We are inviting all of our clients and their guests to come celebrate the season with us at our annual KFG Christmas Open House on December 15th, from 3 to 5 pm.  This year, we will be serving an English Champagne Cream Tea, with all of the trappings (to include plum pudding and mince pies).  Katherine Huenber, our authentic English Tea expert, will once again charm us with her delectable goodies, stories, and warm smile. 

Make plans to let us thank all of you for allowing us to serve you by stopping by to enjoy a bit of merry old England.  Reservations are a must, so sign up today!  Go to our website by clicking here to register.

Listen to Rick’s column here: Download interior_finance_and_your_net_worth.mp3

As most readers of this column know, I have a written a lot about the importance of the emotional side of money and how our beliefs about it affect, not only our investment decisions, but every money decision we make.

I am still occasionally surprised that this idea, which has become commonplace to me and I hope to you as well, is still "cutting edge" information to most professionals in the financial world. One of those who recently became aware of it was Jonathan Clements, columnist for The Wall Street Journal.

In his September 13 column, "Touchy-Feely Finances: How To Find Out What You Really Want From Your Money," Clements expressed amazement that the interior side of money was more than "yet another dubious attempt by advisers to justify their hefty fees." He was surprised at how effective two integrated financial planning exercises were in helping people rethink their finances.

Clements affirmed what I have already seen, that the trend among better financial advisers is to add interior financial services to their traditional financial planning practices. Most of the profession calls these services "life planning," "financial life planning," "values based financial planning," "financial coaching," and "wealth coaching." I use the term "integrated financial planning."

I am glad that Clements is now joining another Wall Street Journal columnist, Jeffrey Zaslow, in understanding the importance of what we think, feel, and believe about money. It is just as vital as is exterior financial knowledge such as asset allocation, good estate planning, and asset protection.

I am excited that the mainstream financial press is beginning to awaken to what my colleagues and I have been learning for over ten years. While much of this was theory ten years ago, today I can look back and count hundreds of lives that have been changed when people uncovered and began to understand their unconscious beliefs about money.

Just recently, a participant in one of the weeklong "financial therapy" workshops I co-facilitate with Ted Klontz, Ph.D., called to tell me how that workshop had changed his life. Until he came to our workshop, he was in a helping profession because his underlying beliefs were "the only thing that really counts in life is helping people" and "if you do anything for money, it is evil." These beliefs caused him a lot of pain, since he had a natural affinity for real estate and finance. He had to suppress those abilities because they were "evil."

What he learned about his unconscious beliefs set him free. Today, he has expanded his career to help people overcome their financial demons. While he is still helping people, he is also accumulating a real estate portfolio for himself. He told me that his assets just surpassed $1 million and that he owed it all to what he learned about his interior beliefs about money. "Until I came to your workshop, I would sabotage every real estate deal that came my way. It was all because of my unconscious belief that making money, having money, and understanding money was evil. And of course, I didn’t want to be an evil person so I was continually sabotaging myself."

The interesting thing about his feedback was, while I had seen scores of people vastly improve the quality of their life, it really hadn’t occurred to me that many of these people also improved their financial net worth.

So, call it what you will—touchy-feely finances, the emotional side of money, or integrated financial planning—it works. It not only works to increase your quality of life, but it can do wonderful things to your net worth, too.

Christmas time is filled with tradition, and one of those traditions some families celebrate is gathering together to hear the annual reading of Charles Dickens’s most famous work, A Christmas Carol.

This year, at 4:00 p.m. MDT on Thursday, December 14, join the KFG family and Rick as he recites Dickens’s most famous work…..only with a twist! Once you’ve heard Rick tell A Christmas Carol you will never again be able to view Scrooge, Cratchit, Fred, or Fezziwig the same. You may not view money in the same way, either.

There is no more fitting time of the year to put a log on the fire, cozy up to your telephone and computer with a steaming hot cup of "smoking Bishop," and spend an hour of Holiday fun and enlightenment with Rick. To register, click here or call 343-1400.

n by Marcia Welch-Kahler, guest columnist

Last June the Center for Disease Control sent out a press release recommending a second dose of varicella (chickenpox) vaccine for all children age thirteen and under to be given at least ninety days after the first dose. I emailed the CDC for clarification because the Q & A section on varicella didn’t indicate there was a second dose needed. Duane Kilgus, the Commander of the US Public Health Service, promptly emailed back that the recommendations voted on by the Advisory Committee on Immunization in June do not actually become official until they are published in the MMWR. After the vote it still takes several months to actually get them published. Mr. Kilgus explained that may be the reason my doctor didn’t offer the second dose of vaccine.

