the most relevant details to craft out the ratios and averages to determine the share value.

2. Picking up the right ratios for determining asset performance.

Now, there are two jargons here. Ratio’s and asset performance.

Asset performance means how much return on the assets the company is able to generate in a particular financial year. That determines how the revenue generated can be spread over the average fixed assets of the company. If the company is capital intensive, then your fixed assets number could be huge and a major determining factor in determining asset performance.

But if you are still wondering why we need to analyze the asset performance, it is to find out how efficiently the company is utilizing its fixed assets. That’s a precursor to understanding what they will do if you and I give them more resources in the form of investment in the company shares.  The more the company is productive in utilizing its assets in sales generation, better is the company’s performance. If the company is capital intensive and has more fixed assets, Investors should look for high fixed asset turnover ratios and preferably greater than 1, to start with. For other companies, return on total assets would be ideal as an indicator to asset performance.

3. Determining the working capital position.

Working capital position is most crucial in valuing a business. It determines the company’s efficiency in both inventory as well as accounts receivable. The operating cycle of the company is that which quantifies the time taken by the company to convert stock into accounts receivables and realize it to bring in cash into the business, this will determine the managerial efficiency of the company. Managerial efficiency may be qualitative and not measurable from balance sheet directly. But if you find the operating cycle of the business to be favorable then be rest assured that the company is in safe hands and in turn your money.

4. Watch out for Intangible Assets.

The non physical assets present in the balance sheet like goodwill could possibly confuse you if you don’t rightly deal with them. Goodwill could be a purchased goodwill and are usually deducted in calculating the tangible net worth. Look out in the notes to financial statements as these are not apparently disclosed in the statements.  

Hope this write-up gives you a fair idea about how to go about reading the balance sheet.With time and consistent quest for knowledge. you are sure to become a wise investor. Let me know how your experience was, analyzing the financial statements.

Tax reforms and Economic growth in US – here are my 2 cents…

The main key to economic growth of any country is boosting direct and indirect investment. Most of the fast growing developing nations like India and china have shown direct and strong correlation between their high investment levels and economic growth. But policies of the Government of US seem to have been a straight contrast. They aim at improving consumption instead of investment and employment opportunities which is a self devastating move that only pulls down the pace of economic growth.

So, given that improving investment is the key to economic growth, the next question that comes up is how to improve investment levels in the economy. Here, tax reforms prove vital in bringing about a sea change in economic growth of the nation. A small change in the taxing policy can affect capital, saving, employment, GDP and ultimately the economic growth. At this juncture, a new trend of tax reforms that has set in many states of the US would need a mention. Almost nine states of the US, including fast growing ones like Texas, Florida etc. has shifted to a new tax policy of slicing down their income tax to nil and compensating the same by increasing sales tax.

This policy is in rule in almost all GCC countries (a.k.a Middle East) which is a clever move to improve investment. This is because income tax is a straight penalty to individual savings which turns into investment. When this saving is affected, economic growth is affected too. On the other hand, sales tax is a direct hit on consumption rates that would pull down excess expenditure leading to improved savings in turn leading to investment and economic growth.

Another added advantage to this policy of nil income tax and increased sales tax is that it would create more jobs. This in turn would help in retaining intellectual talent of the country without letting them migrate to other countries for jobs that would recognize their talent and performance both emotionally and financially. Thus improved investment via decline in income tax and corporate tax would pave way for a rich talent base eliminating the need to recruit talents from abroad for higher pay scales.

This strategy has been well capitalized by many of the developing countries who are competing cut throat to lure investments to their countries by announcing many new tax reforms like reduce shareholder tax, lowered corporate tax and allowances to companies investing major amount domestically and so on. Unfortunately, policy makers in US are still only in the process of waking up from their debate as to whether or not to adopt the new strategy of lowered or nil income tax or still stay with hiked tax levels. Some statistics would prove this scenario more clearly. On one side, there is a race that is up and running as to who will join next with the nine states of the US that have boldly announced zero tax on personal income. States like Kansas, Indiana, New Mexico, North Carolina, Oklahoma and so on are in the process of lowering their income tax and corporate tax levels following suite with the nine states.  On the other hand, Governors of states like Illinois, Massachusetts California, and New York etc still believe in old policies and have recently announced a hike in income tax levels.

But what needs serious consideration is that the US economy is too slow in economic growth when compared to other trading partners. Experts and economists have also emphasized innumerous number of times that if and only if The US plans tax reforms to improve its investment to more than 50 %, its growth would double. But the current statistics says that Americans are far ahead of all countries in consumption and are almost 15 to 20 percent lower than almost every developed country as far as investment is concerned. So, serious tax reforms are the need of the hour to bring about drastic changes in investment levels of the US economy. Some of the reforms that are advisable are discussed below:

  • Firstly lowering or bringing down income tax levels to zero and in turn compensating this by increasing sales tax.
  • Ensuring that the increase in sales tax is not on necessity goods like milk or meat and rather on luxury purchases like car or purchase of property and so on.
  • Reducing corporate income tax levels considerably to encourage investment domestically.
  • Reducing taxes on exports that would improve economic growth and increasing taxes on imports to cut consumption.
  • Reducing shareholder taxes which would encourage investment.
  • Providing special allowances and tax concession for companies investing domestically and luring foreign direct investment into the country.

