tag:blogger.com,1999:blog-52562776610099217802024-03-13T11:35:36.901-07:00Financial Tip of the WeekMU Financial Successhttp://www.blogger.com/profile/14117781251967743442noreply@blogger.comBlogger328125tag:blogger.com,1999:blog-5256277661009921780.post-14846461053919185922013-05-23T12:55:00.000-07:002013-05-24T03:00:03.895-07:00Public Service Loan Forgiveness Program<div class="WordSection1"> <p class="MsoNormal"><i><span style="font-size:10.0pt;line-height:115%">Graham McCaulley, Extension Associate, MU Personal Financial Planning Extension <o:p></o:p></span></i></p> <p class="MsoNormal">For many students this time of year marks graduation, and for some, graduation prompts thinking about student loans. Those graduating high school may be anticipating the disbursements of their first student loans in a few months to cover new tuition expenses. Alternatively, those graduating college may be expecting the end of student loan deferment and the beginning of repayment in the coming months. No matter where one is on the continuum of student loan debt, it is always important to think about the long term realities of student loans, including repayment options. This tip will outline one possible option for students who may go into careers in public service jobs. <o:p></o:p></p> <p class="MsoNormal"><b>What’s a public service job?<o:p></o:p></b></p> <p class="MsoNormal">The definition of what is considered a public service job is fairly broad.<b> </b>Any employment with a federal, state, or local government agency, entity, or organization or a non-profit organization that has been designated as tax-exempt by the Internal Revenue Service (IRS) under Section 501(c)(3) of the Internal Revenue Code (IRC). The type or nature of employment with the organization does not matter for PSLF purposes. Additionally, the type of services that these public service organizations provide does not matter for PSLF purposes. Some private, non-profit employers that are not tax exempt (i.e., 501(c)(3) status) can even be considered qualifying employment for the PSLF program, provided the employer provides certain public services (e.g., public health, safety, etc). <br> <br> <b><o:p></o:p></b></p> <p class="MsoNormal"><b>What types of loans are eligible?<o:p></o:p></b></p> <p class="MsoNormal">Loans are either:<o:p></o:p></p> <p class="MsoListParagraphCxSpFirst" style="text-indent:-.25in;mso-list:l0 level1 lfo1"> <![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>Federal- Made and/or regulated by the government, including Direct Loans, Federal Family Education Loans (FFEL), and Federal Perkins Loans; or <o:p></o:p></p> <p class="MsoListParagraphCxSpLast" style="text-indent:-.25in;mso-list:l0 level1 lfo1"> <![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>Private- Made by a bank/private lender and generally carry higher fees and interest rates than federal loans. For more information about avoiding deceptive private loans, visit <a href="http://missourifamilies.org/features/financearticles/cfe63.htm">http://missourifamilies.org/features/financearticles/cfe63.htm</a>) <o:p></o:p></p> <p class="MsoNormal">Private loans are not eligible for loan forgiveness programs, and not all federal loans are either. For a list of debt cancellation/forgiveness programs and which types of federal loan types are eligible for each program, visit <a href="http://studentaid.ed.gov/repay-loans/forgiveness-cancellation">http://studentaid.ed.gov/repay-loans/forgiveness-cancellation</a>. Regarding the Public Service Loan Forgiveness Program (PSLF), only direct loans are eligible (i.e., loans you received under the William D. Ford Federal Direct Loan Program). Federal Family Education loans and Perkins loans are not eligible, however, they do become eligible if you consolidate them into a direct consolidation loan (more on this at <a href="http://www.loanconsolidation.ed.gov/">http://www.loanconsolidation.ed.gov/</a>). <o:p></o:p></p> <p class="MsoNormal"><b>What do I have to do to get my debt forgiven?<o:p></o:p></b></p> <p class="MsoListParagraphCxSpFirst" style="text-indent:-.25in;mso-list:l1 level1 lfo2"> <![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><b>Work full-time:</b> At least an annual average of 30 hours per week. For purposes of the full-time requirement, your qualifying employment at a not-for-profit organization does not include time spent participating in religious instruction, worship services, or any form of proselytizing. If you are a teacher, or other employee of a public service organization, under contract for at least eight out of 12 months, you meet the full-time standard if you work an average of at least 30 hours per week during the contractual period and receive credit by your employer for a full year's worth of employment. If you have multiple eligible jobs, you must work a combined average of at least 30 hours per week.<o:p></o:p></p> <p class="MsoListParagraphCxSpMiddle"><o:p> </o:p></p> <p class="MsoListParagraphCxSpMiddle" style="text-indent:-.25in;mso-list:l1 level1 lfo2"> <![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><b>Make 120 on time, full, monthly loan payments: </b> Basically, you have to put in 10 years of full, on time payments before you can be eligible for the remainder of your loans to be forgiven. On-time payments are those that are received by your Direct <cite><span style="font-style:normal">Loan servicer</span></cite> no later than 15 days after the scheduled payment due date. Full payments are payments on your Direct Loan in an amount that equals or exceeds the amount you are required to pay each month under your Direct Loan repayment schedule.<b> </b><o:p></o:p></p> <p class="MsoListParagraphCxSpMiddle"><o:p> </o:p></p> <p class="MsoListParagraphCxSpLast" style="text-indent:-.25in;mso-list:l1 level1 lfo2"> <![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><b>Be paying back your loan through a qualifying repayment plan</b>. You cannot necessarily choose a repayment plan that will greatly lengthen your repayment period so that you are eligible for most of your loans to be forgiven. For example, 30-year extended repayment plans are not eligible for the PSLF program. However, the income-based repayment (IBR) plan (<a href="http://studentaid.ed.gov/repay-loans/understand/plans/income-based">http://studentaid.ed.gov/repay-loans/understand/plans/income-based</a>) and the income-contingent repayment (ICR) plan (<a href="http://studentaid.ed.gov/repay-loans/understand/plans/income-contingent">http://studentaid.ed.gov/repay-loans/understand/plans/income-contingent</a>) are eligible. The 10-year Standard Repayment Plan is also eligible, however, after meeting the PSLF requirement of 120 consecutive payments, there would be no debt left to forgive!<o:p></o:p></p> <p class="MsoNormal">Deciding whether or not the PSLF program is right for you depends on many factors, mainly how much student loan debt you have and how much money you will make during the first 10 years of your public service career. The more debt you have and the less you will make, the more attractive an option the PSLF may be for you (as payments tied to your income will be less when you make less money). Alternatively, if you make a high income you may very well have paid off, or be close to paying off, your student loans by the time you get to the end of the 10 year requirement under the PSLF. <o:p></o:p></p> <p class="MsoNormal">There are many repayment options for student loans. A good first step would be to visit the Federal Student Aid repayment calculator at <a href="https://studentloans.gov/myDirectLoan/repaymentEstimatorLoginRedirect.action"> https://studentloans.gov/myDirectLoan/repaymentEstimatorLoginRedirect.action</a> to see what all your options may be. You can also look at past financial tips (achieved at <a href="http://mufinancialtip.blogspot.com/">http://mufinancialtip.blogspot.com/</a>, especially the September and October 2011 tips) or visit the <i>Managing Student Finances and Debt</i> area of our website: <a href="http://pfp.missouri.edu/financial/studentfinances.html"> http://pfp.missouri.edu/financial/studentfinances.html</a>. Again, whether you are just starting to take out loans or have been paying them back for years, it is always good to consider your repayment options and realities. Even though the PSLF program may help some (and does encourage public service jobs), you will still end up paying back a substantial amount of the debt you take out, so never take out more loans than you need.<o:p></o:p></p> </div> MU Financial Successhttp://www.blogger.com/profile/14117781251967743442noreply@blogger.com132tag:blogger.com,1999:blog-5256277661009921780.post-10733345209134983312013-05-16T09:19:00.000-07:002013-05-17T03:00:08.655-07:00Older Family Members and Finances<div class="WordSection1"> <p class="MsoNormal"><span style="font-size:12.0pt;line-height:115%">by Lucy Schrader</span><b><span style="font-size:12.0pt;line-height:115%;color:black"><o:p></o:p></span></b></p> <p class="MsoNormal"><span style="font-size:12.0pt;line-height:115%;color:black">I expect to help our kids learn about money and finances. I know we need to guide them, but not make all of their decisions. We need to set up situations for them to succeed to become independent. Yet when it comes to my parents, I hold some different beliefs—they are grown adults; they should take care of their own finances; who am I to tell them how to live and spend their money? Yet with changes in aging, I may need to shift my thinking. There are more and more elderly adults who are not able to take care of their finances anymore or who need extra help. <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;line-height:115%;color:black">So how can a person assist when parents or relatives need more help with their finances? This process takes time and for many families, this is not an easy thing to talk about. Finances often have many emotions attached, including fear and anger. And when someone loses control over financial decisions, they often loose independence (in where they live, how they live and what they can do or buy). <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;line-height:115%;color:black">As you start discussions, be sure to: <o:p></o:p></span></p> <p class="MsoListParagraphCxSpFirst" style="text-indent:-.25in;mso-list:l2 level1 lfo1"> <![if !supportLists]><span style="font-size:12.0pt;line-height:115%;font-family:Symbol;color:black"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-size:12.0pt;line-height:115%;color:black">Acknowledge feelings<o:p></o:p></span></p> <p class="MsoListParagraphCxSpMiddle" style="text-indent:-.25in;mso-list:l2 level1 lfo1"> <![if !supportLists]><span style="font-size:12.0pt;line-height:115%;font-family:Symbol;color:black"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-size:12.0pt;line-height:115%;color:black">Find a low-stress time to talk <o:p></o:p></span></p> <p class="MsoListParagraphCxSpMiddle" style="text-indent:-.25in;mso-list:l2 level1 lfo1"> <![if !supportLists]><span style="font-size:12.0pt;line-height:115%;font-family:Symbol;color:black"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-size:12.0pt;line-height:115%;color:black">Find natural times to talk about the issues or to ask questions (for example, use a news feature or an article to start the conversation)<o:p></o:p></span></p> <p class="MsoListParagraphCxSpMiddle" style="text-indent:-.25in;mso-list:l2 level1 lfo1"> <![if !supportLists]><span style="font-size:12.0pt;line-height:115%;font-family:Symbol;color:black"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-size:12.0pt;line-height:115%;color:black">Be aware of possible reactions (from relief to anger) from everyone involved, including yourself<o:p></o:p></span></p> <p class="MsoListParagraphCxSpLast" style="text-indent:-.25in;mso-list:l2 level1 lfo1"> <![if !supportLists]><span style="font-size:12.0pt;line-height:115%;font-family:Symbol;color:black"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-size:12.0pt;line-height:115%;color:black">Respect the person<o:p></o:p></span></p> <p class="MsoNoSpacing"><span style="font-size:12.0pt">Having financial conversations can be very hard to do. Let the person know you want to help them in the way she wants to be helped and that you have her best interest at heart. You might ask some questions, to encourage the person to put her wishes together and to have a place for all of these items (safe deposit box, fire-water proof file box, etc) so that if you need them in a medical emergency, then you can get to them. <o:p></o:p></span></p> <p class="MsoNoSpacing"><span style="font-size:12.0pt"><o:p> </o:p></span></p> <p class="MsoNoSpacing"><span style="font-size:12.0pt">These questions (from Caring.com) can be useful as you help your relative plan for the future. The person many not want to give you answers to all of these for privacy or other reasons. Again, you can share the information and continue the conversation another time.<o:p></o:p></span></p> <p class="heading" style="margin-left:.5in;text-indent:-.25in;mso-list:l1 level1 lfo2"> <a name="237"></a><![if !supportLists]><span style="font-family:"Calibri","sans-serif""><span style="mso-list:Ignore">1.<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-family:"Calibri","sans-serif"">Do they have a durable power of attorney?<o:p></o:p></span></p> <p style="margin-left:.5in"><span style="font-family:"Calibri","sans-serif"">The durable power of attorney (DPOA) is considered one of the most important personal legal documents for any older adult to have. Along with a healthcare proxy, it will give whomever your parent designates—whether it be you, one of your siblings, or someone else –the power to make financial and legal decisions (or, in the case of a healthcare proxy, to make medical decisions) if your parent is incapacitated. Without a durable power of attorney in place, you'll have to go to court to get appointed as your parent's guardian. <o:p></o:p></span></p> <p class="heading" style="margin-left:.5in;text-indent:-.25in;mso-list:l1 level1 lfo2"> <a name="232"></a><![if !supportLists]><span style="font-family:"Calibri","sans-serif""><span style="mso-list:Ignore">2.<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-family:"Calibri","sans-serif"">Where do they keep their financial records?<o:p></o:p></span></p> <p class="heading" style="margin-left:.5in;text-indent:-.25in;mso-list:l1 level1 lfo2"> <a name="236"></a><![if !supportLists]><span style="font-family:"Calibri","sans-serif""><span style="mso-list:Ignore">3.<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-family:"Calibri","sans-serif"">What are their monthly expenses?<o:p></o:p></span></p> <p class="heading" style="margin-left:.5in;text-indent:-.25in;mso-list:l1 level1 lfo2"> <a name="229"></a><![if !supportLists]><span style="font-family:"Calibri","sans-serif""><span style="mso-list:Ignore">4.<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-family:"Calibri","sans-serif"">How can I pay their bills if necessary?<o:p></o:p></span></p> <p class="heading" style="margin-left:.5in;text-indent:-.25in;mso-list:l1 level1 lfo2"> <a name="233"></a><![if !supportLists]><span style="font-family:"Calibri","sans-serif""><span style="mso-list:Ignore">5.<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-family:"Calibri","sans-serif"">Do they have any kind of medical insurance?<o:p></o:p></span></p> <p class="heading" style="margin-left:.5in;text-indent:-.25in;mso-list:l1 level1 lfo2"> <a name="230"></a><![if !supportLists]><span style="font-family:"Calibri","sans-serif""><span style="mso-list:Ignore">6.<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-family:"Calibri","sans-serif"">What's their income and where does it come from?<o:p></o:p></span></p> <p class="heading" style="margin-left:.5in;text-indent:-.25in;mso-list:l1 level1 lfo2"> <a name="228"></a><![if !supportLists]><span style="font-family:"Calibri","sans-serif""><span style="mso-list:Ignore">7.<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-family:"Calibri","sans-serif"">Have your parents done any estate planning?<o:p></o:p></span></p> <p class="heading" style="margin-left:.5in;text-indent:-.25in;mso-list:l1 level1 lfo2"> <a name="234"></a><![if !supportLists]><span style="font-family:"Calibri","sans-serif""><span style="mso-list:Ignore">8.<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-family:"Calibri","sans-serif"">If they can no longer live on their own, what can they afford in terms of housing?<o:p></o:p></span></p> <p class="heading" style="margin-left:.5in;text-indent:-.25in;mso-list:l1 level1 lfo2"> <a name="235"></a><![if !supportLists]><span style="font-family:"Calibri","sans-serif""><span style="mso-list:Ignore">9.<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-family:"Calibri","sans-serif"">What financial planning have they done?<o:p></o:p></span></p> <p class="heading" style="margin-left:.5in;text-indent:-.25in;mso-list:l1 level1 lfo2"> <a name="231"></a><![if !supportLists]><span style="font-family:"Calibri","sans-serif""><span style="mso-list:Ignore">10.<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-family:"Calibri","sans-serif"">Do they have an advance health directive?<o:p></o:p></span></p> <p class="MsoNormal"><a name="341"></a><a name="338"></a><span style="font-size:12.0pt;line-height:115%;color:black">Helping someone with finances may not be an all or nothing approach. If you feel the person does need help, w</span><span style="font-size:12.0pt;line-height:115%">hen at all possible, choose the least intrusive financial tool to keep your relative as financially independent as possible (<i>Helping Older Family Members Make Financial Decisions guide).</i> For example, maybe your mother gets behind in paying her utility bills, so you set up automatic bill payments for her. She can, however, still manage some cash for grocery shopping, so you set up a system for her to get a cash amount every week to give her some independence.<o:p></o:p></span></p> <p class="MsoNoSpacing"><span style="font-size:12.0pt">Also in the guide <i>Helping Older Family Members Make Financial Decisions</i>, the authors look at different tools based on if the relative is or is not able to make financial decisions. <i>(Please note, the following explanations are very brief. You will need to seek legal and professional help in setting up several of these options.)<o:p></o:p></i></span></p> <p class="MsoNoSpacing"><span style="font-size:12.0pt"><o:p> </o:p></span></p> <p class="MsoNoSpacing"><b><span style="font-size:12.0pt">When the relative can make sound financial decisions, these tools can help:<o:p></o:p></span></b></p> <p class="MsoNoSpacing" style="margin-left:.5in;text-indent:-.25in;mso-list:l3 level1 lfo3"> <![if !supportLists]><span style="font-size:12.0pt;font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-size:12.0pt">Automatic bill payments<br> <br> <o:p></o:p></span></p> <p class="MsoNoSpacing" style="margin-left:.5in;text-indent:-.25in;mso-list:l3 level1 lfo3"> <![if !supportLists]><span style="font-size:12.0pt;font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-size:12.0pt">Joint bank accounts<br> <br> <o:p></o:p></span></p> <p class="MsoNoSpacing" style="margin-left:.5in;text-indent:-.25in;mso-list:l3 level1 lfo3"> <![if !supportLists]><span style="font-size:12.0pt;font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-size:12.0pt">Power of attorney<br> The person designates someone to make financial and legal decisions for him when he is not able (when he is incapacitated).<br> <br> <o:p></o:p></span></p> <p class="MsoNoSpacing" style="margin-left:.5in;text-indent:-.25in;mso-list:l3 level1 lfo3"> <![if !supportLists]><span style="font-size:12.0pt;font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-size:12.0pt">Living trusts<o:p></o:p></span></p> <p class="MsoNoSpacing" style="margin-left:.5in"><span style="font-size:12.0pt">A trust is a three-party arrangement, where assets are transferred from one person (the grantor) to another (the trustee). The trustee holds and manages these assets for the benefit of a third person (the beneficiary).<o:p></o:p></span></p> <p class="MsoNoSpacing"><span style="font-size:12.0pt"><o:p> </o:p></span></p> <p class="MsoNoSpacing"><b><span style="font-size:12.0pt">When your relative can’t make sound financial decisions, these strategies can help:<o:p></o:p></span></b></p> <p class="MsoNoSpacing" style="margin-left:.5in;text-indent:-.25in;mso-list:l0 level1 lfo4"> <![if !supportLists]><span style="font-size:12.0pt;font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-size:12.0pt">Representative payee<br> <br> <o:p></o:p></span></p> <p class="MsoNoSpacing" style="margin-left:.5in"><span style="font-size:12.0pt">If a person cannot manage his checks from Social Security, veteran’s pension, railroad retirement or public benefit programs, a representative payee can be appointed. Checks are written to the payee on behalf of the beneficiary. The representative payee cannot get access to the person’s savings accounts or other assets.<o:p></o:p></span></p> <p class="MsoNoSpacing"><span style="font-size:12.0pt"><o:p> </o:p></span></p> <p class="MsoNoSpacing" style="margin-left:.5in;text-indent:-.25in;mso-list:l0 level1 lfo4"> <![if !supportLists]><span style="font-size:12.0pt;font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-size:12.0pt">Conservatorship (or guardianship of the estate or guardianship of the property)<br> <br> <o:p></o:p></span></p> <p class="MsoNoSpacing" style="margin-left:.5in"><span style="font-size:12.0pt">Only a court can create a conservatorship. A person asks the court for the right to manage another person’s financial affairs after that person cannot do so (and if a durable power of attorney or a living trust is not in operation).<o:p></o:p></span></p> <p class="MsoNoSpacing"><span style="font-size:12.0pt"><o:p> </o:p></span></p> <p class="MsoNoSpacing"><span style="font-size:12.0pt">Families should be aware of their motives for seeking a conservatorship (or any of these tools)—do they have inheritance concerns or concerns about protecting an older person’s money for his or her own needs and wants. Also, are there differences in values? Sometimes the older person spends money on different wants and needs, but he is not endangering himself. <o:p></o:p></span></p> <p class="MsoNoSpacing"><span style="font-size:12.0pt"><o:p> </o:p></span></p> <p class="MsoNoSpacing"><span style="font-size:12.0pt">On an emotional level, none of these may be easy to do. Role reversals, change of care and change of life habits can be difficult to come to terms with. Be aware of your family member’s and your reactions and reasons and reassess the situation regularly. The goal is to help the person stay as financially independent as possible.<o:p></o:p></span></p> <p class="MsoNoSpacing"><a name="339"></a><span style="font-size:12.0pt"><o:p> </o:p></span></p> <h1><span style="font-size:12.0pt;font-weight:normal">References and Resources<o:p></o:p></span></h1> <h1><span style="font-size:12.0pt;font-weight:normal">5 Most Important Financial Questions to Ask </span><span style="font-size:12.0pt;font-family:"Calibri","sans-serif";font-weight:normal">Your Parent. Retrieved May 9, 2013 </span><a href="http://www.caring.com/checklists/financial-questions-for-parents"><span style="font-size:12.0pt;font-family:"Calibri","sans-serif"">http://www.caring.com/checklists/financial-questions-for-parents</span></a><span style="font-size:12.0pt;font-family:"Calibri","sans-serif";font-weight:normal"><o:p></o:p></span></h1> <h1><span style="font-size:12.0pt;font-family:"Calibri","sans-serif";font-weight:normal">10 Things You Should Know About Your Parents' Finances. Retrieved May 9, 2013 </span><a href="http://www.caring.com/checklists/elderly-parents-finances"><span style="font-size:12.0pt;font-family:"Calibri","sans-serif"">http://www.caring.com/checklists/elderly-parents-finances</span></a><span style="font-size:12.0pt;font-family:"Calibri","sans-serif";font-weight:normal"><o:p></o:p></span></h1> <h1><span style="font-size:12.0pt;font-family:"Calibri","sans-serif";color:black;font-weight:normal">Parker, K. & Patter, E. (2013.) The Sandwich Generation: Rising financial burdens for middle-aged Americans. Pew Research Center. </span><a href="http://www.pewsocialtrends.org/2013/01/30/the-sandwich-generation/#overview"><span style="font-size:12.0pt;font-family:"Calibri","sans-serif"">http://www.pewsocialtrends.org/2013/01/30/the-sandwich-generation/#overview</span></a><span style="font-size:12.0pt;font-family:"Calibri","sans-serif";color:black;font-weight:normal"> </span><span style="font-size:12.0pt;font-family:"Georgia","serif";color:black;font-weight:normal"><o:p></o:p></span></h1> <p class="MsoNoSpacing"><span style="font-size:12.0pt;color:black">Schmall, V., Nay, T., & Bowman, S. (2005.) Helping older family members handle finances. Oregon State University. Retrieved May 9, 2013 </span><a href="http://extension.oregonstate.edu/catalog/pdf/pnw/pnw344.pdf"><span style="font-size:12.0pt">http://extension.oregonstate.edu/catalog/pdf/pnw/pnw344.pdf</span></a><span style="font-size:12.0pt;color:black"> <o:p></o:p></span></p> <p class="MsoNoSpacing"><span style="font-size:12.0pt;color:black"><o:p> </o:p></span></p> <p class="MsoNoSpacing"><span style="font-size:12.0pt;font-family:"Georgia","serif";color:black"><o:p> </o:p></span></p> <p class="MsoNormal"><span style="color:#006600">Lucy Schrader <br> HES Associate State Specialist and<br> Building Strong Families Program Coordinator <br> University of Missouri Extension <br> 162 Stanley Hall <br> Columbia, MO 65211 <br> 573-882-4071 or <a href="mailto:SchraderL@missouri.edu"><span style="color:black">SchraderL@missouri.edu</span></a> <o:p></o:p></span></p> <p class="MsoNormal"><span style="color:#006600"><a href="http://extension.missouri.edu/bsf"><span style="color:black">http://extension.missouri.edu/bsf</span></a> <o:p></o:p></span></p> <p class="MsoNormal"><span style="color:#006600"><o:p> </o:p></span></p> <p class="MsoNormal"><span style="color:#006600">Strong Families for Strong Communities<o:p></o:p></span></p> <p class="MsoNoSpacing"><span style="font-size:12.0pt"><o:p> </o:p></span></p> <p class="MsoNormal"><o:p> </o:p></p> </div> MU Financial Successhttp://www.blogger.com/profile/14117781251967743442noreply@blogger.com34tag:blogger.com,1999:blog-5256277661009921780.post-71756012737747955402013-05-08T15:21:00.000-07:002013-05-09T15:00:02.838-07:00Top Ten Financial Tips for a New College Grad<div class="WordSection1"> <p class="MsoNormal"><span style="font-family:"Times New Roman","serif""> Often we are asked to work with a promising undergraduate on a project allowing them to receive Honors credit for a course they take in our department. A common course where this occurs is our Introductory Personal and Family Finance course. Ms. Paige Wheeler wrote her paper on the ten most important financial tips for a new college graduate, after reading <i>The Only Guide You’ll Ever Need for the Right Financial Plan</i>, by Larry Swedroe. This financial tip will enumerate her highlights for her peers and, hopefully, you.