I wish my doctor had known about the recommendations when I took Davin in recently for his booster shots as a requirement for entry into kindergarten. If he had gotten a second varicella vaccination dose we might not have had to cancel our family vacation ten hours before we were scheduled to fly out. It was a horrible, stress-filled, disappointing week. As it happened, Davin had a fever of 102 at about the time we would have been getting on the international flight portion of our trip. He was certainly contagious and feeling miserable. He also would have put any pregnant women and other vulnerable people at risk, so we had to cancel. Davin ended up with a mild case that went away quickly, so we do thank the initial vaccine for that. The timing of the outbreak was just incredibly bad.

London is now in the incubation period, so we will have to see if she gets it. The doctor that kindly opened his office for us on a Saturday night to diagnose Davin told us ninety percent of siblings contract chickenpox as well. That same doctor also said in the initial afternoon phone call that it was highly unlikely Davin had chickenpox since he had been vaccinated. Only after Rick took Davin into an emergency clinic and got an affirmative physicians assistant’s diagnosis did the doctor-on-call believe that maybe it was chickenpox. Even though such typical childhood diseases are not normally a big deal, we went to extraordinary lengths to get a diagnosis and proper recommendation regarding travel since we were going on an airplane and then getting on a ship. I didn’t want to spend the whole trip quarantined in the ship cabin.

I don’t know how many kids all over Rapid City have come down with chickenpox. I know it spread to Davin’s school (Children’s House) via the brother whose sibling contracted her case at Seton. I have heard there have been cases all over town. At Davin’s school, there have been six children so far and one parent who got it. It is amazing that all the children had received the vaccination as babies. And the parent had had chickenpox as a child. It is ironic that the only child in Davin’s class that hasn’t been vaccinated has not come down with chickpox…yet.

One mother took her child to the dermatologist because she was convinced it couldn’t be chickenpox since the child had had the vaccine. All of us, doctors and parents, were feeling safe so it was hard to believe. Davin’s first pox actually looked more like a spider bite…a bit painful and certainly not itching. He had no fever for almost three days after that first and only pox appeared. During the fever, he broke out a bit more, but only the first one ever scabbed over. The scabs are the main indication that a person is no longer contagious.

Another mother at Children’s House is pregnant and is choosing to keep her child at home until her pregnancy is further along and the danger has passed. I’d be nervous also. I looked it up on the CDC site and found out that it is only 1.4 to 2 percent (depending on how far along the pregnancy is) that a child will end up with birth defects because of maternal chickenpox.

So that small number is reassuring. The CDC also has articles posted regarding the drop in hospitalizations and deaths since the vaccination became standard among childhood vaccinations. So (in spite of the couple we know that blames the chickenpox vaccine for their daughter’s autism), overall I think the vaccination is a good thing. I just think more parents and doctors need to know that children should get a booster shot for it to be worth it. I know chickenpox is a normal childhood disease. But if you get the vaccine for your child, you expect they won’t have to miss school (or any vacation) because of chickenpox. If not, why bother with the expense and pain of an extra shot and the worry over whether or not your child is contagious anyway.

Here is a link to the June article from the CDC. Maybe it will help other parents and children avoid some confusion and scratching…

http://www.cdc.gov/od/oc/media/pressrel/r060629-b.htm

http://www.cdc.gov/nip/vaccine/varicella/varicella_acip_recs_prov_june_2006.pdf

The Portland Herald’s financial columnist, Jeff Bogue, recently reviewed The Financial Wisdom of Ebenezer Scrooge.  You can read his review here.

There isn’t a  better family vacation than cruising. We typically book our cruises over Thanksgiving, when we can get some pretty awesome deals, unlike booking over Christmas vacation when prices are sky-high. Our annual family vacation this year was scheduled for tomorrow, November 19, on a cruise departing from Rome and visiting a number of ports, including Athens and Istanbul. I say it "was scheduled," until our son, Davin, came down with chicken pox.