Such drastic tax reforms are sure to bring about a radical improvement in investment levels in turn leading to a doubled up pace in economic growth of the USA Smile

Are you an LGBT couple planning to marry? – Find the details about tax and its implications for same sex marriage

The slicing down of certain clause of the Defense of Marriage Act (DOMA) by the US Supreme Court recently, has been the talk of the town since this has surely proved to be highly beneficial for lesbians and gays. With around 12 states of the US and the Washington DC approving same-sex marriages as legal, these recent changes in DOMA has been termed by many renowned news magazines as one of the greatest shift in the civil rights in the history of the United States.

Further, it is a great move towards reduction of contradicting laws in different states in USA and a step forward in bringing together the vast population.  The   Supreme court clearly ordered that if individuals of same sex are legally married in any state that permits same sex marriages, then the federal government also need to treat them as married for tax purposes irrespective of whether the state they currently live in, supports same-sex marriages or not.

This victory for equality is not only a civil right gain for the homosexually married couples but also a huge financial benefit for them. A whole chunk of financial profit awaits them after the striking of DOMA. These can be discussed in detail as follows:

Advantage on gift tax

Previously, when homosexual couples transferred gift or assets to each other, they were levied tax which was assessed to 40 percent once the value of accumulated transfers exceeded 5.25 million dollars over their life time. This was never payable by any man-woman couple as per Defense of Marriage Act (DOMA). Now, this is being waived for same sex married couples too.

The retrospective effect

By legalizing same sex marriage for tax purpose, the beneficiaries not only can take advantage on future tax payments but also can claim retrospectively refunds for excess tax paid previously due to Defense of Marriage Act (DOMA).

The state of ceremony stands vital

As per the ruling passed by the Supreme court, the same sex marriage should be considered as legal for tax purposes by the federal Government when the marriage ceremony has taken place in one of the states whose rules declare same sex marriages as legal, irrespective of whether the state they currently live in approves of such marriage or not. In other words, it is the state where the marriage ceremony occurred, that gains importance than the state where the couples live before or after.

Advantage on health tax

Whenever employers covers their same sex married employee’s spouse as part of health insurance, the employee had to pay an extra income tax in order to receive benefits for his or her spouse through his or her insurance plan. This is now saved since they need not anymore pay such taxes on such spousal benefits.

Retirement and Death benefits

The new ruling by the Supreme Court has enabled health and retirement benefits to be applicable to the spouse of same sex married employee after retirement as like any other couple. Moreover, in case of death of one individual among the same sex married couple, the other is eligible for all survivor benefits like social security benefits as it is in case of opposite sex marriages.

Other than these advantages, there are certain important points to be remembered while filing tax returns if you are a same sex married couple using the married filing status. These are discussed below:

    1.  Since same sex marriages are now given the same status as opposite sex marriages, the tax payer who has married in same sex cannot file as head of household. But there is also a clause that provides for this opportunity wherein if the couple is staying away from each other for more than six months during the tax filing year and the proof for the same is provided, then the tax payer can file his or her tax returns under head of household status. In this case, along with the proof for staying away for more than six months from his or her spouse, the tax payer needs to show expense proof for more than half of the house maintenance cost which is the residence for the dependent child for that period during the taxable year.
    2.  Secondly, a very vital point to be noted by all the tax payers who fall under same sex marriages is that, since they are given marital status and treated similar to opposite sex couples, henceforth they cannot claim standard deduction (section 63(c)(6)(A)) if his or her spouse has already itemized the same. This is because the tax payer’s spouse is no more treated as a dependent of the tax payer after the new ruling passed by the Supreme Court.
    3.  If the homo sexually married couple have a legally adopted child who qualifies under section 152(c) for both the parents and in case the parents are filing tax using married filing status, then only one of the parents can claim a dependency deduction for the child in their tax returns. In case, both parents have claimed for a dependency deduction for the same child, then the federal Government would take into consideration only that parent’s filing with whom the child has lived for longer period during the taxable year. And, in case, the child has lived together with both the parents for same duration during the taxable year, then deduction would be approved for that parent whose gross income is higher.

Whether or not this striking down of DOMA by Supreme Court is considered as a civil right of equality, it is definitely a boon to same sex married couples since they gain a lot financially. This is more so especially for old retired couples struggling with their health at one end and managing their tight finance at the other end. They can now save a lot on their health insurance, gift taxes, income tax  and gain other survivor social security benefits. So, the new ruling has paved way to solace for these couples.

Passion through Profession – What does it mean to be?

Does anyone love their job here? Hardly a handful of people love working for others. But I always believed, whatever may be the profession, if one doesn’t love it, then it’s going to be a hard life for them.

I always believed and believe that my passion for life has driven me to explore this journey called life and it has given me exciting thrills and adventures. This blog has been started to share all my experiences with you and will always like to entertain you with my multitude of experiences.

So, Just fill out the form and tell me what profession you are in and why do you chose that? You can share all your ideas and experiences with me and you can expect my support in pursuing your passion as I am a lover of passion..