<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoListParagraphCxSpFirst" style="text-indent:-.25in;mso-list:l0 level1 lfo1"> <![if !supportLists]><span style="font-family:"Times New Roman","serif""><span style="mso-list:Ignore">1.<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-family:"Times New Roman","serif"">Stay within your means. While it is normal to graduate with debt, proper debt management is crucial. Don’t get over extended. Shop for the best rates from quality companies. Pay off your loans as quickly as possible. <o:p></o:p></span></p> <p class="MsoListParagraphCxSpMiddle" style="text-indent:-.25in;mso-list:l0 level1 lfo1"> <![if !supportLists]><span style="font-family:"Times New Roman","serif""><span style="mso-list:Ignore">2.<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-family:"Times New Roman","serif"">Appropriate insurance is vital to financial success. People buy insurance to protect their property, their income, and their wealth by transferring risks they do not want to keep to an insurance company. Shopping for insurance is the same as shopping around for loans – you need to search for the best rates from high quality companies<o:p></o:p></span></p> <p class="MsoListParagraphCxSpMiddle" style="text-indent:-.25in;mso-list:l0 level1 lfo1"> <![if !supportLists]><span style="font-family:"Times New Roman","serif""><span style="mso-list:Ignore">3.<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-family:"Times New Roman","serif"">Having a well prepared and detailed investment plan is a necessary condition for financial success. A good investment plan helps eliminate fear and emotion when making investment decisions, as you will be more disciplined. You cannot predict the market but you can stick to your plan, including paying yourself first, dollar cost averaging, and diversification.<o:p></o:p></span></p> <p class="MsoListParagraphCxSpMiddle" style="text-indent:-.25in;mso-list:l0 level1 lfo1"> <![if !supportLists]><span style="font-family:"Times New Roman","serif""><span style="mso-list:Ignore">4.<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-family:"Times New Roman","serif"">Understand the difference between risk and uncertainty. In finance, risk is calculated using historical data but the returns on your investments depend on the uncertain returns of the future. This uncertainty demands a diversified portfolio.<o:p></o:p></span></p> <p class="MsoListParagraphCxSpMiddle" style="text-indent:-.25in;mso-list:l0 level1 lfo1"> <![if !supportLists]><span style="font-family:"Times New Roman","serif""><span style="mso-list:Ignore">5.<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-family:"Times New Roman","serif"">Related to the above, financial success requires one to make financial decisions with your head and not your stomach, as “stomachs rarely make good decisions”. Yes, one can spend a lot of time doing research and making calculations, but making informed choices is key for success. Gut feelings are not a good basis for decision making. Use the information available to make an educated decision and decide which risks are worth taking and which aren’t.<o:p></o:p></span></p> <p class="MsoListParagraphCxSpMiddle" style="text-indent:-.25in;mso-list:l0 level1 lfo1"> <![if !supportLists]><span style="font-family:"Times New Roman","serif""><span style="mso-list:Ignore">6.<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-family:"Times New Roman","serif"">You have to be smart about which risks you do take. Importantly, never invest more than you can afford to lose. Sure, if you are worth 1 billion dollars, risking 1 million dollars with the hopes of making 2 million may not be that big of a deal. If you are worth 1 million dollars, however, and are consider risking all of it with the hopes of it doubling, it is a huge deal. If you are wrong, you are financially devastated. <o:p></o:p></span></p> <p class="MsoListParagraphCxSpMiddle" style="text-indent:-.25in;mso-list:l0 level1 lfo1"> <![if !supportLists]><span style="font-family:"Times New Roman","serif""><span style="mso-list:Ignore">7.<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-family:"Times New Roman","serif"">A well-diversified investment portfolio is paramount to financial success. It must have appropriate asset allocations to fit your risk tolerance and time horizon. As a young person, you should try to can take on more investment risk, but do so in a highly diversified set of equities. In addition to equity investments, it is important to have proper asset allocations among stocks, real estate, bonds, etc. A related point is the need to periodically rebalance the portfolio to make sure it reflects your investment plan.<o:p></o:p></span></p> <p class="MsoListParagraphCxSpMiddle" style="text-indent:-.25in;mso-list:l0 level1 lfo1"> <![if !supportLists]><span style="font-family:"Times New Roman","serif""><span style="mso-list:Ignore">8.<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-family:"Times New Roman","serif"">It bears repeating that a younger investor should be more heavily weighted in equities. Equities (common stocks and stock mutual funds) are one of the few asset classes that consistently keep pace with inflation over the long run. Inflation diminishes purchasing power but equities will help preserve wealth, in spite of inflation. <o:p></o:p></span></p> <p class="MsoListParagraphCxSpMiddle" style="text-indent:-.25in;mso-list:l0 level1 lfo1"> <![if !supportLists]><span style="font-family:"Times New Roman","serif""><span style="mso-list:Ignore">9.<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-family:"Times New Roman","serif"">Find the right investment management strategy, either active or passive. Having actively managed funds means you try to stay ahead of the market with the hopes of performing above expectations. On the other hand, passively managed funds, only require the investor to invest across each asset class and to rebalance. Many are the advocates for passive investing, as you can earn market rates of return with low expenses and high tax efficiency. <o:p></o:p></span></p> <p class="MsoListParagraphCxSpLast" style="text-indent:-.25in;mso-list:l0 level1 lfo1"> <![if !supportLists]><span style="font-family:"Times New Roman","serif""><span style="mso-list:Ignore">10.<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-family:"Times New Roman","serif"">The final tip for a new college graduate is a key to long-run success. Begin saving for your retirement. Take advantage of the opportunities employers provide to enable you to lead a comfortable retirement life. If your employer has a 401(k) program in which they match funds, make sure you set aside at least enough to get the full employer match. Be sure to maintain a well diversified investment plan. Understand the pros and cons of a Traditional IRA versus a Roth IRA. (More information on IRAs is contained in an earlier Financial Tip (<a href="http://mufinancialtip.blogspot.com/2013/04/the-battle-of-iras-roth-versus.html">click here</a>).) <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-family:"Times New Roman","serif"">Having a solid financial plan and sticking to it is crucial for financial success. To assure the desired result; plan ahead, spend wisely, and understand your insurance and investment portfolio. Stay on top of your financial life, so as to not be crushed by your financial mistakes. Along the way, never forget that the <i>right</i> decision depends on your definition of financial success - as it will set your path toward your financial success. It will likely differ from your friends’. <o:p></o:p></span></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal"><span style="font-family:"Times New Roman","serif"">Paige Wheeler, Undergraduate student, MU School of Journalism<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-family:"Times New Roman","serif"">Robert O. Weagley, Ph.D. CFP<sup>®<o:p></o:p></sup></span></p> </div> MU Financial Successhttp://www.blogger.com/profile/14117781251967743442noreply@blogger.com4tag:blogger.com,1999:blog-5256277661009921780.post-25181336566270328032013-05-02T11:45:00.000-07:002013-05-03T03:00:03.904-07:00The Importance of Personal Financial Planning for College Graduates<div class="WordSection1"> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">by Ryan H. Law<b><o:p></o:p></b></span></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">Over the past 5 weeks we have had more than 350 graduating seniors come through our doors to receive student loan exit counseling. By the time the semester is over we will have visited with more than 500 of them.<span style="background:yellow;mso-highlight:yellow"><o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">Seeing all these seniors come through our doors has caused me to reflect on my own graduation and some things I did well as well as some things I wish I had known or done upon graduation.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">Today’s tip will focus on some specific steps that I think all graduating seniors should take (but don’t worry – it’s good advice for everyone – even if you haven’t graduated yet or graduated years ago). <o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><b><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">Become financially literate<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">Financial literacy in the United States is, unfortunately, not widespread. Most high school students fail a personal finance exam (less than 50% of questions answered correctly) and college students score just 62%<a style="mso-footnote-id:ftn1" href="#_ftn1" name="_ftnref1" title=""><sup><sup><span style="font-size:12.0pt;font-family:"Times New Roman","serif";mso-fareast-language:EN-US">[1]</span></sup></sup></a>. One of the best things you can do for your future is to become financially literate. If you can take a college course in personal finance I highly recommend it. In a 3-credit personal finance class you will learn about everything on this list and you will be more financially literate by the end of the course than most people in America. If you don’t have the option to take one on campus look into one of the many excellent Open Courseware classes – you won’t get any college credit for it, but you can’t beat the price tag – free!<a style="mso-footnote-id:ftn2" href="#_ftn2" name="_ftnref2" title=""><sup><sup><span style="font-size:12.0pt;font-family:"Times New Roman","serif";mso-fareast-language:EN-US">[2]</span></sup></sup></a> <o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">As a part of becoming financially literate I recommend you learn the fundamentals of how the U.S. economy works. Learn about the business cycle, unemployment rates, inflation and interest rates. All of these things affect your personal finances, so a basic understanding of them is helpful.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><b><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">Don’t get your financial advice from amateurs<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">Financial advice can be found almost anywhere – it is prolific on the internet and on the bookshelves at libraries and bookstores. However, I would caution you to be careful that you are not getting your financial advice from amateurs. For example, a few years back there was a taxi driver who “figured out the system to wealth” day-trading stocks. A lot of people lost a lot of money following his advice. Be careful of advice received from friends or family about the latest “hot tip” on a stock. This tip, like all the others, will take you back to the first recommended suggestion – a good solid class will teach you much about how to win at personal finance.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><b><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">Establish financial goals and take action to achieve them<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">You need to start thinking about some short and long-term financial goals. How soon do you want to pay off your consumer debt? How much money do you need at retirement? Do you plan to buy a home eventually? Do you plan to have children and send them to college? What are your plans for increasing your earning potential? I recommend you take some time to sit down and make some decisions about where you are financially, where you want to be, and how you plan to get there.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><b><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">Learn to budget<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">No company would go one day without a good, solid budget. They understand how much is coming in, how much is going out and exactly where those dollars are going. You should likewise have a budget. A budget is not a record of where your money went (though that is important as well); it is a <i>plan</i> for where you want your money to go. Learn the process for budgeting then discipline yourself to take action and stick to your budget<a style="mso-footnote-id:ftn3" href="#_ftn3" name="_ftnref3" title=""><sup><sup><span style="font-size:12.0pt;font-family:"Times New Roman","serif";mso-fareast-language:EN-US">[3]</span></sup></sup></a>. A key component of your budget should be to spend less than you earn and to pay yourself first. As part of your budget you should work diligently to build up a 3-6 month emergency fund.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><b><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">Develop a net worth statement and update it annually<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">A net worth statement is a snapshot of a particular moment in time. It should list all of your assets (everything you own that is worth money) and all of your liabilities (debts). Minus your liabilities from your assets and you will come up with your net worth. You should update this annually to see how you are doing. Over time this number should increase.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><b><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">Care about your credit<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">You should know what your credit report contains<a style="mso-footnote-id:ftn4" href="#_ftn4" name="_ftnref4" title=""><sup><sup><span style="font-size:12.0pt;font-family:"Times New Roman","serif";mso-fareast-language:EN-US">[4]</span></sup></sup></a>, what your credit score is and what steps you can take to improve that score<a style="mso-footnote-id:ftn5" href="#_ftn5" name="_ftnref5" title=""><sup><sup><span style="font-size:12.0pt;font-family:"Times New Roman","serif";mso-fareast-language:EN-US">[5]</span></sup></sup></a>. Your credit score determines what interest rate you pay on loans, what your auto insurance will cost, if you can rent certain apartments, and in some cases if you can even get a particular job.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><b><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">Pay off consumer debt as quickly as possible<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">Carrying consumer debt, especially credit card debt, is toxic to your financial goals. Pay it off as quickly as possible by paying more than the minimum and refusing to take on additional unnecessary debt<a style="mso-footnote-id:ftn6" href="#_ftn6" name="_ftnref6" title=""><sup><sup><span style="font-size:12.0pt;font-family:"Times New Roman","serif";mso-fareast-language:EN-US">[6]</span></sup></sup></a>.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><b><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">Start saving now for retirement and take advantage of employer-sponsored retirement plans such as a 401(k) or 403(b)<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">If your employer offers a tax-advantaged retirement savings plan, such as a 401(k) or 403(b), take advantage of it! You will save on taxes now and can often get free money through a company “match” of your savings. <o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">Time is your best friend when it comes to saving for retirement. If a 23-year old saves $3000 a year at 8% interest until he or she is age 65 they will have about $912,000 in the bank. If a 33-year old does the same thing they will have about $402,000. That is the power of compound interest!<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><b><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">Understand taxes, insurance and basic estate planning<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">Even if you pay someone else to prepare your tax return for you, you need to understand your own taxes. You should know your average tax rate, your marginal tax rate, and some steps you can take to reduce your tax burden. You should understand the difference between taking the standard deduction and itemizing deductions. <o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">You also need to understand your insurance products. We spend a lot of money on disability insurance, life insurance, auto insurance, renter’s or homeowner’s insurance and other types of insurance. You should understand what your policy covers, what it doesn’t cover and how much you are paying for each one. You should occasionally check around to see if you can get lower cost insurance.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">Everyone needs to do some basic estate planning. Even if you are single with no dependents you at least need a basic will, healthcare directives and a power of attorney. As your situation changes you should review these documents and update them and add other important estate planning documents as necessary.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><b><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">Start an uncomplicated financial record-keeping system<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">You and your loved ones should know where important financial documents are and what each one is for. For example, if I were to pass away today I would want my wife to know exactly where my life insurance policies are and how to begin the process of collecting that money. The system I use is a fireproof file box with the HomeFile Organizer system<a style="mso-footnote-id:ftn7" href="#_ftn7" name="_ftnref7" title=""><sup><sup><span style="font-size:12.0pt;font-family:"Times New Roman","serif";mso-fareast-language:EN-US">[7]</span></sup></sup></a>. With this low-cost system I can file and find auto titles, insurance policies, medical records, warranties and any other financial documents.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><b><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">Give yourself an annual financial checkup<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">I recommend that you set aside a day each year to give yourself a financial checkup. Review your goals, your budget, your net worth, your insurance and estate policies, your savings and your debt level and determine some steps you can take to improve in each area. As part of the review I recommend you choose a new personal finance book to read over the next year. Take this opportunity to reassess where you are and determine a plan for how to get to the next level.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><b><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">Conclusion<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">Hopefully you got some good ideas about improving your financial situation from this list. I recommend you choose just one or two things from this list that you can take action on today. As that becomes a habit you can incorporate another item until you have implemented all of them that fit your situation.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal">Ryan H. Law, M.S., CFP®, AFC®<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">Personal Financial Planning Department<o:p></o:p></p> <p class="MsoNormal">Office for Financial Success Director <o:p></o:p></p> <p class="MsoNormal">University of Missouri Center on Economic Education Director<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">162 Stanley Hall<o:p></o:p></p> <p class="MsoNormal">University of Missouri<o:p></o:p></p> <p class="MsoNormal">Columbia, MO 65211<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">573.882.9211 (office)<o:p></o:p></p> <p class="MsoNormal">573.884.8389 (fax)<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> </div> <div style="mso-element:footnote-list"><br clear="all"> <hr align="left" size="1" width="33%"> <div style="mso-element:footnote" id="ftn1"> <p class="MsoFootnoteText"><a style="mso-footnote-id:ftn1" href="#_ftnref1" name="_ftn1" title=""><span class="MsoFootnoteReference"><span class="MsoFootnoteReference"><span style="font-size:10.0pt;font-family:"Calibri","sans-serif";mso-fareast-language:EN-US">[1]</span></span></span></a> <a href="http://jumpstart.org/survey.html">http://jumpstart.org/survey.html</a> <o:p> </o:p></p> </div> <div style="mso-element:footnote" id="ftn2"> <p class="MsoFootnoteText"><a style="mso-footnote-id:ftn2" href="#_ftnref2" name="_ftn2" title=""><span class="MsoFootnoteReference"><span class="MsoFootnoteReference"><span style="font-size:10.0pt;font-family:"Calibri","sans-serif";mso-fareast-language:EN-US">[2]</span></span></span></a> If you are looking for an excellent course I recommend Alena Johnson’s Family Finance course from Utah State Open Courseware: <a href="http://ocw.usu.edu/Family__Consumer____Human_Development/Family_Finance/index.html"> http://ocw.usu.edu/Family__Consumer____Human_Development/Family_Finance/index.html</a>. This is the course I took that convinced me to change my major and helped determine my life’s work.<o:p></o:p></p> </div> <div style="mso-element:footnote" id="ftn3"> <p class="MsoFootnoteText"><a style="mso-footnote-id:ftn3" href="#_ftnref3" name="_ftn3" title=""><span class="MsoFootnoteReference"><span class="MsoFootnoteReference"><span style="font-size:10.0pt;font-family:"Calibri","sans-serif";mso-fareast-language:EN-US">[3]</span></span></span></a> <a href="http://www.Mint.com">www.Mint.com</a> is a great, free resource for budgeting. The software I personally use can be found at <a href="http://www.YNAB.com">www.YNAB.com</a>. It isn’t free, but I highly recommend it.<o:p></o:p></p> </div> <div style="mso-element:footnote" id="ftn4"> <p class="MsoFootnoteText"><a style="mso-footnote-id:ftn4" href="#_ftnref4" name="_ftn4" title=""><span class="MsoFootnoteReference"><span class="MsoFootnoteReference"><span style="font-size:10.0pt;font-family:"Calibri","sans-serif";mso-fareast-language:EN-US">[4]</span></span></span></a> <a href="http://www.AnnualCreditReport.com">www.AnnualCreditReport.com</a> is the only place to get a free copy of all three of your credit reports annually<o:p></o:p></p> </div> <div style="mso-element:footnote" id="ftn5"> <p class="MsoFootnoteText"><a style="mso-footnote-id:ftn5" href="#_ftnref5" name="_ftn5" title=""><span class="MsoFootnoteReference"><span class="MsoFootnoteReference"><span style="font-size:10.0pt;font-family:"Calibri","sans-serif";mso-fareast-language:EN-US">[5]</span></span></span></a> <a href="http://www.MyFico.com">www.MyFico.com</a> has a great explanation of credit scores and is the most reliable place to purchase your score.<o:p></o:p></p> </div> <div style="mso-element:footnote" id="ftn6"> <p class="MsoFootnoteText"><a style="mso-footnote-id:ftn6" href="#_ftnref6" name="_ftn6" title=""><span class="MsoFootnoteReference"><span class="MsoFootnoteReference"><span style="font-size:10.0pt;font-family:"Calibri","sans-serif";mso-fareast-language:EN-US">[6]</span></span></span></a> <a href="http://www.PowerPay.org">www.PowerPay.org</a> is a great free resource to figure out how you can pay your debt off quickly<o:p></o:p></p> </div> <div style="mso-element:footnote" id="ftn7"> <p class="MsoFootnoteText"><a style="mso-footnote-id:ftn7" href="#_ftnref7" name="_ftn7" title=""><span class="MsoFootnoteReference"><span class="MsoFootnoteReference"><span style="font-size:10.0pt;font-family:"Calibri","sans-serif";mso-fareast-language:EN-US">[7]</span></span></span></a> <a href="http://www.homefileorganizer.com/">http://www.homefileorganizer.com/</a><o:p></o:p></p> </div> </div> MU Financial Successhttp://www.blogger.com/profile/14117781251967743442noreply@blogger.com14tag:blogger.com,1999:blog-5256277661009921780.post-2168247747094276122013-04-24T15:23:00.000-07:002013-04-25T15:00:02.424-07:00Is There a Taxing Reason for the Marriage Season?<div class="WordSection1"> <p class="MsoNormal">I divorced in 2012 and for the 2012 tax year, I was surprised by a federal tax refund and a state tax bill of similar amounts. I thought I would owe more to both. This led me to think about the vagaries of our tax system and, in particular, one that is spoken of often, <i>the marriage tax penalty</i>. Does it really exist?<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">First, we’ll use 2013 tax law, where it is true that the standard deduction for married couples ($12,200) is twice the standard deduction for single taxpayers and married couples filing separately ($6,100). Also, the 10% and 15% marginal tax brackets for married couples are twice the size of those for single taxpayers. Taken together, there would appear to be a desire to have no marriage tax penalty in the tax code. That is, however, where the story begins, rather than ends.