Davin was diagnosed with chicken pox Saturday night, just ten hours before our early Sunday morning flight. And, yes, he was vaccinated as a toddler for the chicken pox, just as were six of his school mates who also have come down with the disease over the past two weeks.

Fortunately, I had trip insurance that hopefully will make us whole, financially.  Right now, the toughest pill to swallow is the loss of the time and effort put into planning and preparing for the trip and the expectation of making memories as a family. As I write this I am looking at five fully packed bags that were anticipating starting a long journey in just nine hours.

Many of you remembered all the drama from our cruise last year when Celebrity canceled a portion of our cruise and my daughter’s cat had to be put to sleep while we were in the middle of the Atlantic. We all wished for a "drama-less" trip this year. I guess we got less drama, but in a more intense dose.

My daughter, London, cried her sweet heart out upon hearing the news. She concluded, with big tears rolling down her face, that Celebrity is "just a jinxed cruise line," and that canceling our vacation on her birthday was not exactly the present she had in mind. She was ten years old today.  I was reminded that last year the cat we gave her for her birthday died while we were on our cruise.  From her perspective, she may have a point.

So for the last hour we’ve been calling tour operators, Northwest Airlines, Celebrity, our house sitter, shuttle companies, and hotels canceling reservations that we’ve worked on for eight months.  Monday we file a claim with our trip insurer, Travelex, and begin collecting all our receipts, about $8,000 worth of non-refundable deposits, and cross our fingers that they will pay.

Certainly, we are sad and disappointed. As the doctor, who so generously opened his clinic at 8:00PM on this Saturday night, said, "I had to see this to believe it. Kids that get vaccinated aren’t supposed to come down with this stuff. I mean, what’s the point of spending the money on a vaccination if it doesn’t work?"

I am sure that before too long, the planning will start all over again. And next time, we can be reasonably sure that chicken pox won’t be on the list of culprits that could result in the best laid vacation plans (and vaccinations) going nowhere!

Listen to Rick’s column here: Download surgical_investing.mp3

I learned a few months ago that I needed shoulder surgery to repair a torn rotator cuff. My best guess is that I injured my shoulder over two years ago doing "power yoga." So much for the idea that yoga is a gentle, passive activity.

In preparation for the surgery, I spent a lot of time researching on the Internet, talking with people who had undergone the procedure, and asking questions of several physicians and a physical therapist.

Amid all this research, there was one question I never asked. How much would it cost?

I wasn’t totally ignorant about the possible cost. I knew I had insurance, I knew the deductible was $2,500, and I knew I would pay 20% of the cost over that amount. Yet cost didn’t even factor into my decision to have the operation.

I find this interesting, especially for a financially conscious guy like myself whose work is helping people assess the financial costs of decisions. It’s also interesting that not once did my surgeon offer to tell me the cost of the operation, ask me how I was going to pay for it, or indicate that he even considered the cost of the procedure and its effect on my pocketbook. By the way, my surgery, MRI, and physical therapy ended up costing around $15,000.

My mindset was that I needed the operation, regardless of the cost. I had been told that the tear would only get worse, it would never heal on its own, and my pain would continue to increase. Eventually, the physical and emotional cost of putting off the operation would exceed the cost of having it done now. My response was to hire the best surgeon in the region and get the operation done. Even with only a vague idea of what it would cost, I assumed the results would be worth that cost.

So far, I have no reason to question my assumption. With the help of time and physical therapy, my shoulder is healing well. I’m even back doing yoga—minus the "power" part for now.

It recently occurred to me that part of my work with clients is similar to the whole process of my surgery. One of several specialties of my practice is doing intensive work to help high-income overspenders change their destructive financial patterns. When such potential clients call me, they usually have two questions. Can I help them? And how much will it cost?

My answer to the first question is a comfortable "yes." I can’t guarantee success, of course, any more than the surgeon could guarantee success with my shoulder. Yet, like him, I can assure them the process I use is clinically proven to work and has a high success rate.

It’s the second question I have trouble with. I’m still uncomfortable asking clients to spend more money to help them stop overspending. Yet the process to help these clients involves three professionals working with them for one to four days. The cost, ranging from $10,000 to $30,000, is similar to the cost of a surgical procedure.

The benefits to the clients are also similar to the benefits of such surgery. Given the incredible transformations that I’ve seen in our work, I know logically that this process is worth every penny it costs. For example, if I can help someone reduce their spending by $20,000 a year, for a one-time cost of $10,000, the return on that investment is pretty darn good.

