I can’t say I have always been smart. I won’t cite examples of why but I will say I was right in one area. That is, realizing that there are certain things I either can’t or won’t do and the need to sometimes hire an expert.
Let me just mention briefly my friend Leonard. Not only a nice guy but a very capable individual in many areas. He manages an upscale local clothing store. His store is very popular and does very well, so he apparently is a good manager. His wife regards him not only as a good husband but a great father to his two young children (he attends all their sports events, even swimming meets, which to me at least requires the most dedicated dads because of the boredom even your own children splashing around). He is involved in many charitable and community organizations. A model citizen.
He is also a small investor who buys and sells real estate.
And that’s where he has problems.
The reason is surprisingly simple. He thinks he can do it all.
A leaky faucet? He can save money by fixing it himself. In fact, he thinks he can do any repairs at all. He found that was a mistake when he recently ruined some pipes and had to call a REAL plumber to fix it: A $400 mistake.
Of course, having a handyman who really can fix anything or solve most routine maintenance issues is a Godsend for small investors. And no one should be in the business without that kind of help.
But then we come to the more complicated affairs. Taxes, to use one example.
And here Leonard’s problems got even worse. Last year, he did his taxes himself, as always. He used a popular software program available to just about everyone for almost no cost.
Without seeking any professional help, Leonard tried to figure out what he should be paying in taxes, and what shelters he could honestly claim without running afoul of the IRS. He had an apartment building and a small office that he rented out, both of which had different criteria for how taxes should be formulated.
His Internet tax program made a mistake. He initially was bragging to me about how it only cost him less than $100 (actually $95) to buy the program and he believed he was getting great advice.
Not so, said the IRS. He was audited. And his deductions were denied. The IRS said he had to pay another $8,000 (which made the $95 somewhat less of a bargain).
Leonard expected a profit of just that from his real estate investments last year. Poof.
All the work he did, up in smoke. He worked for nothing.
He came to me and by then, of course, it was far too late. The damage had been done.
All he could do now was pay the $8,000.
And of course, hire an expert the next time around because the old saying may not always be true but it sometimes comes in handy.
Penny-wise and pound foolish immediately comes to mind, but I am sure you can find your own old adage to fit in this case and your own as well.