<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">Let’s dig a little deeper, while using the table below created from the 2013 Tax Rate Schedule (the tax tables used are in <span style="color:red"><a href="http://www.forbes.com/sites/kellyphillipserb/2013/01/15/irs-announces-2013-tax-rates-standard-deduction-amounts-and-more/"><span style="color:red">Forbes</span></a></span> ). We hold taxable incomes constant, below, in order to compare the differences in taxes. (We have purposely ignored all phase outs.)<o:p></o:p></p> <table class="MsoNormalTable" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse"> <tbody> <tr> <td width="164" valign="top" style="width:123.2pt;border:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" align="center" style="text-align:center"><b>Taxable Income<o:p></o:p></b></p> </td> <td width="164" valign="top" style="width:123.25pt;border:solid windowtext 1.0pt;border-left:none;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" align="center" style="text-align:center"><b>Single<o:p></o:p></b></p> </td> <td width="164" valign="top" style="width:123.25pt;border:solid windowtext 1.0pt;border-left:none;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" align="center" style="text-align:center"><b>Married Filing Jointly<o:p></o:p></b></p> </td> <td width="145" valign="top" style="width:109.1pt;border:solid windowtext 1.0pt;border-left:none;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" align="center" style="text-align:center"><b>Single Tax/Married Tax<o:p></o:p></b></p> </td> </tr> <tr> <td width="164" valign="top" style="width:123.2pt;border:solid windowtext 1.0pt;border-top:none;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" align="right" style="text-align:right">$50,000<o:p></o:p></p> </td> <td width="164" valign="top" style="width:123.25pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" align="right" style="text-align:right">$8,428<o:p></o:p></p> </td> <td width="164" valign="top" style="width:123.25pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" align="right" style="text-align:right">$6,607<o:p></o:p></p> </td> <td width="145" valign="top" style="width:109.1pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" align="right" style="text-align:right">1.28<o:p></o:p></p> </td> </tr> <tr> <td width="164" valign="top" style="width:123.2pt;border:solid windowtext 1.0pt;border-top:none;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" align="right" style="text-align:right">$100,000<o:p></o:p></p> </td> <td width="164" valign="top" style="width:123.25pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" align="right" style="text-align:right">$21,293<o:p></o:p></p> </td> <td width="164" valign="top" style="width:123.25pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" align="right" style="text-align:right">$16,857<o:p></o:p></p> </td> <td width="145" valign="top" style="width:109.1pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" align="right" style="text-align:right">1.26<o:p></o:p></p> </td> </tr> <tr> <td width="164" valign="top" style="width:123.2pt;border:solid windowtext 1.0pt;border-top:none;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" align="right" style="text-align:right">$200,000<o:p></o:p></p> </td> <td width="164" valign="top" style="width:123.25pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" align="right" style="text-align:right">$50,130<o:p></o:p></p> </td> <td width="164" valign="top" style="width:123.25pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" align="right" style="text-align:right">$43,465<o:p></o:p></p> </td> <td width="145" valign="top" style="width:109.1pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" align="right" style="text-align:right">1.15<o:p></o:p></p> </td> </tr> <tr> <td width="164" valign="top" style="width:123.2pt;border:solid windowtext 1.0pt;border-top:none;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" align="right" style="text-align:right">$390,000<o:p></o:p></p> </td> <td width="164" valign="top" style="width:123.25pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" align="right" style="text-align:right">$112,830<o:p></o:p></p> </td> <td width="164" valign="top" style="width:123.25pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" align="right" style="text-align:right">$105,013<o:p></o:p></p> </td> <td width="145" valign="top" style="width:109.1pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" align="right" style="text-align:right">1.07<o:p></o:p></p> </td> </tr> <tr> <td width="164" valign="top" style="width:123.2pt;border:solid windowtext 1.0pt;border-top:none;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" align="right" style="text-align:right">$450,000<o:p></o:p></p> </td> <td width="164" valign="top" style="width:123.25pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" align="right" style="text-align:right">$135,964<o:p></o:p></p> </td> <td width="164" valign="top" style="width:123.25pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" align="right" style="text-align:right">$125,846<o:p></o:p></p> </td> <td width="145" valign="top" style="width:109.1pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" align="right" style="text-align:right">1.08<o:p></o:p></p> </td> </tr> </tbody> </table> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">The ratio of single tax/married tax in the fourth column indicates that the single tax is greater for single people and that the difference is not constant. This comes from a multitude of factors, including a different number of exemptions, changes in tax brackets, and cultural biases. For example, if you are single and have $450,000 in taxable income, you could marry someone with no income and no deductions, reducing your taxable income by the amount of the exemption ($3,900) to $446,100. This results in a tax owed of $124,481 for a tax savings of $11,483 ($135,964-$124,481). This is clearly a penalty for being single. <o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">On the other hand, what if your spouse works? Let’s compare two, two-person households, with each person earning $100,000 in taxable income. If the household is made up of two single persons, they each pay $21,293 or their combined household taxes would be $42,586. If they were married with joint taxable incomes of $200,000, they would pay $43,465 in taxes, or $879 more than the two single persons household. Thus, a marriage tax penalty exists and it results from the fact that single taxpayers are in the 25% marginal tax bracket until taxable income reaches $87,850, while married couples leave the 25% marginal tax bracket and enter the 28% marginal tax bracket at a taxable income of $146,400 – which is less than twice $87,850 ($175,700). The married couple pays relatively more tax, given that more of their income is subject to the 28% marginal tax bracket.<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">How can both a single and a married tax penalty exist? The answer is relatively simple. The tax system began during a time when families typically had one earner. When two earners marry each other, they are pushed into higher tax brackets, as they both have income. This is not true when one earner makes substantially less than the other. <o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">Take, for example, a couple with $200,000 in taxable income. Let’s let one member make $176,000, while the other spouse earns $24,000. If they were single, spouse one would pay $42,573 in federal taxes on the $176,000 in taxable income, while spouse two would pay $3,156 on the $24,000 in taxable income. Combined, their tax bill would be $45,729 or $3,143 more than if they were single with equal taxable incomes of $100,000 and $2,264 more than if they were married with total taxable income of $200,000. This highlights the fact that the tax benefit of being married is greater, the greater the disparity in the income of the two spouses. This difference rewards the traditional, outdated view of the household as consisting of a primary earner with, perhaps, a secondary lower-paid earner. <o:p></o:p></p> <p class="MsoNormal">What is the bottom line? There really isn’t one. There exist both single and married penalties in the tax code. In fact, the tax code is full of implicit and explicit taxes and subsidies which have an effect on consumer behavior. Politicians made it that way to steer money toward beneficial (i.e., favorite) activities and away from those they perceive to not be beneficial. These create a complex tax code which confuses taxpayers and is part of the reason why there is such criticism of the tax system. <o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">With respect to marriage, one does not base their decision to marry on the tax code. At least they shouldn’t. If one spouse earns substantially more than the other, it might pay a little to move the wedding forward to December, from February. On the other hand, if the couple earns substantially equal incomes, they might want to delay the wedding from December to January. The odds are pretty good that the choice of whether they can get the room in which to hold the wedding reception will weigh more heavily on the date decision, than their potential tax bill.<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">Regardless, marriage is not about money but, for financial success, it does take some money. If you want to marry, marry. Do not marry for, or not for, the tax benefits. And, don’t forget what Frank Burns, the M*A*S*H character said in 1975,”<i>Marriage isn’t all that it’s cracked up to be. Let me tell you, honestly. Marriage is probably the chief cause of divorce.” </i>Simply put, if you don’t want to get divorced, don’t get married. That’s like a failure once said, “I didn’t want to fail, so I didn’t try to succeed.” <o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> </div> MU Financial Successhttp://www.blogger.com/profile/14117781251967743442noreply@blogger.com0tag:blogger.com,1999:blog-5256277661009921780.post-4789782253615615112013-04-19T08:21:00.001-07:002013-04-19T08:21:40.322-07:00Choosing a credit card: Read the fine print<html> <head> <meta http-equiv="Content-Type" content="text/html; charset=utf-8"> <meta name="Generator" content="Microsoft Word 14 (filtered medium)"> <style><!-- /* Font Definitions */ @font-face {font-family:"MS Mincho"; panose-1:2 2 6 9 4 2 5 8 3 4;} @font-face {font-family:"MS Mincho"; panose-1:2 2 6 9 4 2 5 8 3 4;} @font-face {font-family:Calibri; panose-1:2 15 5 2 2 2 4 3 2 4;} @font-face {font-family:"\@MS Mincho"; panose-1:2 2 6 9 4 2 5 8 3 4;} /* Style Definitions */ p.MsoNormal, li.MsoNormal, div.MsoNormal {margin:0in; margin-bottom:.0001pt; font-size:12.0pt; font-family:"Calibri","sans-serif";} a:link, span.MsoHyperlink {mso-style-priority:99; color:blue; text-decoration:underline;} a:visited, span.MsoHyperlinkFollowed {mso-style-priority:99; color:purple; text-decoration:underline;} span.EmailStyle17 {mso-style-type:personal-compose; font-family:"Calibri","sans-serif"; color:windowtext;} .MsoChpDefault {mso-style-type:export-only; font-family:"Calibri","sans-serif";} @page WordSection1 {size:8.5in 11.0in; margin:1.0in 1.0in 1.0in 1.0in;} div.WordSection1 {page:WordSection1;} /* List Definitions */ @list l0 {mso-list-id:1; mso-list-type:hybrid; mso-list-template-ids:372513166 -1316174916 2072018426 1427699192 -557918296 -13995154 -918002198 728128784 -1908898714 -1543048976;} @list l0:level1 {mso-level-start-at:0; mso-level-number-format:none; mso-level-text:""; mso-level-tab-stop:.25in; mso-level-number-position:left; margin-left:0in; text-indent:0in;} @list l0:level2 {mso-level-start-at:0; mso-level-text:""; mso-level-tab-stop:none; mso-level-number-position:left; margin-left:0in; text-indent:0in;} @list l0:level3 {mso-level-start-at:0; mso-level-text:""; mso-level-tab-stop:none; mso-level-number-position:left; margin-left:0in; text-indent:0in;} @list l0:level4 {mso-level-start-at:0; mso-level-text:""; mso-level-tab-stop:none; mso-level-number-position:left; margin-left:0in; text-indent:0in;} @list l0:level5 {mso-level-start-at:0; mso-level-text:""; mso-level-tab-stop:none; mso-level-number-position:left; margin-left:0in; text-indent:0in;} @list l0:level6 {mso-level-start-at:0; mso-level-text:""; mso-level-tab-stop:none; mso-level-number-position:left; margin-left:0in; text-indent:0in;} @list l0:level7 {mso-level-start-at:0; mso-level-text:""; mso-level-tab-stop:none; mso-level-number-position:left; margin-left:0in; text-indent:0in;} @list l0:level8 {mso-level-start-at:0; mso-level-text:""; mso-level-tab-stop:none; mso-level-number-position:left; margin-left:0in; text-indent:0in;} @list l0:level9 {mso-level-start-at:0; mso-level-text:""; mso-level-tab-stop:none; mso-level-number-position:left; margin-left:0in; text-indent:0in;} ol {margin-bottom:0in;} ul {margin-bottom:0in;} --></style><!--[if gte mso 9]><xml> <o:shapedefaults v:ext="edit" spidmax="1026" /> </xml><![endif]--><!--[if gte mso 9]><xml> <o:shapelayout v:ext="edit"> <o:idmap v:ext="edit" data="1" /> </o:shapelayout></xml><![endif]--> </head> <body lang="EN-US" link="blue" vlink="purple"> <div class="WordSection1"> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif"">Graham McCaulley, Extension Associate, MU Personal Financial Planning Extension<o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif"">A credit card lets you buy things and pay for them over time. Using a credit card is like any borrowing — you have to pay the money back. <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif"">Credit card features vary from card to card and there are several types of cards to choose from. To get the best deal, compare fees, charges, interest rates and benefits. Some credit cards that look like a great deal at first may really be a bad deal when you read the terms and conditions of use and see how the fees could affect your available credit.<o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><b><u><span style="font-family:"Times New Roman","serif"">Credit card terms</span></u></b><b><u><span style="font-family:"Times New Roman","serif""><o:p></o:p></span></u></b></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif"">Important terms of use must be disclosed in any credit card application or for cards that don't require an application. Here are the terms to ask about when you consider credit offers. </span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif"">Many credit cards charge <b>membership or participation</b> <b>fees</b>. These fees have a variety of names, like "annual," "activation," "acceptance," "participation" and "monthly maintenance" fees. Fees may appear monthly, periodically or as one-time charges. They can have an immediate effect on your available credit. <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif"">In 2010, rules from the Credit Card Accountability Responsibility and Disclosure Act (Credit Card Act), as well as additional Federal Reserve regulations, went into effect to create new credit card consumer protections and disclosure requirements. These rules were further strengthened by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Financial Reform Act). For example, these rules specify that fees, such as an annual fee or application fee, cannot total more than 25 percent of the initial credit limit.</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif"">Some credit cards add <b>transaction fees and other charges</b> if you use them to get a cash advance, if you make a late payment or if you go over your credit limit. The rule mentioned above regarding fees being less than 25 percent of the credit limit does not apply to these type of penalty fees.</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><b><span style="font-family:"Times New Roman","serif"">Annual percentage rate (APR)</span></b><span style="font-family:"Times New Roman","serif""> is a measure of the cost of credit, expressed as a yearly rate. It must be disclosed before your account can be activated, and it must appear on your account statements.</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif"">The card issuer also must disclose the <b>periodic rate</b>. That's the rate the issuer applies to your balance to determine the finance charge for each billing period.</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif"">Some credit card plans let the issuer change the APR when interest rates or other economic indicators — called indexes — change. The rate change is linked to the index's performance and often varies. Rate changes can raise or lower the finance charge on your account. Before your account is activated, you must also be given information about any limits on how much and how often your rate may change.<o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif"">If your card does not have a variable interest rate tied to an index, the credit card companies generally cannot raise your APR for the first 12 months after you open your account, and if the rate is going to be raised after that point, you should be given 45 days notice and the opportunity to cancel the card before the new rate takes effect.<o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif"">A <b>grace period</b>, also called a "free period," lets you avoid finance charges if you pay your balance in full before the date it is due. Knowing whether a card gives you a grace period is important if you plan to pay your account in full each month.</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><b><span style="font-family:"Times New Roman","serif"">Balance computation method</span></b><span style="font-family:"Times New Roman","serif""> is how the card issuers calculate your finance charge. If you don't have a grace period, it's important to know this. Which balance computation method is used can make a big difference in how much of a finance charge you pay — even if the APR and your buying patterns stay the same. </span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif"">Many credit card companies offer incentives for <b>balance transfer offers</b> — moving your debt from one credit card to another. All offers are not the same and the terms may be complicated. </span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif"">Many credit card issuers offer transfers with low introductory rates. Some issuers also charge balance transfer fees. In addition, if you pay late or fail to pay off your transferred balance before the introductory period ends, the issuer may raise the introductory rate and/or charge you interest retroactively. When you make payments, they are to be directed to highest interest balances first.<o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><b><u><span style="font-family:"Times New Roman","serif"">Balance computation methods</span></u></b><b><u><span style="font-family:"Times New Roman","serif""><o:p></o:p></span></u></b></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif"">The <b>average daily balance</b> method credits your account from the day the issuer receives your payment. To figure the balance due, the issuer totals the beginning balance for each day in the billing period and subtracts any credits made that day. Although new purchases may or may not be added to the balance, cash advances typically are included. The resulting daily balances are added for the billing cycle. The total is divided by the number of days in the billing cycle to get the average daily balance. </span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><b><span style="font-family:"Times New Roman","serif"">Adjusted balance</span></b><span style="font-family:"Times New Roman","serif""> is usually the most advantageous method for cardholders. The issuer determines your balance by subtracting payments or credits received during the current billing period from the balance at the end of the previous billing period. Purchases made during the billing period aren't included.</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif"">The <b>previous balance</b> is the amount owed at the end of the previous billing period. Payments, credits and purchases made during the current billing period are not included. Some creditors exclude unpaid finance charges. </span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif"">Credit card companies can only impose interest charges on balances in the current billing cycle (i.e., no two-cycle billing). If you don't understand how your balance is calculated, ask your card issuer. An explanation also must appear on your billing statements.<o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><b><u><span style="font-family:"Times New Roman","serif"">Other costs and features</span></u></b><b><u><span style="font-family:"Times New Roman","serif""><o:p></o:p></span></u></b></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif"">Credit terms vary among issuers. When considering a credit card, think about <b>how you plan to use it</b>: </span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal" style="margin-left:.5in;text-indent:-.5in;line-height:16.0pt;mso-list:l0 level1 lfo1;text-autospace:none"> <![if !supportLists]><span style="font-family:"Times New Roman","serif""><span style="mso-list:Ignore"><span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-family:"Times New Roman","serif"">If you expect to pay your bills in full each month, the annual fee and other charges may be more important than the periodic rate and the APR.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left:.5in;text-indent:-.5in;line-height:16.0pt;mso-list:l0 level1 lfo1;text-autospace:none"> <![if !supportLists]><span style="font-family:"Times New Roman","serif""><span style="mso-list:Ignore"><span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-family:"Times New Roman","serif"">If you use the cash advance feature, pay attention to the APR and balance computation method.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left:.5in;text-indent:-.5in;line-height:16.0pt;mso-list:l0 level1 lfo1;text-autospace:none"> <![if !supportLists]><span style="font-family:"Times New Roman","serif""><span style="mso-list:Ignore"><span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-family:"Times New Roman","serif"">If you plan to pay for purchases over time, the APR and the balance computation method are major considerations.<o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif"">You'll also want to consider if the <b>credit limit</b> is enough, how widely the card is accepted and the plan's services and features. </span><span style="font-family:"MS Mincho""> <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif"">Your credit card agreement explains what may happen if you <b>default</b> on your account. For example, if you are one day late with your payment, your issuer may be able to take certain actions, including raising the interest rate on your card. Some issuers' agreements even state that if you are in default on any financial account, those issuers' will consider you in default for them as well. This is known as <b>universal default</b>.</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif"">Some cards with low rates for on-time payments apply a very high APR if you are late a certain number of times in any specified time period. This is a type of <b>special delinquency rate</b>.<o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><b><u><span style="font-family:"Times New Roman","serif"">Help and information</span></u></b><u><span style="font-family:"Times New Roman","serif""><o:p></o:p></span></u></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif"">Questions about a particular issuer should be sent to the agency with jurisdiction.