The value of such changes can’t be measured only in terms of dollars and cents. To remind myself of that, all I need to do is raise my arm. A pain-free shoulder? Priceless.

Every two years we have elections in the US. And, typically, every two years I will have several clients ask if they should position their portfolio based on the outcome of the upcoming election. Typically, my clients are more concerned that a Democratic president will affect their investments than a Republican. My answer is typically the same, "It doesn’t matter."

This year, I was shocked that I didn’t field one question about investments and the election. Either my clients are getting used to my response, or they are less concerned about a Democratically controlled Congress than a Democratic President.

We’ve just added a new feature to our website, at www.kahlerfinancial.com, that allows you to search on words or topics of interest.  The search box is on the lower left corner of the home page under "Search KFG".  On all other pages it is in the top right corner.

For example, if you wanted to know what I’ve written on the difference in being a client of a financial planner, as opposed to a customer, you could search on "client" or "customer."  Searching on "client"  brings up 54 listings, while searching on "customer" brings up 5.  You can then click on the links listed to be taken to that article or place in the website.   

Please note that the search feature does not work on documents and items posted in the "KFG Clients Only" section. 

Stay tuned for our new, redesigned articles section, under "Rick’s Books and Articles." When we are through, it will me much easier to read and find the articles you want to listen to, read, or (coming in 2007) watch.

Listen to Rick’s column here: Download the_latest_from_the_irs.mp3

The election is over. It’s time for a lighter topic—like taxes.

I recently attended a workshop to update tax preparers on changes to the tax code. As motivation to continue reading, let me quote the IRS agent who told us, "The IRS is back in business." Here are the areas they are taking a hard look at.

Unreported Income. The bulk of the 350 billion dollars in uncollected tax revenue comes from sole proprietors or single-member LLCs who use Schedule C to report business income and expenses. According to the agent, 80% of all Schedule C filers use tax preparers. He told the audience of tax preparers, "I know all of you are in the choir, but one of you is singing off key."

Hobby Losses. A business loss reported on Schedule C will be disallowed if the IRS deems your activities a hobby rather than a legitimate business.

Meals and Entertainment. This is a perennial issue, especially for Schedule C filers, if this expense appears too high in relation to your income.

Repairs and Maintenance. This is always on the IRS hot list, as well. Owners of rental property are often confused about what is a capital improvement, to be depreciated over a period of years, and what is a repair and 100% deductible. If your repairs are too high (the definition of "too high" is a tightly held secret) your return will merit a harder look.

Mixing Personal and Business Expenses. This is always a big "no-no," but it happens, especially with Schedule C filers.

Legal Fees. Non-business legal fees are deductible only if they are for the production of income, such as advice on investments, property, and tax issues.

My conclusion from this information—outside of the obvious fact that you should report all your income and not fudge on expenses—is that it probably isn’t a good thing to be a Schedule C filer.

Now, here are the latest tax changes:

· The annual deduction limitation on equipment purchased for a business was increased to $108,000.

· The 15% rate on capital gains and dividends was extended through 2010.

· The alternative minimum tax exemption was increased to $62,550 for a married couple, but reverts to $45,000 in 2007.

· Regardless of your income, you can convert a traditional IRA to a Roth IRA in 2010 and pay the tax in two installments, half in 2011 and half in 2012.

· Retroactive to January 1, 2006, the age limit was raised from 14 to 18 for a child’s passive income over $1700 to be taxed at the parents’ rate.

· For the first time ever, you will receive a 1099-INT for tax exempt interest paid on municipal bonds.

· There is a new tax credit available for certain hybrid vehicles. That’s the good news. The bad news is that the full credit is only available on the first 60,000 cars, and Toyota and Lexus have hit that limit.

· If you improve your personal residence with insulation, windows, doors, a metal roof, or an HVAC makeover, you may qualify for a credit.

· LLCs can avoid having all income subject to FICA tax and be taxed as an S-Corp by taking the election to be taxed as a corporation and filing the S-election.

· 401(k)s can now have a ROTH option, if your employer elects to amend the plan to allow it, and it is available to employees without regard to income limitations.

That’s my scintillating tax update news. If you struggled to stay awake to get this far, it could be worse. I sat through eight hours of presentations on this stuff.