Thursday, March 21, 2013

Personal Finance Symposium V Sustainable Family Finance


It is that time of year, again.  Time for our annual Personal Finance Symposium.  This year’s line-up of speakers continues the tradition of outstanding leaders in the profession.  Please see the list of speakers below, as well as how to register for the program.  I have also attached reply cards, invitations, and a poster if you have others you’d like to invite to participate in the Symposium.  We look forward to seeing you on 17 April!  - Rob Weagley


Personal Finance Symposium V

Sustainable Family Finance

April 17, 2013

Reynolds Alumni Center

University of Missouri - Columbia, MO


9:30 a.m. Welcome and Introduction

Robert O. Weagley, Ph.D., CFP®, Chair, Personal Financial Planning

Betsy Rodriguez, Vice President for Human Resources

University of Missouri


10:00 a.m. “Money Sanity Solutions: Build Healthy Money

Habits for a Successful Future”

Nathan Dungan, President and Founder; Share Save Spend, Minneapolis, MN


11:00 a.m. “Choosing the ‘Best’ Insurance Product: Matching

Needs with Solutions”

John Olsen, President; Olsen Financial Group, Kirkwood, MO


12:00 Lunch


1:30 p.m. “What Recovery? The Muddle-Through Economy”

Juli Niemann, Executive Vice President, Research and Portfolio Management; Smith, Moore & Co., Clayton, MO


2:30 p.m. “Financial Literacy 101 from a Past U.S. Treasurer”

Anna E. Cabral, Unit Chief of Strategic Communications in the

External Relations Division of Inter-American Development Bank

and former Treasurer of the United States of America, Arlington, VA



Program: $30/person (includes lunch)

$60/per person for 4 Hours CFP® Continuing Education Credit (includes lunch)

$10/student (includes lunch)

For more information or to make your reservation, please contact Amy Sanders at

(573) 884-5958 or or mail check

(payable to University of Missouri) to 365 McReynolds Hall, Columbia, MO 65211


Open to the Public ~ RSVP Required

Sponsored by the Personal Financial Planning Department - University of Missouri

Office for Financial Success, Center for Economic Education

and the College of Human Environmental Sciences




Robert O. Weagley, Ph.D., CFP(r)

Chair, Personal Financial Planning

241 Stanley Hall

University of Missouri

Columbia, MO  65211

573-882-9651 - o

573-884-8389 - f

The 3 C's of life


Choices, chances, changes.

You must make a choice, to take a chance or your life will never change.



Thursday, March 14, 2013

Tax Planning

Tax Planning


University of Missouri Extension and the Department of Personal Financial Planning operate a Volunteer Income Tax Assistance site on the MU campus (times and locations). In this tip, I want to share with you some ideas I have gleaned from my interactions with clients over the years. Some of these may run against conventional wisdom, but before you call me crazy, consider what I am proposing. If you still think I am crazy, let us know by sending an email or commenting on our blog.


Never rely on your refund to save you

The vast majority of returns process correctly. However, that means that a sliver of returns do not process correctly. Over the years, client’s refunds have been delayed for several reasons. The IRS may decide to look closer at a return, the return may have been prepared incorrectly, or other unique problems may arise. I remember one taxpayer who came in and was counting on the refund to make a payment on a vehicle loan. The money didn’t come through in time, and he lost his vehicle.


There are avenues to explore if your refund is taking longer than expected. The Taxpayer Advocate is your voice at the IRS, and this agency within the IRS can sometimes accelerate or investigate refunds that have become ‘stuck’. However, the Advocate has tightened what cases it will accept, so you shouldn’t automatically expect the Advocate to step in and help you either.


Receiving a refund by direct deposit or check may be inferior to the third choice

Checks can be stolen from mailboxes. Direct deposit routing and account numbers can be entered incorrectly. Both of these problems can eventually be fixed, but the process can take several weeks. The third option is to use your refund to pay next year’s taxes. I first really considered this option when I looked at the tax returns for the leaders of our country:


President Obama’s 2011 tax return:


President Obama’s 2008 tax return:


President Bush’s 2005 tax return:


There is an option on the 1040 page 2 for your refund to be applied to next year’s tax bill as an estimated payment. You are letting the government keep your money (which is not optimal), but you can offset this by changing your withholding so that you have less taken from your paycheck.


W4s can be confusing, so you might try an online calculator to help you plan:

IRS calculator:

ADP calculator: 


Or get no refund at all

Vice President Biden’s return demonstrates this point:

Vice President Biden’s 2011 tax return:

With an adjusted gross income of $379,035, he paid taxes of $237 with the filing of his tax return. The rest of his tax bill was paid through withholding. Good tax software (including those at the free tax assistance sites) can often calculate what your tax picture looks like next year. Owing a small amount lets you keep your money all year instead of letting the government hold onto it interest free.


Bring four years of returns with you when you prepare your taxes

You don’t have to bring everything, but bring at least the tax forms you filed. Several items on your current tax return will reference your past returns.


The Non Business Energy Credit includes lookbacks to prior tax years. The credit’s lifetime limitation for 2012 is $500. If you claimed over $500 in those prior years, then you get no credit this year.

The American Opportunity Credit for higher education can only be claimed in four tax years, and the IRS has revised form 8863 to ask taxpayers explicitly if they have claimed the credit in four prior years.

First time homeowners that claimed the First Time Homebuyer’s credit  in 2008 and 2009 (but not 2010!) must repay the credit over 15 years. The max amount of the credit was $7,500; over 15 years, that ends up being $500 a year.

If you sold capital assets in a prior year at a loss, but you were not able to use the entire loss to offset income, then you may be able to carry the loss forward to decrease income in future years.