<o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><b><span style="font-family:"Times New Roman","serif"">Office of the Comptroller of the Currency</span></b><span style="font-family:"Times New Roman","serif""> regulates banks with "national" in the name or "N.A." after the name:</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif"">Office of the Ombudsman</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif"">Customer Assistance Group</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif"">1301 McKinney Street,</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif"">Suite 3450</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif"">Houston, TX 77010</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif"">toll-free 800-613-6743 </span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif""><a href="http://www.occ.treas.gov/"><span style="color:windowtext">www.occ.treas.gov</span></a><o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><b><span style="font-family:"Times New Roman","serif"">Board of Governors of the Federal Reserve System</span></b><span style="font-family:"Times New Roman","serif""> regulates state-chartered banks that are members of the Federal Reserve System, bank holding companies, and branches of foreign banks:</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif"">Federal Reserve Consumer Help</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif"">P.O. Box 1200</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif"">Minneapolis, MN 55480</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif"">toll-free 888-851-1920 </span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif"">(TTY: 877-766-8533) </span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif""><a href="mailto:ConsumerHelp@FederalReserve.gov"><span style="color:windowtext">ConsumerHelp@FederalReserve.gov</span></a><o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><b><span style="font-family:"Times New Roman","serif"">Federal Deposit Insurance Corporation</span></b><span style="font-family:"Times New Roman","serif""> regulates state-chartered banks that are not members of the Federal Reserve System:</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif"">Division of Supervision and Consumer Protection</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif"">550 17th Street, NW</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif"">Washington, DC 20429</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif"">toll-free 877-ASK-FDIC (275-3342)<o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""><a href="http://www.fdic.gov/"><span style="color:windowtext">www.fdic.gov</span></a><o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><b><span style="font-family:"Times New Roman","serif"">National Credit Union Administration</span></b><span style="font-family:"Times New Roman","serif""> regulates federally chartered credit unions:</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif"">Office of Public and Congressional Affairs</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif"">1775 Duke Street</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif"">Alexandria, VA 22314-3428</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif"">703-518-6330</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif""><a href="http://www.ncua.gov/"><span style="color:windowtext">www.ncua.gov</span></a><o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><b><span style="font-family:"Times New Roman","serif"">Office of Thrift Supervision</span></b><span style="font-family:"Times New Roman","serif""> regulates federal savings and loan associations and federal savings banks:</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif"">Consumer Programs</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif"">1700 G Street, NW</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif"">Washington, DC 20552</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif"">toll-free 800-842-6929</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif""><a href="http://www.ots.treas.gov/"><span style="color:windowtext">www.ots.treas.gov</span></a><o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><b><span style="font-family:"Times New Roman","serif"">Federal Trade Commission</span></b><span style="font-family:"Times New Roman","serif""> regulates non-bank lenders:</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif"">Consumer Response Center</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif"">600 Pennsylvania Avenue, NW</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif"">Washington, DC 20580</span><span style="font-family:"MS Mincho""> </span><span style="font-family:"Times New Roman","serif"">toll-free 877-FTC-HELP (382-4357)<o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""><a href="http://www.ftc.gov/"><span style="color:windowtext">www.ftc.gov</span></a><o:p></o:p></span></p> <p class="MsoNormal" style="line-height:16.0pt;text-autospace:none"><span style="font-family:"Times New Roman","serif""> <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-family:"Times New Roman","serif"">The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit <a href="http://www.ftc.gov/"> <span style="color:windowtext">www.ftc.gov</span></a> or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters consumer complaints into a secure online database and investigative tool used by hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-family:"Times New Roman","serif"">Source: Procter, B., & McCaulley, G. (2010). <i>Choosing a credit card: Read the fine print</i> (Research Brief). Columbia: University of Missouri, Human Environmental Sciences Extension. <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-family:"Times New Roman","serif"">http://missourifamilies.org/features/consumerarticles/choosecreditcard.htm <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:11.0pt"><o:p> </o:p></span></p> </div> </body> </html> MU Financial Successhttp://www.blogger.com/profile/14117781251967743442noreply@blogger.com0tag:blogger.com,1999:blog-5256277661009921780.post-10173664292822405302013-04-10T13:50:00.000-07:002013-04-11T15:00:03.873-07:00The Battle of the IRAs: Roth versus Traditional<div class="WordSection1"> <p class="MsoNormal">I am surprised that the question I am asked most often is, “Should I get a Roth IRA or a Traditional IRA?”<a style="mso-endnote-id:edn1" href="#_edn1" name="_ednref1" title=""><span class="MsoEndnoteReference"><span class="MsoEndnoteReference"><span style="font-size:11.0pt;font-family:"Calibri","sans-serif"">[i]</span></span></span></a> Most people know that a conventional IRA allows you to put money in savings without paying taxes on the money before you make the deposit. When you withdraw the money, in retirement, ordinary income taxes are levied on the entire withdrawal. On the other hand, with a Roth IRA, deposits are made after you pay taxes. Then, upon retirement withdrawal, no taxes are due. Like most financial matters, consumers try to make this decision much harder than it actually is. First, I’ll give my answer and, for most people, the Roth is preferred. I will explain why, later. Let us begin by comparing the options with math, so we understand the basics. As with most math problems, we have to set forth some assumptions. <o:p></o:p></p> <p class="MsoListParagraphCxSpFirst" style="text-indent:-.25in;mso-list:l0 level1 lfo1"> <![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>We will assume a person in the 25% marginal tax bracket.<o:p></o:p></p> <p class="MsoListParagraphCxSpMiddle" style="text-indent:-.25in;mso-list:l0 level1 lfo1"> <![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>We assume the choice is between a deposit of $5,500 in before-tax dollars (the 2013 limit for IRA deposits) into a conventional IRA or $4,125 in after-tax dollars into a Roth IRA<a style="mso-endnote-id:edn2" href="#_edn2" name="_ednref2" title=""><span class="MsoEndnoteReference"><span class="MsoEndnoteReference"><span style="font-size:11.0pt;font-family:"Calibri","sans-serif"">[ii]</span></span></span></a>. The reason for the difference is that we are holding current earned income constant, as the $5,500 in earnings becomes $4,125 after paying 25% in taxes.<o:p></o:p></p> <p class="MsoListParagraphCxSpLast" style="text-indent:-.25in;mso-list:l0 level1 lfo1"> <![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>The account is invested for 40 years at 8%.<o:p></o:p></p> <p class="MsoNormal" style="margin-left:.25in">Under these assumptions, the conventional IRA will grow to $119,485 which, upon paying taxes at 25% on withdrawal, becomes $89,614. The $4,125 Roth deposit will grow to $89,614, as all taxes have been paid before the original deposit. Conclusion, if we hold the earnings required to make the initial deposit and the tax rate constant, there is no difference in what the retiree has to spend in retirement. If, however, their tax rate is greater in retirement than while working, the Roth IRA would best her traditional cousin, and if the household’s tax rate is lower in retirement, the traditional IRA would best his Roth cousin. <o:p></o:p></p> <p class="MsoNormal" style="margin-left:.25in"><o:p> </o:p></p> <p class="MsoNormal">The reasons why the Roth is preferred for most people follow.<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoListParagraphCxSpFirst" style="text-indent:-.25in;mso-list:l1 level1 lfo2"> <![if !supportLists]><span style="mso-list:Ignore">1.<span style="font:7.0pt "Times New Roman""> </span></span><![endif]>If your company offers a Roth 401k, you may make larger contributions. For 2013, the maximum is $17,000, unless you are a geezer like me and over 50. If you are of such vintage, the maximum is $23,000.<o:p></o:p></p> <p class="MsoListParagraphCxSpMiddle" style="text-indent:-.25in;mso-list:l1 level1 lfo2"> <![if !supportLists]><span style="mso-list:Ignore">2.<span style="font:7.0pt "Times New Roman""> </span></span><![endif]>If you need money from your Roth IRA, you can withdraw you contributions (not interest, dividends, or capital gains) for any use without penalty, as you’ve already paid the taxes. Thus your Roth can double as a savings account. (It is for your retirement so leave it alone!)<o:p></o:p></p> <p class="MsoListParagraphCxSpMiddle" style="text-indent:-.25in;mso-list:l1 level1 lfo2"> <![if !supportLists]><span style="mso-list:Ignore">3.<span style="font:7.0pt "Times New Roman""> </span></span><![endif]>When you die, the money that remains in your Roth IRA is not taxable income. Money that is in a traditional IRA has income taxes that must be paid by your heirs.<o:p></o:p></p> <p class="MsoListParagraphCxSpMiddle" style="text-indent:-.25in;mso-list:l1 level1 lfo2"> <![if !supportLists]><span style="mso-list:Ignore">4.<span style="font:7.0pt "Times New Roman""> </span></span><![endif]>Since taxes have been paid on the corpus of the Roth IRA, your investment decisions will not be affected by tax considerations. Conventional IRAs are often held out as a better place to invest in securities that pay interest and dividends, as these will not be taxed until withdrawal. This is, however, also true with capital gains. The bad news is that those capital gains will be taxed at greater ordinary income rates, as opposed to capital gain tax rates, if held outside of the conventional IRA.<o:p></o:p></p> <p class="MsoListParagraphCxSpMiddle" style="text-indent:-.25in;mso-list:l1 level1 lfo2"> <![if !supportLists]><span style="mso-list:Ignore">5.<span style="font:7.0pt "Times New Roman""> </span></span><![endif]>With a traditional IRA you must begin to take withdrawals (i.e., pay taxes) on the money at the age of 70½. (The government wants to get the money you “owe” them.) Since you’ve paid taxes on the Roth, there are no requirements for withdrawals and, thus, increases the use of the Roth IRA as tool for bequests. You can also continue to make contributions to a Roth IRA, after the age of 70½. You cannot contribute to a traditional IRA after the age of 70½.<o:p></o:p></p> <p class="MsoListParagraphCxSpMiddle" style="text-indent:-.25in;mso-list:l1 level1 lfo2"> <![if !supportLists]><span style="mso-list:Ignore">6.<span style="font:7.0pt "Times New Roman""> </span></span><![endif]>Roth IRA income is not subject to taxes and, thus, may prevent your retirement income from being large enough to cause your Social Security to become taxable. Moreover, with a lower taxable income, you are less likely to be charged greater premiums for Medicare.<o:p></o:p></p> <p class="MsoListParagraphCxSpLast" style="text-indent:-.25in;mso-list:l1 level1 lfo2"> <![if !supportLists]><span style="mso-list:Ignore">7.<span style="font:7.0pt "Times New Roman""> </span></span><![endif]>Lastly, both Roth and conventional IRAs allow you to withdraw $10,000, once in your lifetime, if you are a first-time homebuyer, or a buyer who has not owned a home for two years. This can be a wonderful opportunity for a young person to use their retirement plan, of either flavor, to purchase a home. The only provision is that the money has to have been in the plan for at least five years.<o:p></o:p></p> <p class="MsoNormal">I hope this helps answer your questions or, if you are young, gets you started on saving some of your earned income in a retirement plan. While the laws governing these options may change one thing will never change, financial success begins with your disciplined saving plan.<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> </div> <div style="mso-element:endnote-list"><br clear="all"> <hr align="left" size="1" width="33%"> <div style="mso-element:endnote" id="edn1"> <p class="MsoEndnoteText"><a style="mso-endnote-id:edn1" href="#_ednref1" name="_edn1" title=""><span class="MsoEndnoteReference"><span class="MsoEndnoteReference"><span style="font-size:10.0pt;font-family:"Calibri","sans-serif"">[i]</span></span></span></a> We will use the term IRA with the understanding that the information is able to be generalized to 401k, 403b, and other retirement plans that have both conventional and Roth options. <o:p></o:p></p> </div> <div style="mso-element:endnote" id="edn2"> <p class="MsoEndnoteText"><a style="mso-endnote-id:edn2" href="#_ednref2" name="_edn2" title=""><span class="MsoEndnoteReference"><span class="MsoEndnoteReference"><span style="font-size:10.0pt;font-family:"Calibri","sans-serif"">[ii]</span></span></span></a> If you are eligible in 2013, you can contribute up to the $5,500 maximum into the Roth IRA but, in order to do so, you’d have to use earnings of $7,333, in order to have $5,500 after you pay taxes of 25%. We are holding earnings constant at $5,500, in order to have a fair comparison.<o:p></o:p></p> </div> </div> MU Financial Successhttp://www.blogger.com/profile/14117781251967743442noreply@blogger.com2tag:blogger.com,1999:blog-5256277661009921780.post-26298219361548891142013-04-05T08:51:00.001-07:002013-04-05T08:51:08.790-07:00Investing in Yourself: An Economic Approach to Education Decisions<div class="WordSection1"> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Each month the Federal Reserve Bank of St. Louis publishes a newsletter titled Page One Economics, which is a selection of useful economic information, articles, data, and websites compiled by the librarians of the Federal Reserve Bank of St. Louis Research Library. Recently there was an article titled “Investing in Yourself: An Economic Approach to Education Decisions” that caught my eye and I felt it would be a great fit for the Financial Tip. It is re-printed here with permission from The Research Library. We encourage your comments and thoughts at<span style="color:black"> <a href="http://mufinancialtip.blogspot.com"><span style="color:blue">http://mufinancialtip.blogspot.com</span></a>. <o:p></o:p></span></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:black"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:black">There is a classroom version </span><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">of Page One Economics available <span style="color:black">for teachers for free at: </span><span style="color:#1F497D"><a href="http://research.stlouisfed.org/pageone-economics/pages/newsletter_summary.php?id=75&edition=classroom"><span style="color:blue">http://research.stlouisfed.org/pageone-economics/pages/newsletter_summary.php?id=75&edition=classroom</span></a> </span><span style="color:black"><o:p></o:p></span></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:black"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:black">To subscribe to their newsletter or for more information and resources, visit their website and archives at</span><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#1F497D"> <a href="http://research.stlouisfed.org/pageone-economics/pages/newsletter_summary.php"> <span style="color:blue">http://research.stlouisfed.org/pageone-economics/pages/newsletter_summary.php</span></a>. </span><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><i><span style="font-size:10.0pt;font-family:StoneSans-Italic">The views expressed are those of the author and do not necessarily reflect the official positions of the Federal Reserve Bank of St. Louis, the Federal Reserve System, the Board of Governors, the University of Missouri, the Personal Financial Planning Department or The Office for Financial Success.<o:p></o:p></span></i></p> <p class="MsoNormal" style="text-autospace:none"><i><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></i></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">“<i>When I travel around the country, meeting with students, business people, and others interested in the economy, I am occasionally asked for investment advice…I know the answer to the question and I will share it with you today: Education is the best investment</i>.”—Federal Reserve Chairman Ben S. Bernanke, September 24, 2007(1)<o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">One of the most important investment decisions you will ever make is the decision to invest in yourself. You might think that <b>investment</b> is only about buying stocks and bonds, but let’s take a step back and consider investment a little differently. Economists use the word <b>investment</b> to refer to spending on <b>capital</b>, which can be either physical capital (tools and equipment) or human capital (education and training). Let’s briefly look at each type. <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><b><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Investing in Physical Capital </span></b><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">A firm invests in itself by buying capital that it uses to improve what it does. In other words, it invests in physical capital to earn higher profits in the future. For example, a firm might invest in new technology to increase the <b>productivity</b> of its employees. The increased productivity raises future revenue (income earned by the firm) and <b>profits</b> (revenue minus costs of production). Seems like an easy decision, right? Well, before a firm invests in physical capital, it must consider three very important points. <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">First, a firm invests in technology now with the expectation that it will lead to higher revenue and expected profits in the future. But this expectation might not be realized. For example, the technology might not increase productivity as much as the firm expected. Or the demand for the good the firm produces might decrease, resulting in less revenue than expected. <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Second, a firm considers other investment alternatives. A firm can invest in many ways to raise future profits. For example, maybe investment in technology A results in profits, but investment in technology B, which is more expensive, leads to much larger profits. <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Third, a firm also considers the potential <b>return on investment (ROI)</b>. The ROI is a performance measure of the effectiveness of an investment. It is calculated as the net gain (gain from investment minus cost of investment) divided by the cost of investment. A firm compares the expected gain with the investment cost to make a sound decision. Of course, the result of any investment lies in the future and must be projected. Predicting the future is always tricky; therefore, any uncertainty about the result must also be considered. <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><b><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></b></p> <p class="MsoNormal" style="text-autospace:none"><b><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Investing in Human Capital</span></b><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><br> <br> <b>Investment in human capital</b> is the effort that people expend to acquire education, training, and experience. People invest in their <b>human capital</b> for the same reason a firm invests in physical capital: to increase productivity and earn higher income. An added benefit is the increase in job opportunities for those with more education: The unemployment rate for those with a bachelor’s degree is 4.1 percentage points lower than for those with only a high school diploma. Of course, higher education is expensive. To increase the likelihood that the investment will pay off, let’s consider three points. <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">First, an investment in human capital might not pay off. Just as a firm’s investment in physical capital involves risk, there is also a risk that the expected outcome from investing in human capital will not be realized. Research consistently shows a correlation between more education and higher income (see the second graph), but there is no guarantee. One way to think about the ROI in human capital is the <i>college wage premium</i>, which is the percent increase in earnings of those with a bachelor’s degree compared with those with only a high school diploma. Recent research suggests that the college wage premium has been growing—from 40 percent in the late 1970s to 84 percent in 2012.<sup>2</sup> <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Second, people should consider what kind of an investment to make. Getting an education will most likely lead to higher income, but there are vast differences in the projected income and job opportunities of the various courses of study available. For example, according to the Bureau of Labor Statistics (BLS), an elementary schoolteacher with a four-year degree earned $51,380 (median) in 2010,<sup>3</sup> while a computer programmer with a four-year degree earned $71,380 (median) in 2010.<sup>4</sup> Both earned a higher income than they would have if they had not acquired a college degree, but the difference between the median earnings is significant. <br> <br> The job opportunities available in different professions also vary. The BLS forecasts job outlooks for various occupations. For mechanical engineers (2010-20), the BLS forecasts job growth of 9 percent,<sup>5</sup> while for registered nurses job growth of 26 percent is expected.<sup>6</sup> Again, there is a significant difference. Given these facts, does that mean that you should not become an elementary schoolteacher? Does it mean that you should consider only computer programming or nursing? No, but the median income and the expected job growth rate are two factors to consider when making decisions about future education and training. In fact, there are many opportunities to gain training and valuable job skills besides the usual college route. Vocational, technical, and trade schools teach specific, practical jobs skills that can lead to a good job within 2 to 4 years. For example, many such schools offer programs in computer-aided design and drafting (CADD); law enforcement; heating, ventilation, and air conditioning (HVAC); and information technology (IT). <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Third, people should consider the cost of various kinds of educational institutions when they think about investment in education. For example, the average cost of attending a four-year public university (tuition, room, and board) from 2007 to 2011 was $58,623, while the average cost at a four-year private university for that same period was $125,604.<sup>7</sup> Does that mean you should consider only public universities? No, but cost should be considered in making your decision. The ROI for a would-be elementary schoolteacher would be higher if he or she chose to attend a four-year public university. <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><b><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></b></p> <p class="MsoNormal" style="text-autospace:none"><b><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Conclusion </span></b><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">A firm invests in physical capital in an attempt to increase its revenue (income) and potential profit, but only after considering the return on investment. People might consider using a similar strategy when deciding whether and how to invest in their own human capital. <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><b><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#1F497D"><o:p> </o:p></span></b></p> <p class="MsoNormal" style="text-autospace:none"><b><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#1F497D">NOTES </span></b><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#1F497D"><o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#1F497D">1 Bernanke, Ben S. “Education and Economic Competitiveness.” Speech presented at the U.S. Chamber Education and Workforce Summit, Washington, D.C., September 24; 2007; <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20070924a.htm"> <span style="color:blue">http://www.federalreserve.gov/newsevents/speech/bernanke20070924a.htm</span></a>. <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#1F497D">2 Jonathan, James. “The College Wage Premium.” Federal Reserve Bank of Cleveland Economic Commentary, 2012, No. 2012-10, August 8, 2012; <a href="http://www.clevelandfed.org/research/commentary/2012/2012-10.cfm"> <span style="color:blue">http://www.clevelandfed.org/research/commentary/2012/2012-10.cfm</span></a>. <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#1F497D">3 Bureau of Labor Statistics. “Kindergarten and Elementary School Teachers.” Occupational Outlook Handbook, March 29, 2012a; <a href="http://www.bls.gov/ooh/education-training-and-library/kindergarten-and-elementary-school-teachers.htm"> <span style="color:blue">http://www.bls.gov/ooh/education-training-and-library/kindergarten-and-elementary-school-teachers.htm</span></a>. <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#1F497D">4 Bureau of Labor Statistics. “Computer Programmers.” Occupational Outlook Handbook, March 29, 2012b; <a href="http://www.bls.gov/ooh/computer-and-information-technology/computer-programmers.htm"> <span style="color:blue">http://www.bls.gov/ooh/computer-and-information-technology/computer-programmers.htm</span></a>. <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#1F497D">5 Bureau of Labor Statistics. “Mechanical Engineers.” Occupational Outlook Handbook, March 29, 2012c; <a href="http://www.bls.gov/ooh/architecture-and-engineering/mechanical-engineers.htm"> <span style="color:blue">http://www.bls.gov/ooh/architecture-and-engineering/mechanical-engineers.htm</span></a>. <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#1F497D">6 Bureau of Labor Statistics. “Registered Nurses.” Occupational Outlook Handbook, March 29, 2012d; <a href="http://www.bls.gov/ooh/healthcare/registered-nurses.htm"><span style="color:blue">http://www.bls.gov/ooh/healthcare/registered-nurses.htm</span></a>. <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#1F497D">7 National Center for Education Statistics. “Fast Facts: Tuition Costs of Colleges and Universities.” See <a href="http://nces.ed.gov/fastfacts/display.asp?id=76"><span style="color:blue">http://nces.ed.gov/fastfacts/display.asp?id=76</span></a>. <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><b><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#1F497D"><o:p> </o:p></span></b></p> <p class="MsoNormal" style="text-autospace:none"><b><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">GLOSSARY </span></b><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><b><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Capital: </span></b><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Goods<b> </b>that have been produced and are used to produce other goods and services. They are used over and over again in the production process. <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><b><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Human capital: </span></b><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">The knowledge and skills that people obtain through education, training, and experience. <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><b><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Investment: </span></b><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">The purchase of physical capital goods (e.g., buildings, tools and equipment) that are used to produce goods and services. <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><b><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Investment in human capital:</span></b><span style="font-size:12.0pt;font-family:"Times New Roman","serif""> The efforts people put forth to acquire human capital. These efforts include education, training, and experience. <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><b><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Productivity:</span></b><span style="font-size:12.0pt;font-family:"Times New Roman","serif""> The ratio of output per worker per unit of time. <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><b><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Profit:</span></b><span style="font-size:12.0pt;font-family:"Times New Roman","serif""> The amount of revenue that remains after a business pays the costs of producing a good or service. <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><b><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Return on Investment (ROI):</span></b><span style="font-size:12.0pt;font-family:"Times New Roman","serif""> A performance measure of the effectiveness of an investment. ROI is calculated as the net gain (gain from investment minus cost of investment) divided by the cost of investment. <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#1F497D"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="color:#1F497D"><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Ryan H. Law, M.S., CFP®, AFC<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Personal Financial Planning Department<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Office for Financial Success Director <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">University of Missouri Center on Economic Education Director<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">162 Stanley Hall<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">University of Missouri<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Columbia, MO 65211<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">573.882.9211 (office)<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">573.884.8389 (fax)<o:p></o:p></span></p> <p class="MsoNormal"><o:p> </o:p></p> </div> MU Financial Successhttp://www.blogger.com/profile/14117781251967743442noreply@blogger.com9tag:blogger.com,1999:blog-5256277661009921780.post-27958843978417851512013-03-21T07:08:00.001-07:002013-03-21T07:08:41.446-07:00Personal Finance Symposium V Sustainable Family Finance<div class="WordSection1"> <div align="center"> <table class="MsoNormalTable" border="0" cellspacing="0" cellpadding="0" width="100%" style="width:100.0%;background:#EDEDB5;border-collapse:collapse"> <tbody> <tr style="height:93.75pt"> <td width="901" valign="top" style="width:675.7pt;border:solid black 1.0pt;border-bottom:none;padding:0in 5.4pt 0in 5.4pt;height:93.75pt"> <p class="Default"><o:p> </o:p></p> <p class="Default"><span style="color:windowtext">It is that time of year, again. Time for our annual <b>Personal Finance Symposium. </b> 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 <o:p></o:p></span></p> <p class="Pa0" align="center" style="text-align:center"><o:p> </o:p></p> <p class="Pa0" align="center" style="text-align:center"><span class="A0"><b><span style="font-size:55.0pt">P</span></b></span><span class="A1"><span style="font-size:33.5pt">ersonal </span></span><span class="A0"><b><span style="font-size:55.0pt">F</span></b></span><span class="A1"><span style="font-size:33.5pt">inance </span></span><span class="A0"><span style="font-size:55.0pt">S</span></span><span class="A1"><span style="font-size:33.5pt">ym</span></span><span class="A1"><span style="font-size:33.5pt">p</span></span><span class="A1"><span style="font-size:33.5pt">osium </span></span><span class="A1"><span style="font-size:48.0pt">V </span></span><span style="font-size:33.5pt"><o:p></o:p></span></p> <p class="Pa0" align="center" style="text-align:center"><b><span style="font-size:36.0pt">Sustainable Family Finance </span></b><span style="font-size:36.0pt"><o:p></o:p></span></p> <p class="Pa0" align="center" style="text-align:center"><b><span style="font-size:30.0pt">April 17, 2013 </span></b><span style="font-size:30.0pt"><o:p></o:p></span></p> <p class="Pa0" align="center" style="text-align:center"><span class="A4"><span style="font-size:24.0pt;color:windowtext">Reynolds Alumni Center </span></span><span style="font-size:24.0pt"><o:p></o:p></span></p> <p class="Pa0" align="center" style="text-align:center"><span class="A4"><span style="font-size:24.0pt;color:windowtext">University of Missouri - Columbia, MO </span></span><span style="font-size:24.0pt"><o:p></o:p></span></p> <p class="Pa1" style="text-indent:-124.0pt"><span class="A4"><span style="font-size:24.0pt;color:windowtext">Program </span></span><span style="font-size:24.0pt"><o:p></o:p></span></p> <p class="Default" align="center" style="margin-left:123.0pt;text-align:center;text-indent:-121.0pt;mso-line-height-alt:12.05pt"> <span class="A5"><span style="font-size:20.0pt;color:windowtext;font-style:normal">9:30 a.m. Welcome and Introduction</span></span><span style="font-size:24.0pt;color:windowtext"><o:p></o:p></span></p> <p class="Pa4" align="center" style="margin-left:134.0pt;text-align:center;text-indent:-123.0pt"> <span class="A6"><span style="font-size:18.0pt;color:windowtext;font-weight:normal">Robert O. Weagley, Ph.D., CFP</span></span><span class="A7"><span style="font-size:10.5pt">®</span></span><span class="A6"><span style="font-size:18.0pt;color:windowtext;font-weight:normal">, Chair, Personal Financial Planning</span></span><span style="font-size:18.0pt"><o:p></o:p></span></p> <p class="Pa4" align="center" style="margin-left:134.0pt;text-align:center;text-indent:-123.0pt"> <span class="A6"><span style="font-size:18.0pt;color:windowtext;font-weight:normal">Betsy Rodriguez, Vice President for Human Resources</span></span><span style="font-size:18.0pt"><o:p></o:p></span></p> <p class="Pa4" align="center" style="margin-left:134.0pt;text-align:center;text-indent:-123.0pt"> <span class="A6"><span style="font-size:18.0pt;color:windowtext;font-weight:normal">University of Missouri</span></span><span class="A6"><span style="font-size:18.0pt;font-weight:normal"><o:p></o:p></span></span></p> <p class="Default" align="center" style="text-align:center"><o:p> </o:p></p> <p class="Pa5" align="center" style="margin-left:131.0pt;text-align:center;text-indent:-130.0pt"> <span class="A5"><span style="font-size:20.0pt;color:windowtext;font-style:normal">10:00 a.m. “Money Sanity Solutions: Build Healthy Money</span></span><span style="font-size:20.0pt"><o:p></o:p></span></p> <p class="Pa5" align="center" style="margin-left:131.0pt;text-align:center;text-indent:-130.0pt"> <span class="A5"><span style="font-size:20.0pt;color:windowtext;font-style:normal">Habits for a Successful Future”</span></span><span style="font-size:20.0pt"><o:p></o:p></span></p> <p class="Pa5" align="center" style="margin-left:131.0pt;text-align:center;text-indent:-130.0pt"> <span class="A6"><span style="font-size:18.0pt;color:windowtext;font-weight:normal">Nathan Dungan, President and Founder; Share Save Spend, Minneapolis, MN</span></span><span class="A6"><span style="font-size:18.0pt;font-weight:normal"><o:p></o:p></span></span></p> <p class="Default" align="center" style="text-align:center"><o:p> </o:p></p> <p class="Pa6" align="center" style="margin-left:130.0pt;text-align:center;text-indent:-128.0pt"> <span class="A5"><span style="font-size:20.0pt;color:windowtext;font-style:normal">11:00 a.m. “Choosing the ‘Best’ Insurance Product: Matching</span></span><span style="font-size:20.0pt"><o:p></o:p></span></p> <p class="Pa6" align="center" style="margin-left:130.0pt;text-align:center;text-indent:-128.0pt"> <span class="A5"><span style="font-size:20.0pt;color:windowtext;font-style:normal">Needs with Solutions”</span></span><span style="font-size:20.0pt"><o:p></o:p></span></p> <p class="Default" align="center" style="margin-left:128.0pt;text-align:center;text-indent:-128.0pt;mso-line-height-alt:12.05pt"> <span class="A6"><span style="font-size:18.0pt;color:windowtext;font-weight:normal">John Olsen, President; Olsen Financial Group, Kirkwood, MO<o:p></o:p></span></span></p> <p class="Default" align="center" style="margin-left:128.0pt;text-align:center;text-indent:-128.0pt;line-height:12.05pt"> <o:p> </o:p></p> <p class="Pa8" align="center" style="margin-left:130.0pt;text-align:center;text-indent:-130.0pt"> <span class="A5"><span style="font-size:20.0pt;color:windowtext;font-style:normal">12:00 Lunch</span></span><span class="A5"><span style="font-size:20.0pt;font-style:normal"><o:p></o:p></span></span></p> <p class="Default" align="center" style="text-align:center"><o:p> </o:p></p> <p class="Pa8" align="center" style="margin-left:130.0pt;text-align:center;text-indent:-130.0pt"> <span class="A5"><span style="font-size:20.0pt;color:windowtext;font-style:normal">1:30 p.m. “What Recovery? The Muddle-Through Economy”</span></span><span style="font-size:20.0pt"><o:p></o:p></span></p> <p class="Pa8" align="center" style="margin-left:130.0pt;text-align:center;text-indent:-130.0pt"> <span class="A6"><span style="font-size:18.0pt;color:windowtext;font-weight:normal">Juli Niemann, Executive Vice President, Research and Portfolio Management; Smith, Moore </span></span><span class="A6"><span style="font-size:18.0pt;font-weight:normal">&</span></span><span class="A6"><span style="font-size:18.0pt;color:windowtext;font-weight:normal"> Co., Clayton, MO</span></span><span class="A6"><span style="font-size:18.0pt;font-weight:normal"><o:p></o:p></span></span></p> <p class="Default" align="center" style="text-align:center"><o:p> </o:p></p> <p class="Pa8" align="center" style="margin-left:130.0pt;text-align:center;text-indent:-130.0pt"> <span class="A5"><span style="font-size:20.0pt;color:windowtext;font-style:normal">2:30 p.m. “Financial Literacy 101 from a Past U.S. Treasurer”</span></span><span style="font-size:20.0pt"><o:p></o:p></span></p> <p class="Pa9" align="center" style="margin-left:131.0pt;text-align:center;text-indent:-131.0pt"> <span class="A6"><span style="font-size:18.0pt;color:windowtext;font-weight:normal">Anna E. Cabral, Unit Chief of Strategic Communications in the</span></span><span style="font-size:18.0pt"><o:p></o:p></span></p> <p class="Pa9" align="center" style="margin-left:131.0pt;text-align:center;text-indent:-131.0pt"> <span class="A6"><span style="font-size:18.0pt;color:windowtext;font-weight:normal">External Relations Division of Inter-American Development Bank</span></span><span style="font-size:18.0pt"><o:p></o:p></span></p> <p class="Pa9" align="center" style="margin-left:131.0pt;text-align:center;text-indent:-131.0pt"> <span class="A6"><span style="font-size:18.0pt;color:windowtext;font-weight:normal">and former Treasurer of the United States of America, Arlington, VA</span></span><span class="A6"><span style="font-size:18.0pt;font-weight:normal"><o:p></o:p></span></span></p> <p class="Default"><o:p> </o:p></p> <p class="Pa10" align="center" style="text-align:center"><span class="A5"><span style="font-size:20.0pt;color:windowtext;font-style:normal">Registration:</span></span><span style="font-size:20.0pt"><o:p></o:p></span></p> <p class="Pa10" align="center" style="text-align:center"><span class="A11"><span style="font-size:16.0pt">Program: $30/person (includes lunch)</span></span><span style="font-size:16.0pt"><o:p></o:p></span></p> <p class="Pa10" align="center" style="margin-left:131.0pt;text-align:center;text-indent:-131.0pt"> <span class="A11"><span style="font-size:16.0pt">$60/per person for 4 Hours CFP</span></span><span class="A7"><span style="font-size:10.5pt">® </span></span><span class="A11"><span style="font-size:16.0pt">Continuing Education Credit (includes lunch)</span></span><span style="font-size:16.0pt"><o:p></o:p></span></p> <p class="Pa10" align="center" style="text-align:center"><span class="A11"><span style="font-size:16.0pt">$10/student (includes lunch)</span></span><span style="font-size:16.0pt"><o:p></o:p></span></p> <p class="Pa0" align="center" style="text-align:center"><span class="A6"><span style="font-size:18.0pt;color:windowtext;font-weight:normal">For more information or to make your reservation, please contact Amy Sanders at</span></span><span style="font-size:18.0pt"><o:p></o:p></span></p> <p class="Pa0" align="center" style="text-align:center"><span class="A6"><span style="font-size:18.0pt;color:windowtext;font-weight:normal">(573) 884-5958 or sandersal@missouri.edu or mail check</span></span><span style="font-size:18.0pt"><o:p></o:p></span></p> <p class="Pa0" align="center" style="text-align:center"><span class="A6"><span style="font-size:18.0pt;color:windowtext;font-weight:normal">(<i>payable to University of Missouri</i>) to 365 McReynolds Hall, Columbia, MO 65211</span></span><span class="A6"><span style="font-size:18.0pt;font-weight:normal"><o:p></o:p></span></span></p> <p class="Default"><o:p> </o:p></p> <p class="Pa0" align="center" style="text-align:center"><span class="A5"><span style="font-size:20.0pt;color:windowtext">Open to the Public ~ RSVP Required</span></span><span style="font-size:20.0pt"><o:p></o:p></span></p> <p class="Pa0" align="center" style="text-align:center"><span class="A6"><i><span style="font-size:18.0pt;color:windowtext">Sponsored by </span></i></span><span class="A6"><span style="font-size:18.0pt;color:windowtext">the Personal Financial Planning Department - University of Missouri</span></span><span style="font-size:18.0pt"><o:p></o:p></span></p> <p class="Pa0" align="center" style="text-align:center"><span class="A6"><span style="font-size:18.0pt;color:windowtext">Office for Financial Success, Center for Economic Education</span></span><span style="font-size:18.0pt"><o:p></o:p></span></p> <p class="MsoNormal" align="center" style="text-align:center"><span class="A6"><span style="font-size:18.0pt;color:windowtext">and the College of Human Environmental Sciences</span></span><o:p></o:p></p> </td> </tr> <tr> <td width="901" valign="top" style="width:675.7pt;border:solid black 1.0pt;border-top:none;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal"><b><span style="font-size:12.0pt;font-family:"Arial","sans-serif";color:black"><o:p> </o:p></span></b></p> </td> </tr> </tbody> </table> </div> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">Robert O. Weagley, Ph.D., CFP<sup>(r) </sup><o:p></o:p></p> <p class="MsoNormal">Chair, Personal Financial Planning<o:p></o:p></p> <p class="MsoNormal">241 Stanley Hall<o:p></o:p></p> <p class="MsoNormal">University of Missouri<o:p></o:p></p> <p class="MsoNormal">Columbia, MO 65211<o:p></o:p></p> <p class="MsoNormal">573-882-9651 - o<o:p></o:p></p> <p class="MsoNormal">573-884-8389 - f<o:p></o:p></p> <p class="MsoNormal" align="center" style="text-align:center"><b><span style="font-size:14.0pt;color:#4F81BD">The 3 C's of life <o:p></o:p></span></b></p> <p class="MsoNormal" align="center" style="text-align:center"><span style="font-size:12.0pt;color:#4F81BD"><o:p> </o:p></span></p> <p class="MsoNormal" align="center" style="text-align:center"><span style="font-size:12.0pt;color:#4F81BD">Choices, chances, changes.<o:p></o:p></span></p> <p class="MsoNormal" align="center" style="text-align:center"><span style="font-size:12.0pt;color:#4F81BD">You must make a choice, to take a chance or your life will never change.<o:p></o:p></span></p> <p class="MsoNormal" align="center" style="text-align:center"><span style="font-size:12.0pt;color:#4F81BD"><o:p> </o:p></span></p> <p class="MsoNormal"><o:p> </o:p></p> </div> MU Financial Successhttp://www.blogger.com/profile/14117781251967743442noreply@blogger.com0tag:blogger.com,1999:blog-5256277661009921780.post-49219027287509843982013-03-14T13:39:00.000-07:002013-03-14T15:00:04.080-07:00Tax Planning<div class="WordSection1"> <p class="MsoNormal"><b><span style="font-size:12.0pt;font-family:"Arial","sans-serif";color:#595959"><a href="http://mufinancialtip.blogspot.com/"><span style="color:#595959">Tax Planning</span></a><o:p></o:p></span></b></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">University of Missouri Extension and the Department of Personal Financial Planning operate a Volunteer Income Tax Assistance site on the MU campus (<a href="http://extension.missouri.edu/hes/taxed/Taxhandbill.pdf">times and locations</a>). 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 <a href="http://mufinancialtip.blogspot.com/"> blog</a>. <o:p></o:p></p> <p class="MsoNormal"><b><o:p> </o:p></b></p> <p class="MsoNormal"><b>Never rely on your refund to save you<o:p></o:p></b></p> <p class="MsoNormal">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. <o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">There are avenues to explore if your refund is taking longer than expected. The <a href="http://www.taxpayeradvocate.irs.gov/">Taxpayer Advocate</a> 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. <o:p></o:p></p> <p class="MsoNormal"><b><o:p> </o:p></b></p> <p class="MsoNormal"><b>Receiving a refund by direct deposit or check may be inferior to the third choice<o:p></o:p></b></p> <p class="MsoNormal">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:<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">President Obama’s 2011 tax return: <a href="http://goo.gl/zx9BQ"> http://goo.gl/zx9BQ</a><o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">President Obama’s 2008 tax return: <a href="http://goo.gl/65ymQ"> http://goo.gl/65ymQ</a><o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">President Bush’s 2005 tax return: <a href="http://goo.gl/TvJo7"> http://goo.gl/TvJo7</a> <o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">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.<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">W4s can be confusing, so you might try an online calculator to help you plan:<o:p></o:p></p> <p class="MsoNormal">IRS calculator: <a href="http://www.irs.gov/Individuals/IRS-Withholding-Calculator"> http://www.irs.gov/Individuals/IRS-Withholding-Calculator</a> <o:p></o:p></p> <p class="MsoNormal">ADP calculator: <a href="http://goo.gl/JFHGG">http://goo.gl/JFHGG</a> <o:p></o:p></p> <p class="MsoNormal"><b><o:p> </o:p></b></p> <p class="MsoNormal"><b>Or get no refund at all<o:p></o:p></b></p> <p class="MsoNormal">Vice President Biden’s return demonstrates this point:<o:p></o:p></p> <p class="MsoNormal">Vice President Biden’s 2011 tax return: <a href="http://goo.gl/jVp5q"> http://goo.gl/jVp5q</a><o:p></o:p></p> <p class="MsoNormal">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<a name="_GoBack"></a>. <o:p></o:p></p> <p class="MsoNormal"><b><o:p> </o:p></b></p> <p class="MsoNormal"><b>Bring four years of returns with you when you prepare your taxes<o:p></o:p></b></p> <p class="MsoNormal">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.<o:p></o:p></p> <p class="MsoNormal">Examples:<o:p></o:p></p> <p class="MsoNormal">The <a href="http://www.irs.gov/pub/irs-pdf/f5695.pdf">Non Business Energy Credit</a> 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. <o:p></o:p></p> <p class="MsoNormal">The <a href="http://www.irs.gov/pub/irs-pdf/p970.pdf">American Opportunity Credit</a> 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. <o:p></o:p></p> <p class="MsoNormal">First time homeowners that claimed the <a href="http://www.irs.gov/uac/First-Time-Homebuyer-Credit-1"> First Time Homebuyer’s credit </a> 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. <o:p></o:p></p> <p class="MsoNormal">If you sold capital assets in a prior year at a <a href="http://www.irs.gov/taxtopics/tc409.html"> loss</a>, 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. <o:p></o:p></p> <p class="MsoNormal"><b><o:p> </o:p></b></p> <p class="MsoNormal"><b>Never destroy your tax returns<o:p></o:p></b></p> <p class="MsoNormal">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. <o:p></o:p></p> <p class="MsoNormal">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…<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">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.<o:p></o:p></p> <p class="MsoNormal"><b><o:p> </o:p></b></p> <p class="MsoNormal"><b>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<o:p></o:p></b></p> <p class="MsoNormal">The automated phone tree at the IRS relies on touch tone phones. Almost all phones are touch tone, but some individuals still have their <a href="http://www.youtube.com/watch?v=EzVsAY4UAh0">rotary phones</a>. 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.<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> </div> MU Financial Successhttp://www.blogger.com/profile/14117781251967743442noreply@blogger.com1tag:blogger.com,1999:blog-5256277661009921780.post-45910042948838368182013-03-07T12:59:00.000-08:002013-03-07T15:00:05.582-08:00YIPPEE!! We're Making Money!!<div class="WordSection1"> <p class="MsoNormal">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.<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">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 <u>always</u> do. <o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">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: <a href="http://pfp.missouri.edu/financial/tipoftheweek/efficientindexing.pdf">http://pfp.missouri.edu/financial/tipoftheweek/efficientindexing.pdf</a> ) <o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">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.<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">I recently read an article in the T. Rowe Price <i>Investor</i> 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: <a href="http://www.sec.gov/investor/pubs/assetallocation.htm"> http://www.sec.gov/investor/pubs/assetallocation.htm</a> . Let me turn to the problem…<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">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.<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">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.<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">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.<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">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: <a href="http://www.ipers.org/calcs/AssetAllocator.html">http://www.ipers.org/calcs/AssetAllocator.html</a> was referenced in the SEC document we linked to earlier.<o:p></o:p></p> <p class="MsoNormal"><br> 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. <o:p></o:p></p> </div> MU Financial Successhttp://www.blogger.com/profile/14117781251967743442noreply@blogger.com1tag:blogger.com,1999:blog-5256277661009921780.post-17428179373996877852013-02-28T14:04:00.000-08:002013-03-01T03:00:03.592-08:00Winter Storms<div class="WordSection1"> <p class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><span style="font-family:"Times New Roman","serif"">With the recent snowstorms that have been sweeping across the United States it is wise for each of us to think about our own preparation for a major storm. The following suggestions are some things you can do to prepare for a storm and how to stay safe during and after a storm.<o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><b><span style="font-family:"Times New Roman","serif"">Be Prepared for a Storm:<o:p></o:p></span></b></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><span style="font-family:"Times New Roman","serif"">Before Mother Nature strikes, be prepared for a major storm. Everyone should have some basic supplies on hand to survive for at least three days in the event of an extended power outage. Following are suggested items to keep on hand and easily accessible, although everyone should consider the unique needs of their own family in order to create an emergency kit that will provide for your needs.<o:p></o:p></span></p> <ul type="disc"> <li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Water: at least one gallon per person, per day for drinking and sanitation. If you have pets, have extra available.<o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Food: at least a three-day supply of non-perishable food, focusing on items that can be eaten without being cooked. Don’t forget a hand-operated can opener.<o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Flashlights and a supply of fresh batteries.<o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">A corded telephone. Cordless phones will not work when your power is out.<o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">A battery-powered radio and/or television. Midwest Energy Cooperative works with regional news media to provide regular updates about major power outages.<o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">A battery-powered or wind-up clock.<o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">A first-aid kit and hand sanitizer. Be sure to fill prescriptions and have any needed medical supplies on hand.<o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Extra blankets.<o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Candles and matches.<o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Moist towelettes, garbage bags and plastic ties for personal sanitation.<o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Wrench or pliers to turn off utilities.<o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Rock salt or other product to melt ice on walkways.<o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Sand to improve traction.<o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Snow shovels and other snow removal equipment.<o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Sufficient heating fuel. You may become isolated in your home and regular fuel sources may be cut off. Store a good supply of dry, seasoned wood for your fireplace or wood-burning stove.