Never destroy your tax returns

Tax returns tell stories. We often don’t consider them as family scrapbooks, but they actually are. They hold clues to who we worked for, when we were married, the birth of children, buying or selling a home, the organizations we donated or belonged to, and other small details.

I picture myself sitting with my grandchildren on a rainy day going through old tax returns and telling stories: here is when your grandmother and I were married; this is when we bought our first house and paid the interest; here is when we made some energy improvements; here is when we sold the house and moved; we made our first deductible contribution to the symphony society; here is when we first claimed your parents; etc…


In addition, old tax documents can help correct errors that could crop up in the future. For example, if your Social Security and Medicare wages are reported incorrectly in one year or several, it would be useful to have the documents to correct the error instead of scrambling to find replacements. The IRS can also audit you within six years of the due date of that year’s tax return.


Bonus tip: When you call the IRS at their main hotline, 1-800-829-1040, be patient and do not press any buttons on your phone

The automated phone tree at the IRS relies on touch tone phones. Almost all phones are touch tone, but some individuals still have their rotary phones. To allow people with rotary phones to talk to someone at the IRS, the IRS has left a secret way to get in touch with the operator who can connect your call. If you call the main number, 1-800-829-1040, and do not press any buttons, then the IRS assumes that you are calling from a rotary phone and will connect you to the operator. You will have to listen to many lists of options, but it is still easier than navigating the tree to speak to a human.


Thursday, March 7, 2013

YIPPEE!! We're Making Money!!

The past few weeks have been wonderful for those who are invested in the stock market.  Heck, just the other day I had a meeting with some business partners and one of them went to great lengths to tell me about his “never-lose” options trading strategy.  Last weekend, moreover, I was talking to an artist friend who told me she was about to “get into the market”, so she can accumulate enough money to retire.  Both conversations made me cringe with fear, as the old market psychology of everyone wanting to get on the band wagon, once the parade has started, is unfolding again right in front of my eyes.


I’m not saying the market is about to collapse.  To the contrary, my personal belief is that there is still room for this market to go up.  Clearly, a lot of fear remains in the market.  This is especially true, when one considers Europe, our recalcitrant Congress, and the headwinds provided by unemployment and sequestration.  Fear should be holding prices down and, if these issues move toward resolution, I expect investor confidence to be buoyed.  Yet, this tip is not about what you should do now.  It is about what you should always do. 


If you are not in the market, should you take all of your money and invest?  The answer is “NO”.  I would recommend that you dollar cost average your way back into the market.  Perhaps being patient enough to wait to purchase your fixed dollar investments on the days the indices will inevitably be worth less.  Dollar cost averaging, while using index investing, could be the answer for you to begin to step back into the market with a minimum of investment risks.  (Check out:


What if you’re already invested  in the market?  First, I say, “Good for you!”  You have demonstrated an understanding of the inevitable ups and downs of market investing and have remained confident in your plan.  Secondly, I ask, “When was the last time you rebalanced your portfolio?”  A well constructed portfolio contains stocks and bonds, of both large companies and small companies; real estate; cash; and et cetera allocated in such a way that you take more risks when you are younger and less risks when you are older.  Yet once we set our portfolio allocation, we need to occasionally revisit it and rebalance our portfolio to assure it stays within our plan.


I recently read an article in the T. Rowe Price Investor magazine (December 2012 issue) about rebalancing and what it can mean to you.  The rest of this piece is drawn from this article.  Another good article is from our Security Exchange Commission: .  Let me turn to the problem…


Let us assume you had a portfolio of 60% stocks, 30% bonds, and 10% cash at the beginning of 2008.  Let this be your target allocation.  By the end of 2008, your portfolio would have dramatically changed to 46% stocks, 41% bonds and 13% cash; as stocks lost 37% of their value over 2008, prior to the stock market recovery beginning in 2009.  By 2010, your portfolio would have been 53% stocks, 37% bonds, and 10% cash.  This is closer to your goal, but it is still not what you wanted to own.  You need to sell investments that have increased in value and buy those who have decreased in value, in order to regain your preferred allocation.  Why?  The same article provides an answer.


If you compare “no rebalancing” to “monthly rebalancing” to “annual rebalancing over both 10 and 20 year periods, the results are quite pleasing.  Over 10 years, while annually rebalancing to your target allocation, would have resulted in a terminal value for a $100,000 original account of $151,179.  This is compared to $148,019 for monthly rebalancing and $144,574 for no rebalancing.   While this amount is appealing, the spread in the results begins to widen, over the next ten years.   After 20 years, the annual rebalanced portfolio has a $418,422 in the account, monthly rebalancing would have $405,271, and the no rebalancing option only $394,322.  Certainly, a difference in final values of $24,100 was worth the time it took to do the annual act of rebalancing.


How do you implement this plan?  If you are adding money to the account, calculate how much more you need to deposit in the “low balance” investments to bring them up to the level you have decided to own.  If you are not adding money, you will need to sell those investments that have become over weighted and buy those who are underweighted.   The good news is that you will be selling investments at a “high” and buying more at a “low” and you don’t have to think about it.  You just have to follow your plan.  If this is too much work for you, pay someone to do it for you.  Many mutual fund companies, asset management accounts, as well as investment advisors, do rebalancing for their clients.


As for what type of investments you should have in your portfolio, there are many answers and the absolute truth is that no one size fits all.  What is correct for you may not be what “experts” think, on average, is right for someone of your characteristics.  For an example of a tool to help with general allocation questions, the following: was referenced in the SEC document we linked to earlier.

Clearly, you cannot control the market but you can control yourself.  The daily ups and downs will help you, as you implement a rebalancing strategy, for you will be forced to sell winners (sell high) and to buy more of some assets who have decreased in price (buy low).  While nothing is guaranteed, a solid plan with minimal management, is a monumental first-step toward financial success.