<o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Adequate clothing to keep you warm.<o:p></o:p></span></li></ul> <p class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><b><span style="font-family:"Times New Roman","serif"">Safety Tips During and After a Storm:<o:p></o:p></span></b></p> <ul type="disc"> <li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Pay attention to Winter Storm Watches and Warnings, Winter Weather Advisories and Travel Restrictions. See additional resources below for definitions of the various warnings.<o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Stay indoors during the storm.<o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Walk carefully on snowy or icy walkways.<o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Avoid overexertion when shoveling snow. <o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Keep dry. Change wet clothing frequently to prevent a loss of body heat.<o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Watch for signs of frostbite. These include loss of feeling and white or pale appearance in fingers, toes, ear lobes and the tip of the nose. If symptoms are detected, get medical help immediately.<o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Watch for signs of hypothermia. These include uncontrollable shivering, memory loss, disorientation, incoherence, slurred speech, drowsiness and apparent exhaustion. If symptoms of hypothermia are detected get the victim to a warm location, remove wet clothing, warm the center of the body and give warm, non-alcoholic beverages if the victim is conscious. Get medical help as soon as possible.<o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Drive only if it is absolutely necessary. If you must drive, travel in the day, don’t travel alone and keep others informed of your schedule.<o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">To prevent water pipes from freezing, keep faucets turned on slightly so that water drips from the tap. Know how to shut off water valves in case a pipe bursts. <o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">If your pipes freeze, remove any insulation of layers of newspapers and wrap pipes in rags. Completely open all faucets and pour hot water over the pipes, starting where they were most exposed to the cold.<o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Conserve fuel, if necessary, by keeping your residence cooler than normal. <o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">If you will be going away during cold weather, leave the heat on in your home set to a temperature no lower than 55°F.<o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Stay away from downed power lines. A power line does not need to be sparking or arcing to be energized. Lines that appear to be “dead” can become energized as crews work to restore power. Assume all low and downed lines are energized and dangerous.<o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Never drive over a downed line as snagging a line could pull down a pole or other equipment and cause other hazards.<o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Be careful approaching intersections where traffic lights may be out.<o:p></o:p></span></li></ul> <p class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><b><span style="font-family:"Times New Roman","serif"">What to Do If the Power is Out:</span></b><span style="font-family:"Times New Roman","serif""><o:p></o:p></span></p> <ul type="disc"> <li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">If you plan to use a generator, know how to operate it safely.<o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Turn off all appliances, including your furnace, air conditioner, water heater and water pump so you avoid a circuit overload when power is restored. Leave on one lamp to know when power has been restored. <o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Keep freezer and refrigerator doors closed. Food will stay frozen for 36 to 48 hours in a fully loaded freezer if you keep the door closed. A half-full freezer will generally keep food frozen for 24 hours. If it looks like the power outage will be prolonged, prepare a cooler with ice for your freezer items.<o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Keep candles away from furniture, curtains or any other flammable material. Never leave children alone in a room with a burning candle or open flame.<o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Never use gas stoves, charcoal or briquette grills or camp stoves to cook or heat within your home. <o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Make sure cell phones and laptop computers are charged ahead of time. Consider using them only to update family and friends on conditions, and to check the weather or road conditions.<o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">If you can’t stay warm go to a designated public shelter. Text <b>SHELTER</b> + your ZIP code to <b>43362</b> (4FEMA) to find the nearest shelter in your area (example: <b><i>shelter 65203</i></b>).<o:p></o:p></span></li></ul> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><b><span style="font-family:"Times New Roman","serif"">Additional Resources:<o:p></o:p></span></b></p> <ul style="margin-top:0in" type="disc"> <li class="MsoNormalCxSpMiddle" style="margin-bottom:10.0pt;mso-add-space:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Ready.gov Winter Weather: <a href="http://www.ready.gov/winter-weather"> <span style="color:blue">http://www.ready.gov/winter-weather</span></a><o:p></o:p></span></li><li class="MsoNormalCxSpMiddle" style="margin-bottom:10.0pt;mso-add-space:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">CDC Extreme Cold Brochure: <a href="http://emergency.cdc.gov/disasters/winter/pdf/cold_guide.pdf"> <span style="color:blue">http://emergency.cdc.gov/disasters/winter/pdf/cold_guide.pdf</span></a> <o:p></o:p></span></li><li class="MsoNormalCxSpMiddle" style="margin-bottom:10.0pt;mso-add-space:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Weather.gov (<a href="http://www.weather.gov/"><span style="color:blue">http://www.weather.gov/</span></a>) <o:p></o:p></span></li><li class="MsoNormalCxSpMiddle" style="margin-bottom:10.0pt;mso-add-space:auto;line-height:115%;mso-list:l0 level1 lfo1"> <span style="font-family:"Times New Roman","serif"">Confused by winter weather watches, warnings, etc.? Read definitions here: <a href="http://www.weather.com/encyclopedia/winter/index.html"><span style="color:blue">http://www.weather.com/encyclopedia/winter/index.html</span></a> <o:p></o:p></span></li></ul> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><span style="font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="margin-bottom:10.0pt;line-height:115%"><span style="font-family:"Times New Roman","serif"">Information for this article was compiled from Midwest Energy Cooperative (<a href="http://www.teammidwest.com/your-home/storm-outage-information/"><span style="color:blue">http://www.teammidwest.com/your-home/storm-outage-information/</span></a>) and Ready.gov (<a href="http://www.ready.gov/winter-weather"><span style="color:blue">http://www.ready.gov/winter-weather</span></a>). </span><o:p></o:p></p> <p class="MsoNormal">Ryan H. Law, M.S., CFP®, AFC<span style="color:#1F497D">®</span><o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">Personal Financial Planning Department<o:p></o:p></p> <p class="MsoNormal">Office for Financial Success Director <o:p></o:p></p> <p class="MsoNormal">University of Missouri Center on Economic Education Director<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">162 Stanley Hall<o:p></o:p></p> <p class="MsoNormal">University of Missouri<o:p></o:p></p> <p class="MsoNormal">Columbia, MO 65211<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">573.882.9211 (office)<o:p></o:p></p> <p class="MsoNormal">573.884.8389 (fax)<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> </div> MU Financial Successhttp://www.blogger.com/profile/14117781251967743442noreply@blogger.com0tag:blogger.com,1999:blog-5256277661009921780.post-9128132247729777232013-02-21T14:18:00.001-08:002013-02-21T14:18:18.660-08:00College Savings Tips <div style="direction: ltr;font-family: Tahoma;color: #000000;font-size: 10pt;"> <p class="MsoNormal" style="margin: 0in 0in 0.0001pt; font-size: 11pt; font-family: Calibri, sans-serif;"> <span style="background-color: rgb(255, 255, 255); font-size: 11pt;">While many of our readers are students, tips on how to save/pay for college are the keys to one's financial success. </span><span style="background-color: rgb(255, 255, 255); font-size: 11pt;"> </span><span style="background-color: rgb(255, 255, 255); font-size: 11pt;">I have been known to say that the most important asset in everyone's portfolio is one's self, for it is one's self who works to earn the income it takes to have a fruitful financial plan. </span><span style="background-color: rgb(255, 255, 255); font-size: 11pt;"> </span><span style="background-color: rgb(255, 255, 255); font-size: 11pt;">It is well documented that education is highly correlated with earnings and, thus, understanding how to save for the investments we make in ourselves, or our loved ones, is essential to total portfolio management. </span><span style="background-color: rgb(255, 255, 255); font-size: 11pt;"> </span><span style="background-color: rgb(255, 255, 255); font-size: 11pt;">Besides, for our younger readers, it is important to consider the costs of a child, before you decide you want to have one.</span><span style="background-color: rgb(255, 255, 255); font-size: 11pt;"> </span><span style="background-color: rgb(255, 255, 255); font-size: 11pt;"> </span></p> <p class="MsoNormal" style="margin: 0in 0in 0.0001pt; font-size: 11pt; font-family: Calibri, sans-serif;"> <span style="background-color: rgb(255, 255, 255);"><br> </span></p> <p class="MsoNormal" style="margin: 0in 0in 0.0001pt; font-size: 11pt; font-family: Calibri, sans-serif;"> <span style="background-color: rgb(255, 255, 255);">Saving for college is overwhelming for many, the realization that one's children or loved ones cannot succeed in college due to financial constraints can be quite depressing. Yes, the loved one can and, perhaps, should work to help pay for college. When average costs for tuition and fees, room, board, books, supplies, personal expenses, and transportation are included, it is estimated by the <a href="http://www.scholarshipworkshop.com/college-cost-estimator/private-colleges-and-universities.html" style="color: purple;">Scholarship Workshop</a> to annually cost $27,210, at a public, in-state university, and $58,640, at a private university, for academic year 2013-14. This high price tag makes working to cover the entire cost of a higher education difficult. As a result, many choose the expensive alternative of student loans. Loans can help and much has been written about their use and misuse in the education marketplace, however, that is not the focus of a tip on college savings. So, let's build some education capital!</span></p> <p class="MsoNormal" style="margin: 0in 0in 0.0001pt; font-size: 11pt; font-family: Calibri, sans-serif;"> <span style="background-color: rgb(255, 255, 255);"><br> </span></p> <p class="MsoNormal" style="margin: 0in 0in 0.0001pt; font-size: 11pt; font-family: Calibri, sans-serif;"> <span style="background-color: rgb(255, 255, 255);">T<span style="color: windowtext; font-size: 11pt;">he most important thing you can do for your child, beginning prior to conception, is to create a healthy environment in which to rear the child.</span><span style="color: windowtext; font-size: 11pt;"> </span><span style="color: windowtext; font-size: 11pt;">Good nutrition and exercise is important for the mother, as it will be for her progeny.</span><span style="color: windowtext; font-size: 11pt;"> </span><span style="color: windowtext; font-size: 11pt;">Importantly, work with the child to develop a love of learning.</span><span style="color: windowtext; font-size: 11pt;"> </span><span style="color: windowtext; font-size: 11pt;">Read to the child, prior to their entering school, in an effort to put them at or above their grade-level.</span><span style="color: windowtext; font-size: 11pt;"> </span><span style="color: windowtext; font-size: 11pt;">Academic success is the easiest way to receive financial help for university attendance.</span></span></p> <p class="MsoNormal" style="margin: 0in 0in 0.0001pt; font-size: 11pt; font-family: Calibri, sans-serif;"> <span style="background-color: rgb(255, 255, 255);"><br> </span></p> <p class="MsoNormal" style="margin: 0in 0in 0.0001pt; font-size: 11pt; font-family: Calibri, sans-serif;"> <span style="background-color: rgb(255, 255, 255);">If you intend to help the child with their college expenses, begin shortly after they are born, in order to have the benefit of time and compounding on your savings. Start small with what you can manage or do a finely-tuned calculation utilizing an expected future cost of four years of college and what it would take on a periodic deposit to help reach the goal, at an assumed rate of return and time period. Do NOT sacrifice your retirement savings for your child's college expenses. You need to be on track for saving for your retirement. Your child is not your retirement plan and they can always borrow the money they need, if they have no other option. </span></p> <p class="MsoNormal" style="margin: 0in 0in 0.0001pt; font-size: 11pt; font-family: Calibri, sans-serif;"> <span style="background-color: rgb(255, 255, 255);"><br> </span></p> <p class="MsoNormal" style="margin: 0in 0in 0.0001pt; font-size: 11pt; font-family: Calibri, sans-serif;"> <span style="background-color: rgb(255, 255, 255);">There are several ways to save for college. </span></p> <p class="MsoNormal" style="margin: 0in 0in 0.0001pt; font-size: 11pt; font-family: Calibri, sans-serif; text-indent: -0.25in; line-height: 15.6pt; vertical-align: baseline;"> <span style="font-size: 10pt; font-family: Symbol; color: rgb(51, 51, 51); background-color: rgb(255, 255, 255);">·<span style="font-size: 7pt; line-height: normal; font-family: 'Times New Roman';"> </span></span></p> <p class="MsoNormal" style="margin: 0in 0in 0.0001pt; font-size: 11pt; font-family: Calibri, sans-serif; text-indent: -0.25in; line-height: 15.6pt; vertical-align: baseline;"> <span style="background-color: rgb(255, 255, 255);"><span style="font-size: 10pt; font-family: Symbol; color: rgb(51, 51, 51);"><span style="font-size: 7pt; line-height: normal; font-family: 'Times New Roman';">* * </span></span>State-sponsored 529 plans are very popular as they offer federal and, sometimes, state tax benefits. These include tax-free withdrawals for qualified educational expenditures. Missouri's 529 plan is called the MOST plan and more about it can be found here: https://missourimost.s.upromise.com/ . Besides being tax-free, other tax advantages include:<span style="color: rgb(51, 51, 51);"><o:p></o:p></span></span></p> <ul type="disc" style="font-family: 'Times New Roman'; font-size: medium; margin-top: 0in;"> <ul type="circle" style="margin-top: 0in;"> <li class="MsoNormal" style="margin: 0in 0in 0.0001pt; font-size: 11pt; font-family: Calibri, sans-serif; color: rgb(51, 51, 51); line-height: 15.6pt; vertical-align: baseline;"> <span style="background-color: rgb(255, 255, 255);"><span style="color: windowtext;">Investment </span>earnings grow tax-deferred.<o:p></o:p></span></li><li class="MsoNormal" style="margin: 0in 0in 0.0001pt; font-size: 11pt; font-family: Calibri, sans-serif; color: rgb(51, 51, 51); line-height: 15.6pt; vertical-align: baseline;"> <span style="background-color: rgb(255, 255, 255);">While your contributions are not tax deductible on your federal taxes, they are likely deductible at the state level.<o:p></o:p></span></li><li class="MsoNormal" style="margin: 0in 0in 0.0001pt; font-size: 11pt; font-family: Calibri, sans-serif; color: rgb(51, 51, 51); line-height: 15.6pt; vertical-align: baseline;"> <span style="background-color: rgb(255, 255, 255);">If you make non-qualified withdrawals, both taxes and penalties will be charged.<o:p></o:p></span></li><li class="MsoNormal" style="margin: 0in 0in 0.0001pt; font-size: 11pt; font-family: Calibri, sans-serif; color: rgb(51, 51, 51); line-height: 15.6pt; vertical-align: baseline;"> <span style="background-color: rgb(255, 255, 255);">Should a child not use their entire 529 account, a tax-free transfer of the account can be made to a sibling, cousin or another family member. If this person uses the money for qualified education expenses, the withdrawals are tax free.<o:p></o:p></span></li></ul> </ul> <p class="MsoListParagraphCxSpFirst" style="margin-right: 0in; margin-left: 0in; font-size: 10pt; font-family: 'Trebuchet MS', sans-serif; color: rgb(63, 74, 80); text-indent: -0.25in;"> <span style="background-color: rgb(255, 255, 255);"><span style="font-family: Symbol;">·<span style="font-size: 7pt; font-family: 'Times New Roman';"> * </span></span>Gift money to the child. Money gifted to the child is counted more heavily against their eligibility for financial aid, if one might qualify for financial aid. These periodic gifts, under the control of the parent, are a great way to save and to visibly state that you believe in your child's future and are willing to put your money where your mouth is – toward their future.</span></p> <p class="MsoListParagraphCxSpMiddle" style="margin-right: 0in; margin-left: 0in; font-size: 10pt; font-family: 'Trebuchet MS', sans-serif; color: rgb(63, 74, 80); text-indent: -0.25in;"> <span style="font-family: Symbol; background-color: rgb(255, 255, 255);">·<span style="font-size: 7pt; font-family: 'Times New Roman';"> </span></span></p> <p class="MsoListParagraphCxSpMiddle" style="margin-right: 0in; margin-left: 0in; font-size: 10pt; font-family: 'Trebuchet MS', sans-serif; color: rgb(63, 74, 80); text-indent: -0.25in;"> <span style="background-color: rgb(255, 255, 255);"><span style="font-family: Symbol;"><span style="font-size: 7pt; font-family: 'Times New Roman';"> * </span></span>Life insurance may have a cash value which can accumulate through premium payments and can be borrowed from the policy later, in order to be used for college expenses. These withdrawals do not need to be repaid, as they will simply reduce the death benefits to your beneficiaries, should the inevitable occur sooner than planned. Before you choose this option, make sure you need the life insurance and, if you do, that you have enough life insurance. It is often the case that savings-type life insurance policies are too costly for many young families to purchase and to still provide adequate life insurance coverage. Buying term life insurance and saving the difference in premiums is still a very effective plan.</span></p> <p class="MsoListParagraphCxSpLast" style="margin-right: 0in; margin-left: 0in; font-size: 10pt; font-family: 'Trebuchet MS', sans-serif; color: rgb(63, 74, 80); text-indent: -0.25in;"> <span style="font-family: Symbol; background-color: rgb(255, 255, 255);">·<span style="font-size: 7pt; font-family: 'Times New Roman';"> </span></span></p> <p class="MsoListParagraphCxSpLast" style="margin-right: 0in; margin-left: 0in; font-size: 10pt; font-family: 'Trebuchet MS', sans-serif; color: rgb(63, 74, 80); text-indent: -0.25in;"> <span style="background-color: rgb(255, 255, 255);"><span style="font-family: Symbol;"><span style="font-size: 7pt; font-family: 'Times New Roman';"> * </span></span>Accumulate equity in your home and then refinance, through a home-equity loan or a new first mortgage, to provide liquidity to meet college obligations. Accumulating more debt, as one gets older, is not the best way for parents to get ready for retirement. Moreover, this debt is the parents' debt, not the debt of the child. The investment, however, is being made in the child and the child will be the one who primarily benefits from the investment. I'd let my child borrow the money. If I want to help, I'll send her a check.</span></p> <p class="MsoNormal" style="margin: 0in 0in 0.0001pt; font-size: 11pt; font-family: Calibri, sans-serif;"> <span style="background-color: rgb(255, 255, 255);"><br> </span></p> <p class="MsoNormal" style="margin: 0in 0in 0.0001pt; font-size: 11pt; font-family: Calibri, sans-serif;"> <span style="background-color: rgb(255, 255, 255);">Regardless of your plan, make sure your asset mix is appropriate. Take greater risks when the child is young by utilizing more equity investments and, perhaps, riskier equity investments. As the child approaches college, reduce the risks by reallocating to relatively more cash and bonds. If you have trouble managing your investments, invest in one or more age-based college savings plans. Most 529 plans have this option, as well as many mutual fund companies have target date funds. Whatever your chosen investment vehicle, keep the costs of your investments low. Make sure you remain well-diversified across asset categories, as well as within categories and don't panic with market fluctuations. Fluctuations are a fact of life and, unfortunately, the biggest losers are those who take their money out, when they can't stand the declining market anymore, and those who put it in, after the market has already appreciated. Buying high and selling low is not the way to invest. </span></p> <p class="MsoNormal" style="margin: 0in 0in 0.0001pt; font-size: 11pt; font-family: Calibri, sans-serif;"> <span style="background-color: rgb(255, 255, 255);"><br> </span></p> <p class="MsoNormal" style="margin: 0in 0in 0.0001pt; font-size: 11pt; font-family: Calibri, sans-serif;"> <span style="background-color: rgb(255, 255, 255);">One last comment. If you have a child and want to save money for his education, please begin today. It is easier to stick to a plan than it is to start a plan. So, get started.</span></p> <div><br> <div><br> </div> </div> </div> MU Financial Successhttp://www.blogger.com/profile/14117781251967743442noreply@blogger.com1tag:blogger.com,1999:blog-5256277661009921780.post-88982608007411482192013-02-13T12:56:00.000-08:002013-02-14T18:00:03.251-08:00No More Paper Checks for Federal Benefits<div class="WordSection1"> <p class="MsoNormal"><i><span style="font-size:9.0pt">By Brenda Procter, Extension Associate Professor, Personal Financial Planning <o:p></o:p></span></i></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">If you like to hold a paper check in your hand, you will soon be out of luck if you receive federal benefits. By March 1, 2013, you will be required to switch to electronic payments of benefits for:<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoListParagraphCxSpFirst" style="text-indent:-.25in;mso-list:l1 level1 lfo1"> <![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>Social Security<o:p></o:p></p> <p class="MsoListParagraphCxSpMiddle" style="text-indent:-.25in;mso-list:l1 level1 lfo1"> <![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>Supplemental Security Income<o:p></o:p></p> <p class="MsoListParagraphCxSpMiddle" style="text-indent:-.25in;mso-list:l1 level1 lfo1"> <![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>Veterans Affairs<o:p></o:p></p> <p class="MsoListParagraphCxSpMiddle" style="text-indent:-.25in;mso-list:l1 level1 lfo1"> <![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>Railroad Retirement Board<o:p></o:p></p> <p class="MsoListParagraphCxSpMiddle" style="text-indent:-.25in;mso-list:l1 level1 lfo1"> <![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>Office of Personnel Management<o:p></o:p></p> <p class="MsoListParagraphCxSpLast" style="text-indent:-.25in;mso-list:l1 level1 lfo1"> <![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>Department of Labor (Black Lung)<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">Paper checks are no longer an option for anyone after March 1. You can either have your government check direct deposited into a bank or credit union account or ask the U.S. Treasury to deposit benefits onto a prepaid debit card if you don’t have or don’t want a bank account. <o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">Your benefit will always be deposited on your payment date.<b><span style="font-family:"Arial","sans-serif""> </span></b>If you have the prepaid debit card, you can sign up to get free text, phone or email alerts when your money goes into your card account. <o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal"><b>Direct Deposit<o:p></o:p></b></p> <p class="MsoNormal">To sign up for Direct Deposit, you can:<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoListParagraphCxSpFirst" style="text-indent:-.25in;mso-list:l0 level1 lfo2"> <![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><a href="http://links.govdelivery.com:80/track?type=click&enid=ZWFzPTEmbWFpbGluZ2lkPTIwMTMwMjExLjE1NDYwNTAxJm1lc3NhZ2VpZD1NREItUFJELUJVTC0yMDEzMDIxMS4xNTQ2MDUwMSZkYXRhYmFzZWlkPTEwMDEmc2VyaWFsPTE3Mzk1MzIwJmVtYWlsaWQ9cHJvY3RlcmJAbWlzc291cmkuZWR1JnVzZXJpZD1wcm9jdGVyYkBtaXNzb3VyaS5lZHUmZmw9JmV4dHJhPU11bHRpdmFyaWF0ZUlkPSYmJg==&&&101&&&https://www.godirect.gov/gpw/SecurityNotification.gd">Enroll online</a><o:p></o:p></p> <p class="MsoListParagraphCxSpMiddle" style="text-indent:-.25in;mso-list:l0 level1 lfo2"> <![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>Talk to your bank or credit union<o:p></o:p></p> <p class="MsoListParagraphCxSpMiddle" style="text-indent:-.25in;mso-list:l0 level1 lfo2"> <![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>Call (800) 333-1795 (Mon-Fri, 8am-8pm ET)<o:p></o:p></p> <p class="MsoListParagraphCxSpMiddle" style="text-indent:-.25in;mso-list:l0 level1 lfo2"> <![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>Contact the local office of the agency providing your federal benefits (e.g., Social Security or Veterans Affairs office) <o:p></o:p></p> <p class="MsoListParagraphCxSpMiddle" style="text-indent:-.25in;mso-list:l0 level1 lfo2"> <![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><a href="http://links.govdelivery.com:80/track?type=click&enid=ZWFzPTEmbWFpbGluZ2lkPTIwMTMwMjExLjE1NDYwNTAxJm1lc3NhZ2VpZD1NREItUFJELUJVTC0yMDEzMDIxMS4xNTQ2MDUwMSZkYXRhYmFzZWlkPTEwMDEmc2VyaWFsPTE3Mzk1MzIwJmVtYWlsaWQ9cHJvY3RlcmJAbWlzc291cmkuZWR1JnVzZXJpZD1wcm9jdGVyYkBtaXNzb3VyaS5lZHUmZmw9JmV4dHJhPU11bHRpdmFyaWF0ZUlkPSYmJg==&&&102&&&https://www.godirect.gov/gpw/RegisterByMail.gd">Enroll by mail</a><o:p></o:p></p> <p class="MsoListParagraphCxSpLast"><o:p> </o:p></p> <p style="margin:0in;margin-bottom:.0001pt"><b><span style="font-size:11.0pt;font-family:"Calibri","sans-serif"">Prepaid Debit Card</span></b><span style="font-size:11.0pt;font-family:"Calibri","sans-serif""><o:p></o:p></span></p> <p style="margin:0in;margin-bottom:.0001pt"><span style="font-size:11.0pt;font-family:"Calibri","sans-serif"">To request a Prepaid Debit Card for federal benefits, call (800)333-1795. If you use the prepaid card, </span><span style="font-size:11.0pt;font-family:"Calibri","sans-serif"">Direct Express® Debit MasterCard®</span><span style="font-size:11.0pt;font-family:"Calibri","sans-serif"">, exercise caution. </span><span style="font-size:11.0pt;font-family:"Calibri","sans-serif"">It is possible to use the Direct Express card for free by buying things at stores that accept Debit MasterCard<sup>®</sup> and getting cash back from the cashier when make the purchase. You can check your balance at ATMs or online at no charge. But be careful, because there are some fees for optional services. Visit </span><a href="http://www.GoDirect.org"><span style="font-size:11.0pt;font-family:"Calibri","sans-serif"">www.GoDirect.org</span></a><span style="font-size:11.0pt;font-family:"Calibri","sans-serif""> or </span><span style="font-size:11.0pt;font-family:"Calibri","sans-serif"">call the Go Direct Helpline at (800) 333-1795 </span><span style="font-size:11.0pt;font-family:"Calibri","sans-serif"">for a list of card fees and features. The Go Direct Helpline can answer any other questions, as well.<o:p></o:p></span></p> <p style="margin:0in;margin-bottom:.0001pt"><span style="font-size:11.0pt;font-family:"Calibri","sans-serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="background:white;vertical-align:baseline"><b>What You’ll Need to Sign Up</b><span style="color:#525252"><o:p></o:p></span></p> <p class="MsoNormal" style="background:white;vertical-align:baseline">To have federal benefit payments paid by <b><span style="border:none windowtext 1.0pt;padding:0in">direct deposit</span></b> to your checking or savings account, you'll need your:<o:p></o:p></p> <p class="MsoNormal" style="background:white;vertical-align:baseline"><o:p> </o:p></p> <p class="MsoNormal" style="margin-left:31.3pt;text-indent:-.25in;mso-list:l2 level1 lfo3;vertical-align:baseline"> <![if !supportLists]><span style="font-size:10.0pt;font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>Social Security number or claim number<o:p></o:p></p> <p class="MsoNormal" style="margin-left:31.3pt;text-indent:-.25in;mso-list:l2 level1 lfo3;vertical-align:baseline"> <![if !supportLists]><span style="font-size:10.0pt;font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>12-digit federal benefit check number<o:p></o:p></p> <p class="MsoNormal" style="margin-left:31.3pt;text-indent:-.25in;mso-list:l2 level1 lfo3;vertical-align:baseline"> <![if !supportLists]><span style="font-size:10.0pt;font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>Amount of most recent federal benefit check<o:p></o:p></p> <p class="MsoNormal" style="margin-left:31.3pt;text-indent:-.25in;mso-list:l2 level1 lfo3;vertical-align:baseline"> <![if !supportLists]><span style="font-size:10.0pt;font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>Financial institution's routing transit number*<o:p></o:p></p> <p class="MsoNormal" style="margin-left:31.3pt;text-indent:-.25in;mso-list:l2 level1 lfo3;vertical-align:baseline"> <![if !supportLists]><span style="font-size:10.0pt;font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>Account number* and type - checking or savings<o:p></o:p></p> <p class="MsoNormal" style="vertical-align:baseline"><o:p> </o:p></p> <p class="MsoNormal" style="mso-line-height-alt:10.0pt;background:white;vertical-align:baseline"> <a href="https://www.godirect.gov/gpw/images/treasury-check.jpg"><span style="font-size:7.5pt;font-family:"Helvetica","sans-serif";color:windowtext;border:none windowtext 1.0pt;padding:0in;text-decoration:none"><a href="http://2.bp.blogspot.com/-bjsxEr_Cxkc/UR2Wo4AXmzI/AAAAAAAAAGs/BcXnu-VsmBM/s1600/image001-703252.jpg"><img src="http://2.bp.blogspot.com/-bjsxEr_Cxkc/UR2Wo4AXmzI/AAAAAAAAAGs/BcXnu-VsmBM/s320/image001-703252.jpg" border="0" alt="" id="BLOGGER_PHOTO_ID_5844993520369638194" /></a></span></a><a href="https://www.godirect.gov/gpw/images/personal-check.jpg"><span style="font-size:7.5pt;font-family:"Helvetica","sans-serif";color:blue;border:none windowtext 1.0pt;padding:0in;text-decoration:none"><a href="http://2.bp.blogspot.com/-xUEIbgjwDog/UR2WpKjKyZI/AAAAAAAAAG4/E32Eqxydy2A/s1600/image002-704453.jpg"><img src="http://2.bp.blogspot.com/-xUEIbgjwDog/UR2WpKjKyZI/AAAAAAAAAG4/E32Eqxydy2A/s320/image002-704453.jpg" border="0" alt="" id="BLOGGER_PHOTO_ID_5844993525347436946" /></a></span></a><span style="font-size:7.5pt;font-family:"Helvetica","sans-serif";color:#525252"><o:p></o:p></span></p> <p class="MsoNormal" style="line-height:10.0pt;background:white;vertical-align:baseline"> <span style="font-size:7.5pt;font-family:"Helvetica","sans-serif";color:#525252"><o:p> </o:p></span></p> <p class="MsoNormal" style="background:white;vertical-align:baseline"><span style="border:none windowtext 1.0pt;padding:0in">*This information is often on personal checks.</span><o:p></o:p></p> <p class="MsoNormal" style="background:white;vertical-align:baseline"><o:p> </o:p></p> <p class="MsoNormal" style="background:white;vertical-align:baseline">If you want to get your benefit payments through the <b><span style="border:none windowtext 1.0pt;padding:0in">Direct Express</span></b>® card, you'll need your:<o:p></o:p></p> <p class="MsoNormal" style="margin-left:31.3pt;text-indent:-.25in;mso-list:l2 level1 lfo3;vertical-align:baseline"> <![if !supportLists]><span style="font-size:10.0pt;font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>12-digit federal benefit check number<o:p></o:p></p> <p class="MsoNormal" style="margin-left:31.3pt;text-indent:-.25in;mso-list:l2 level1 lfo3;vertical-align:baseline"> <![if !supportLists]><span style="font-size:10.0pt;font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>Amount of most recent federal benefit check<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> </div> MU Financial Successhttp://www.blogger.com/profile/14117781251967743442noreply@blogger.com0tag:blogger.com,1999:blog-5256277661009921780.post-8980315363559069012013-02-07T20:25:00.001-08:002013-02-07T20:25:40.874-08:00Are You Ready to Rotate?<div style="direction: ltr;font-family: Tahoma;color: #000000;font-size: 10pt;"> <div class="WordSection1"> <p class="MsoNormal">Much has been in the press lately, especially last weekend, about the "Great Rotation" on Wall Street. The story line is that small investors are creating a "great rotation" out of bonds (safety) and toward equities (risk). They tell us that this shift will add momentum to the current bull market and take the indices to new highs. </p> <p class="MsoNormal"> </p> <p class="MsoNormal">OH BOY! This sounds good, doesn't it? Yet, an increasing inflow of capital to the stock market in January is not a new phenomenon, albeit true that the Standard and Poor's 500 did increase by 5% last month. Investors put $20.7 billion in new money into stocks during the first four weeks of 2013. While this is great news, it is a very small number when we compare it to $410 billion that has been taken from the market since the start of 2008. Nor is this number that unique. In 2011, investors moved $23.9 billion into stock funds and another $28.6 billion in 2006. The year 2011, ended the year relatively flat (-.05%). In 2006, the market did gain 13.62% for the year. To add to our confusion, in January, the market issued $111.725 billion of US high-quality debt and MIZZOU alumnus, Bill Gross, who runs the Pimco Total Return Fund ($285 billion), commented that, "January inflows at Pimco show few signs of bond/stock rotation."</p> <p class="MsoNormal"> </p> <p class="MsoNormal">I don't want to be Debbie-downer and I am not saying that stocks are not a good place to invest in 2013. There are many reasons for investors to be optimistic. We avoided going over the "fiscal cliff" at the end of 2012, Europe's problems seem to be more manageable than they were perceived two years ago, and China seems to be stabilizing. (We even avoided the Mayan End of the World on 21 December 2012!) The World Bank, however, comments that developing countries will continue to have growth 1-2 percentage points below what it was before the Great Recession. They also caution those countries to focus their efforts on productivity enhancements, rather than demand stimuli. (Hmm, this sounds familiar.) While the World Bank is cautious, they see that the risks to the world's economies have diminished compared to last year and that any foreseen impacts from those risks will be less than a year ago. They agree that surprises still await us, behind the doors of Europe, the Middle-East, US fiscal policy<a href="#_edn1" name="_ednref1" title="" style=""><span class="MsoEndnoteReference"><span class="MsoEndnoteReference"><span style="font-size:11.0pt; font-family:"Calibri","sans-serif"">[i]</span></span></span></a>, and, as always, a <a href="http://en.wikipedia.org/wiki/Black_swan_theory" target="_blank"> black-swan</a> could be lurking overhead.</p> <p class="MsoNormal"> </p> <p class="MsoNormal">So, are you ready to rotate? My "tip" for financial success is simple and it is the same as I've advocated for years to my friends, clients, students, and readers. Stick to your plan, if you have one. If you don't have a plan, get one. Then, stick to your plan. Always maintain a well diversified portfolio of investments, employing mutual funds, ETFs, and index funds with exposure to small-, mid-, and large capitalized corporations. Make sure that you not only invest in the United States but take advantage of the opportunities to further diversify by investing overseas in other regions of the world. Don't shy away from bonds because they are too boring, as they will greatly reduce the volatility of your portfolio. At the same time, don't be afraid of stocks, because they are too risky. Learn to manage the <a href="http://en.wikipedia.org/wiki/Financial_risk#Diversification" target="_blank"> risks of investing</a> that you cannot control: market risk, inflation, interest rates, and exchange rate risk by investing in each of them. Sure, one will outperform the others and one will be the dog, but you don't know which one will "win" and which will "bark", until after it no longer really matters. What does matter is whether you can take care of yourself and your financial goals. If you have a plan, the only rotating you need to do is while you sleep and you will sleep well, knowing you are on course to reach your goals.</p> <p class="MsoNormal"> </p> <p class="MsoNormal">For more reading, check out our webpage: <a href="http://pfp.missouri.edu/financial/investinghome.html" target="_blank"> http://pfp.missouri.edu/financial/investinghome.html</a> , where we have assembled a variety of links to investment education materials that we believe to be useful.</p> <p class="MsoNormal"> </p> <p class="MsoEndnoteText"><span class="MsoEndnoteReference"><span class="MsoEndnoteReference"><span style="font-size:10.0pt; font-family:"Calibri","sans-serif"">[1]</span></span></span> March 1, 2013 is the date that the "meat cleaver" approach to reducing expenditures, known as sequestering, occurs. This is when all federal expenditures are cut, regardless of outcome. I'm sure there are scalpels in Washington, DC, if our elected officials would start looking and work together toward a compromise.</p> <p class="MsoNormal"> </p> <p class="MsoListParagraph" style="text-indent:-.25in"><span style="">-<span style="font:7.0pt "Times New Roman""> </span></span>Robert O. Weagley, Ph.D., CFP<sup>(r) </sup></p> </div> <div style=""><br clear="all"> <hr align="left" size="1" width="33%"> <div id="edn1" style=""> <p class="MsoEndnoteText"><a href="#_ednref1" name="_edn1" title="" style=""></a><span style="font-size:11.0pt; color:#1F497D"> </span></p> </div> </div> </div> MU Financial Successhttp://www.blogger.com/profile/14117781251967743442noreply@blogger.com2tag:blogger.com,1999:blog-5256277661009921780.post-88622873602252606462013-01-29T12:21:00.000-08:002013-02-01T03:00:03.667-08:00Choices Are Everywhere: Why Can't We Just Have It All?<div class="WordSection1"> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Each month the Federal Reserve Bank of St. Louis publishes a newsletter titled Page One Economics, which <span style="color:black">is a selection of useful economic information, articles, data, and websites compiled by the librarians of the Federal Reserve Bank of St. Louis Research Library. <o:p></o:p></span></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="color:#1F497D"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:black">There is a classroom version of Liber8 </span><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">available to teachers <span style="color:black">for free at: </span><span style="color:#1F497D"><a href="http://research.stlouisfed.org/pageone-economics/uploads/newsletter/2013/PageOneClassroomEdition0113_Opportunity_Cost_Scarcity.pdf"><span style="color:blue">http://research.stlouisfed.org/pageone-economics/uploads/newsletter/2013/PageOneClassroomEdition0113_Opportunity_Cost_Scarcity.pdf</span></a> </span><span style="color:black"><o:p></o:p></span></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:black"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:black">To subscribe to their newsletter or for more information and resources, visit their website and archives at </span><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#1F497D"><a href="http://research.stlouisfed.org/pageone-economics/"><span style="color:blue">http://research.stlouisfed.org/pageone-economics/</span></a> </span><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><i><span style="font-size:10.0pt;font-family:StoneSans-Italic">The views expressed are those of the author and do not necessarily reflect the official positions of the Federal Reserve Bank of St. Louis, the Federal Reserve System, the Board of Governors, the University of Missouri, the Personal Financial Planning Department or The Office for Financial Success.<o:p></o:p></span></i></p> <p class="MsoNormal" style="text-autospace:none"><span style="color:#1F497D"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Scott A. Wolla, Senior Economic Education Specialist<o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">“You can’t always get what you want.”—The Rolling Stones <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">The public debate about the best way to reduce the level of government debt highlights our difficult situation: Our wants greatly exceed our ability to pay for them. In the case of government, purchases require current revenue through taxation or borrowing; the fiscal cliff arose from a level of debt caused by wanting more (and purchasing more) than we can pay for.<o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">If we wish to reduce debt, we must make difficult choices. One choice is to cut government spending on goods and services—but which spending priorities should be cut? The other choice is to raise taxes—but who should pay more? <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">You might prefer one choice or the other or a combination of both. In fact, you may have very similar thoughts about your personal or family budget. These issues are based on understanding the economic concepts of scarcity and opportunity cost. <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><b><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Personal and Household Spending <o:p></o:p></span></b></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Let’s use a specific example to get a better grasp of these ideas. Suppose you receive a $20 gift card during the holidays. The $20 limit acts like a budget that constrains your spending. In other words, your resources are limited. How about your wants? Are they limited? If you are like most people, they are not—you would like to have much more than you can afford. This condition of limited resources and unlimited wants is called scarcity. The $20 limit means that you can’t have all the CDs, movies, or games you want; you must choose the one you want the most. Deciding between the recently released CD from your favorite band and the newest hit movie requires a choice, which involves an opportunity cost —the value of the next-best alternative when a decision is made. The opportunity cost is what is given up. So, choosing the CD from your favorite band means giving up the movie.<o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">People make such decisions all the time. Managing a family budget is also an exercise in managing scarcity and opportunity costs. Household income determines the amount of money a family has to spend; that is, it constrains spending. And, unlike our gift card example, household wants are not limited to CDs, movies, and games. Rather, they include basics such as housing, medical care, education, food, and clothing. But, just like the gift card example, because our wants exceed our ability to spend, we must make choices, which involve opportunity costs. So, more money spent by a family on food might require less spent on clothing. <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Credit cards and other forms of credit make it possible (and quite tempting) to exceed spending limits. Does debt negate scarcity? Does it permit you to buy more than your income would allow? It might seem so, but you still have a limit. Using debt means that you are borrowing your future income to buy goods today. As you repay the debt (plus interest) over time, you will have less income in the future to buy goods and services then. And remember that credit cards have limits, and lenders avoid lending beyond the borrower’s ability to repay the loan. At the end of the third quarter of 2012 (August 31), total consumer debt stood at $11.31 trillion.<o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><b><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Government Spending <o:p></o:p></span></b></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">In many ways, the government faces these same choices. Citizens have collective wants and the government attempts to satisfy these wants through its spending. Social Security, health care programs such as Medicare and Medicaid, and national defense are among the top federal spending categories. But the ability to satisfy our society’s wants is constrained by the level of government income, which is generated primarily by taxing workers and companies. Just like individuals who make spending choices, when the government chooses, there is an opportunity cost. If more money is spent on national security, the result might be less spending on health care. It is possible to raise taxes to provide additional income for the government to allocate, but that imposes further budget constraints on workers and companies who pay taxes—so, this policy choice also has opportunity costs. Of course, the government’s spending is not limited to tax revenue. Just as families can, the government can use debt to pay for some of its goods and services. At the end of the third quarter of 2012 (August 31), total federal debt stood at $16.07 trillion.<o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">What is the downside of government debt? Using debt to buy goods and services today means the government is borrowing future income (that is, tax revenue)—which means less income in the future for buying goods and services then. In addition, there is a limit to how much credit lenders (or investors) will extend to a country; they will avoid lending beyond the government’s ability or willingness to repay the loan or will do so only at very high interest rates. <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><b><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Conclusion <o:p></o:p></span></b></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">An understanding of scarcity and opportunity cost is crucial to making good economic decisions. Remember that scarcity describes the condition in which our wants exceed the resources necessary to satisfy those wants. Scarcity requires us to make choices and choosing involves an opportunity cost—the value of the item given up when a choice is made. So, making wise (and sometimes difficult) choices requires considering the opportunity costs. <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><b><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">GLOSSARY <o:p></o:p></span></b></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Government debt: The sum of accumulated budget deficits. Also known as national debt. <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Opportunity cost: The value of the next-best alternative when a decision is made; it’s what is given up. <o:p></o:p></span></p> <p class="MsoNormal" style="text-autospace:none"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Scarcity: The condition that exists because there are not enough resources to produce everyone’s wants. <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#1F497D"><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#1F497D"><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Ryan H. Law, M.S., CFP® AFC® <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Personal Financial Planning Department<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Office for Financial Success Director <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">University of Missouri Center on Economic Education Director<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">162 Stanley Hall<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">University of Missouri<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Columbia, MO 65211<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">573.882.9211 (office)<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">573.884.8389 (fax)<o:p></o:p></span></p> <p class="MsoNormal"><o:p> </o:p></p> </div> MU Financial Successhttp://www.blogger.com/profile/14117781251967743442noreply@blogger.com0tag:blogger.com,1999:blog-5256277661009921780.post-70226497267032588412013-01-23T14:04:00.000-08:002013-01-25T03:00:03.425-08:00Your Relationship with Money<div class="WordSection1"> <p class="MsoNormal"> This is inspired by an excellent book from an author who visits Mizzou regularly, Ted Klontz. The book is <u>The Financial Wisdom of Ebenezer Scrooge</u>, a book of readings/stories from various authors. The authors tell their life story and how it has shaped their relationship with money. (If you don’t think you have a relationship with money, try getting by without it!) <o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal"> The author proposes that Bob Cratchit (of <i> Christmas Carol </i>fame) had a relationship with money that was just as destructive as Ebenezer Scrooge’s. Cratchit’s relationship with money was, however, different. You recall that Mr. Ebenezer worshipped money and held on to every single penny he made. On the other hand, Mr. Cratchit was quick to blow his paycheck on a single Christmas meal. It also described that someone as talented and obviously qualified to work for Mr. Ebenezer, should not have too much trouble finding a better paying job, or starting his own successful business. (Yes, to believe this, we need to forget that the 19<sup>th</sup> century was quite different from our early 21<sup>st</sup> century.)<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal"> The book goes on to describe that we all possess a “money script” which determines how we view money and most of us inherit our money script from our parents. It is no doubt that parents’ views of money vary widely and, within families, the views of the husband and wife can sometime be quite divergent. Throughout the book, the point is made that money is nothing more than a resource. It is a resource that we can use to buy things which bring us satisfaction including those things we require for sustenance. The authors emphasize that money should be viewed as a means to an end, not the end itself. (We doubt if Mr. Scrooge would have liked this part.) <o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal"> Regardless, the authors implore us to consider the proposition that we all need a little Scrooge in us. We don’t want to be Charles Dickens’ character Scrooge, of course, but we need to be enough of Scrooge to keep us from spending every dollar and that comes our way. After all, it was Scrooge’s frugality that allowed him to amass so much money in the first place. <o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal"> We must acknowledge that we, as Americans, have become spenders over the years. It is hard to recall when we used to be savers. Some of us even spend more than we make and some even justify it as the duty to help the country recover from the recession. Those who spend excessively will often say, “If I just had more money, everything would be better”. This is, simply, untrue. Consider the multi-millionaires who have squandered and wasted their money to the point of poverty. Many are professional athletes who did not learn the lessons of money management. Athletes such as Kenny Anderson, Wally Backman, Charlie Batch, Riddick Bowe, Mark Brunell, Billy Buckner, Jason Caffey, Jack Clark, Derrick Coleman, Dermontti Dawson, Lenny Dykstra, Rollie Fingers, Ray Guy, Tony Gwynn, Steve Howe, Dorothy Hamill, Harmon Killebrew, Bernie Kosar, Terry Long, Darren McCarthy, Denny McLain, Greg Nettles, Jonny Neumann, Gaylord Perry, Andre Rison, Warren Sapp, Billy Sims, Leon Spinks, Lawrence Taylor, Duane Thomas, Bryan Trottier, Johnny Unitas, Michael Vick, Antoine Walker, Danny White, and Rick Wise are on this list (<a href="http://www.businessinsider.com/a-shocking-list-of-athletes-who-have-declared-bankruptcy-2012-10">http://www.businessinsider.com/a-shocking-list-of-athletes-who-have-declared-bankruptcy-2012-10</a> ).<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal" style="text-indent:.5in">While we are inspired by the escalating salaries of professional athletes, the stories of their lack of success in controlling their money to support their goals are numerous. Many overvalue their buddy with the “can’t fail” business idea. These athletes, the lessons of those who fail, are just as important as the stories of the people who get ahead in life by saving 20% of their income religiously. Yet, saving 20% of your income over your lifetime is a certain way to have a better financial and consumption life when you are older than by spending your money in the hopes of being happier today, with a greater chance of being a financial failure when you are older. This is certainly true if you use too much leverage (i.e., borrow too much) which can make the bad times worse, just like it can make the good times better.<o:p></o:p></p> <p class="MsoNormal" style="text-indent:.5in"><o:p> </o:p></p> <p class="MsoNormal"> Just remember it’s not how much or how little money you have, it is your relationship with the concept of money that will determine the quality of your life. Or, like an insurance friend of mine told me over lunch, “When I’m dead it won’t matter how much money I have. All that matters then is whether I’m in heaven or hell.” I will venture to guess that going bankrupt is a lot closer to hell, than it is to financial success, regardless of your religious persuasion.<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoListParagraphCxSpFirst" style="text-indent:-.25in;mso-list:l0 level1 lfo1"> <![if !supportLists]><span style="font-family:"Times New Roman","serif""><span style="mso-list:Ignore">-<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>Matthew Ott, recent graduate Personal Financial Planning<o:p></o:p></p> <p class="MsoListParagraphCxSpLast" style="text-indent:-.25in;mso-list:l0 level1 lfo1"> <![if !supportLists]><span style="font-family:"Times New Roman","serif""><span style="mso-list:Ignore">-<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>Robert O. Weagley, PhD, CFP<sup>®</sup>, Personal Financial Planning<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> </div> MU Financial Successhttp://www.blogger.com/profile/14117781251967743442noreply@blogger.com0tag:blogger.com,1999:blog-5256277661009921780.post-87420055512152766352013-01-17T11:50:00.000-08:002013-01-18T03:00:03.170-08:00“We plan for what we can, and we figure it out as we go, too.”<div class="WordSection1"> <p class="MsoNormal">by Lucy Schrader<o:p></o:p></p> <p class="MsoNormal">It's the beginning of a new year, and I'm going through financial papers at home to prepare for taxes, clean files and look ahead for the coming year. I had our college fund statements out when my 9 year-old son asked what they were. Then of course, he wanted to know how much he had in his account. After I told him, he very dramatically told me, "Mom!! That's not enough. That's not anywhere CLOSE to enough. How can I go to college? I don't have a job. I don't have that kind of money!!"<o:p></o:p></p> <p class="MsoNormal">At first I was impressed—wow, he's actually developing a sense of how much things cost and learning that money doesn't grow on trees. My next actions were to try to help him realize that no, it's not anywhere near the full amount to cover college and that's ok; that we're saving what we can and will have more by the time he goes; that there are different ways to pay for college (scholarships, loans, that he may have to help pay for some of it with a job, but he'll gain new skills as he grows and can do more than he does now, etc); and that we will figure it out as we go. We do not have to have all of the answers right now.<o:p></o:p></p> <p class="MsoNormal">Now, being realistic, my very logical reasons did not completely calm him. What I hope, though, is that we're beginning those many conversations and repeated messages of "we plan for what we can, and we figure it out as we go, too."<o:p></o:p></p> <p class="MsoNormal">I also have to admit, that I had a gut wrenching moment just the week before–we're not saving enough; we don't have everything planned out; "they" [magazines, media, etc] say we need more. And that's where I get stuck. How on earth am I supposed to know how much I'll need in the future and in retirement? How can I truly guess at all of these things? I don't know for sure what tomorrow holds, let alone in 30 years. <o:p></o:p></p> <p class="MsoNormal">I also had to talk myself through those moments and remind myself of several points I found very comforting to follow from the book <i>The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money</i> by Carl Richards (I was also lucky enough to see him speak at the 2012 MU Financial Symposium). Mr. Richards, a <span style="font-variant:small-caps">Certified Financial Planner</span>™, reminds us that we cannot control everything. There are so many global and national events that happen that are out of our control, so we have to look at our personal lives and own financial lives and find what we do have control over. Have a plan, but be willing to adapt to the present situation. <o:p></o:p></p> <p class="MsoNormal">In his book, he relays a story that he was working with a client and asked the client how much was enough to save for the kids' college. The man replied that in his mind it's not about what's enough—it's about saving what he can at this time and that will be enough, because that is all he can do. In my "it's not enough" moment, I had to remind myself that, yes, we've got a plan. We're saving what we can. It might not be enough to cover all expenses, but it's what we CAN do right now. Maybe in a few years we can save more, but at this moment it's what is reasonable for our family. <o:p></o:p></p> <p class="MsoNormal">Mr. Richards also suggests that once you have a plan, focus on shorter time frames and look at the next year or two years (or the next day, week or month). Find what you can control in those time frames, since we don't know for sure what will happen in the future.<o:p></o:p></p> <p class="MsoNormal">Instead of thinking "I don't have enough saved," think "what can I control right now to stay the course on my plan?" One example might be, I can bring my lunch today instead of going out to eat to save money on the food bill. That in turn will help us save money for the college funds this month. Spending is easy and saving can be more difficult, so give yourself credit for these day-to-day actions. Instead of negative thinking that you are not saving more, shift your focus and thoughts to the positive, which helps reinforce the actions you want.<o:p></o:p></p> <p class="MsoNormal">When I or my son start down that negative path, we need to help each other to "keep calm and carry on." Have a financial plan and follow it as you can, but realize you might not have all of the answers. Follow through with things that make sense for your family. Small steps DO make a difference. <o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">Reference<o:p></o:p></p> <p class="MsoNormal">Richards, C. 2012. <i>The behavior gap: simple ways to stop doing dumb things with money</i>. Penguin group: New York.<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal"><span style="color:#006600">Lucy Schrader <br> HES Associate State Specialist and<br> Building Strong Families Program Coordinator <br> University of Missouri Extension <br> 162 Stanley Hall <br> Columbia, MO 65211 <br> 573-882-4071 or <a href="mailto:SchraderL@missouri.edu"><span style="color:black">SchraderL@missouri.edu</span></a> <o:p></o:p></span></p> <p class="MsoNormal"><span style="color:#006600"><a href="http://extension.missouri.edu/bsf"><span style="color:black">http://extension.missouri.edu/bsf</span></a></span><o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> </div> MU Financial Successhttp://www.blogger.com/profile/14117781251967743442noreply@blogger.com0tag:blogger.com,1999:blog-5256277661009921780.post-69497214059129475542013-01-09T09:13:00.000-08:002013-01-11T03:00:27.907-08:00The Affordable Care Act in Plain English<div class="WordSection1"> <p class="MsoNormal" style="mso-margin-top-alt:auto;margin-bottom:19.5pt;background:white"> <span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">by Ryan Law<o:p></o:p></span></p> <p class="MsoNormal" align="center" style="mso-margin-top-alt:auto;margin-bottom:19.5pt;text-align:center;background:white"> <span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">“<i>At the end of the day, what everyone wants is a way to make sure we’re taken care<br> of when we’re sick, and that it doesn’t ruin us financially to get that care</i>.”<br> – Jonathan Gruber, architect of the Affordable Care Act<o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;margin-bottom:19.5pt;background:white"> <span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">There is a lot of controversy, confusion, misunderstanding and unfortunately, even blatant lies in the media about what the Affordable Care Act (ACA or Obamacare) is and how it will affect you, your insurance coverage, and the amount you pay for insurance.<o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;margin-bottom:19.5pt;background:white"> <span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">Whether you like it or not the ACA is the law and it is important you understand what it is and how it relates to you and your family. After all, your health is one of your most important assets! <o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;margin-bottom:19.5pt;background:white"> <span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">My attempt with this article will be to describe, non-politically, what the ACA is in plain English. If you want to hear a partisan description of the law you can tune in to your favorite Liberal or Conservative commentator. Trust me; they have plenty to say about it!<o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;margin-bottom:19.5pt;background:white"> <b><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">Jonathan Gruber, Mr. Mandate</span></b><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737"><o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;margin-bottom:19.5pt;background:white"> <span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">The ACA was put together by Jonathan Gruber, an MIT Economist who has studied and analyzed the effects of health-care reform extensively. When Mitt Romney was governor of Massachusetts he called Gruber in to help design a health-care law for Massachusetts, which has become known as Romneycare.<o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;margin-bottom:19.5pt;background:white"> <span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">In 2008 Obama called on Gruber to help him design the ACA. Gruber has written extensively about the law. He says it is the opposite of public health care and that insurance companies like the law because they get more customers, especially young, healthy ones that will pay insurance but not need as much healthcare. He says that the most important provision of the ACA is the individual mandate – without requiring people to get insurance it doesn’t work. There will be more on the mandate later in this article.<o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;margin-bottom:19.5pt;background:white"> <b><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">Goals of the ACA</span></b><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737"><o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;margin-left:30.35pt;text-indent:-.25in;mso-list:l2 level1 lfo1;background:white"> <![if !supportLists]><span style="font-size:10.0pt;font-family:Wingdings;color:#373737"><span style="mso-list:Ignore">§<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">Decrease the number of uninsured Americans. There are currently 44 million uninsured Americans<a style="mso-footnote-id:ftn1" href="#_ftn1" name="_ftnref1" title=""><span class="MsoFootnoteReference"><span class="MsoFootnoteReference"><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737;mso-fareast-language:EN-US">[1]</span></span></span></a>, most of which are either young and they don’t think they need insurance, or they are poor and cannot afford insurance. The ACA should reduce this by 30 million.<o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;margin-left:30.35pt;text-indent:-.25in;mso-list:l2 level1 lfo1;background:white"> <![if !supportLists]><span style="font-size:10.0pt;font-family:Wingdings;color:#373737"><span style="mso-list:Ignore">§<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">Reduce health care costs<o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;margin-bottom:19.5pt;background:white"> <b><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">Important Provisions of the ACA</span></b><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737"><o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;margin-left:30.35pt;text-indent:-.25in;mso-list:l3 level1 lfo2;background:white"> <![if !supportLists]><span style="font-size:10.0pt;font-family:Wingdings;color:#373737"><span style="mso-list:Ignore">§<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><i><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">Pre-existing conditions</span></i><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">: Requires insurance companies to cover all applicants of the same age at the same rate, regardless of pre-existing conditions or gender. This provision is something that will be extremely beneficial to millions of people who were denied coverage due to a pre-existing condition.<o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;margin-left:30.35pt;text-indent:-.25in;mso-list:l3 level1 lfo2;background:white"> <![if !supportLists]><span style="font-size:10.0pt;font-family:Wingdings;color:#373737"><span style="mso-list:Ignore">§<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><i><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">Coverage up to age 26</span></i><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">: If you are under the age of 26 you can stay on your parent’s plan, regardless of whether you live at home or on your own, or are single or married.<o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;margin-left:30.35pt;text-indent:-.25in;mso-list:l3 level1 lfo2;background:white"> <![if !supportLists]><span style="font-size:10.0pt;font-family:Wingdings;color:#373737"><span style="mso-list:Ignore">§<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><i><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">Individual mandate</span></i><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">: This is one part of the law that the government was sued over and that went all the way to the Supreme Court<a style="mso-footnote-id:ftn2" href="#_ftn2" name="_ftnref2" title=""><span class="MsoFootnoteReference"><span class="MsoFootnoteReference"><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737;mso-fareast-language:EN-US">[2]</span></span></span></a>. Because the Supreme Court upheld the Constitutionality of the individual mandate it will go into effect in 2014. Essentially it says that if you don’t buy insurance you will be charged a $95 penalty or 1% of income (whichever is greater) in 2014. That amount will increase until it reaches $695 per person or 2.5% of income in 2016. Regardless of your family size you will never pay more than three times the penalty amount if all your family members are without insurance. However, if health care coverage would cost you more than 8% of your income you don’t have to pay the tax.<o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;margin-left:30.35pt;text-indent:-.25in;mso-list:l3 level1 lfo2;background:white"> <![if !supportLists]><span style="font-size:10.0pt;font-family:Wingdings;color:#373737"><span style="mso-list:Ignore">§<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><i><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">Health Insurance Exchanges</span></i><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">: By 2014 each state is required to set up a health insurance exchange (states that don’t set one up will use the national one) where consumers can compare health insurance policies and premiums.<o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;margin-left:30.35pt;text-indent:-.25in;mso-list:l3 level1 lfo2;background:white"> <![if !supportLists]><span style="font-size:10.0pt;font-family:Wingdings;color:#373737"><span style="mso-list:Ignore">§<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><i><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">Elimination of lifetime coverage caps</span></i><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">: In the past health insurance plans typically had a maximum you would be covered for over your lifetime. It was often as low as $1,000,000. With the ACA coverage caps were eliminated.<o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;margin-left:30.35pt;text-indent:-.25in;mso-list:l3 level1 lfo2;background:white"> <![if !supportLists]><span style="font-size:10.0pt;font-family:Wingdings;color:#373737"><span style="mso-list:Ignore">§<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><i><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">Businesses must offer insurance</span></i><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">: Businesses with 50 or more employees must offer health insurance or they will pay a $2000 fine per employee. They don’t have to provide it for employees working less than 30 hours a week. Businesses with less than 25 employees could qualify for a subsidy to offset the costs of insurance.<br> NOTE: Some companies have said they may have to lay off employees or reduce employee’s hours due to this portion of the law, the most famous of which was Papa John’s CEO John Schnatter. Schnatter later said he was taken out of context and plans to comply with the law and that his company is still doing analysis on how it will affect them.<o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;margin-left:30.35pt;text-indent:-.25in;mso-list:l3 level1 lfo2;background:white"> <![if !supportLists]><span style="font-size:10.0pt;font-family:Wingdings;color:#373737"><span style="mso-list:Ignore">§<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><i><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">Deductibles and out-of-pocket maximums</span></i><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">: Employer plans have a maximum annual deductible of $2000 per person, or $4000 for a family. By 2014 the out-of-pocket maximum per person is $6000 per person per-year (out-of-pocket includes your deductible and co-pays).<o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;margin-left:30.35pt;text-indent:-.25in;mso-list:l3 level1 lfo2;background:white"> <![if !supportLists]><span style="font-size:10.0pt;font-family:Wingdings;color:#373737"><span style="mso-list:Ignore">§<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><i><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">Preventive Care</span></i><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">: There will be no co-pay, co-insurance or deductibles for preventive care.<br> NOTE: This portion is sometimes referred to as the Contraceptive Mandate because under this portion of the law contraceptives and the “morning-after” pill must be free to people with insurance. Some groups, including the Catholic Church, have sued the government over this as they are religiously opposed to contraceptives. Other groups (Hobby Lobby being the largest) have sued the government because they are opposed to providing the morning-after pill to employees. There are currently 28 separate lawsuits about this provision. Under current rulings churches are exempt from providing contraceptives or morning-after pills, but church-run hospitals and schools are not exempt, and they were given until August 1, 2013 to comply. Hobby Lobby and others opposed to offering the morning-after pills were given until January 1, 2013 to comply or they will pay $1.3 million per day in penalties. Hobby Lobby has chosen to stand by its principles and pay the fine rather than offer the pill.<o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;margin-left:30.35pt;text-indent:-.25in;mso-list:l3 level1 lfo2;background:white"> <![if !supportLists]><span style="font-size:10.0pt;font-family:Wingdings;color:#373737"><span style="mso-list:Ignore">§<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><i><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">Insurance subsidies/tax credits</span></i><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">: The Central Budget Office has predicted that insurance premiums may go up 10-13% due to the ACA. To offset this, low-income Americans will not pay anything for health insurance, and many in the middle-class will get some form of tax credits. Individuals making between $14,400 and $43,320 and couples filing taxes jointly making between $29,330 and $88,200 will receive some tax credits.<o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;margin-left:30.35pt;text-indent:-.25in;mso-list:l3 level1 lfo2;background:white"> <![if !supportLists]><span style="font-size:10.0pt;font-family:Wingdings;color:#373737"><span style="mso-list:Ignore">§<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><i><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">Insurance company profits</span></i><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">: Insurance companies must pay out 80-85% of insurance premiums received in medical costs and can use 15-20% for administrative needs and profits.<o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;margin-bottom:19.5pt;background:white"> <b><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">Costs of the ACA</span></b><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737"><o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;margin-left:30.35pt;text-indent:-.25in;mso-list:l4 level1 lfo3;background:white"> <![if !supportLists]><span style="font-size:10.0pt;font-family:Wingdings;color:#373737"><span style="mso-list:Ignore">§<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">Jonathan Gruber claims that by his analysis the ACA should reduce the federal deficit by $143 billion by 2019 and by $1 trillion within 20 years.<a style="mso-footnote-id:ftn3" href="#_ftn3" name="_ftnref3" title=""><span class="MsoFootnoteReference"><span class="MsoFootnoteReference"><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737;mso-fareast-language:EN-US">[3]</span></span></span></a> <br> NOTE: Niall Ferguson in the August 19, 2012 Newsweek cover article<a style="mso-footnote-id:ftn4" href="#_ftn4" name="_ftnref4" title=""><span class="MsoFootnoteReference"><span class="MsoFootnoteReference"><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737;mso-fareast-language:EN-US">[4]</span></span></span></a> claimed that the CBO (Central Budget Office) and Joint Committee on Taxation have said net federal spending will be $1.2 trillion by 2022 even after all taxes and penalties have been collected. However, the CBO has actually said that it will decrease the deficit by more than they originally thought.<a style="mso-footnote-id:ftn5" href="#_ftn5" name="_ftnref5" title=""><span class="MsoFootnoteReference"><span class="MsoFootnoteReference"><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737;mso-fareast-language:EN-US">[5]</span></span></span></a><a style="mso-footnote-id:ftn6" href="#_ftn6" name="_ftnref6" title=""><span class="MsoFootnoteReference"><span class="MsoFootnoteReference"><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737;mso-fareast-language:EN-US">[6]</span></span></span></a> I believe the jury is still out on this one – in 2022 we will know for sure, but I struggle to see how it will actually reduce the deficit. I hope I am wrong, though!<o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;margin-bottom:19.5pt;background:white"> <b><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">Paying for the ACA</span></b><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737"><o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;margin-bottom:19.5pt;background:white"> <span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">The following taxes, fees and penalties have been put into place to help pay for the ACA:<o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;margin-left:30.35pt;text-indent:-.25in;mso-list:l1 level1 lfo4;background:white"> <![if !supportLists]><span style="font-size:10.0pt;font-family:Wingdings;color:#373737"><span style="mso-list:Ignore">§<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">.9% tax on incomes over $200,000 (individual) or $250,000 (family).<o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;margin-left:30.35pt;text-indent:-.25in;mso-list:l1 level1 lfo4;background:white"> <![if !supportLists]><span style="font-size:10.0pt;font-family:Wingdings;color:#373737"><span style="mso-list:Ignore">§<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">3.8% tax on unearned income over $200,000 (individual) or $250,000 (family).<o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;margin-left:30.35pt;text-indent:-.25in;mso-list:l1 level1 lfo4;background:white"> <![if !supportLists]><span style="font-size:10.0pt;font-family:Wingdings;color:#373737"><span style="mso-list:Ignore">§<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">Insurance providers will pay an annual fee.<o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;margin-left:30.35pt;text-indent:-.25in;mso-list:l1 level1 lfo4;background:white"> <![if !supportLists]><span style="font-size:10.0pt;font-family:Wingdings;color:#373737"><span style="mso-list:Ignore">§<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">Pharmaceutical companies and other companies that manufacture medical devices will pay taxes and fees.<o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;margin-left:30.35pt;text-indent:-.25in;mso-list:l1 level1 lfo4;background:white"> <![if !supportLists]><span style="font-size:10.0pt;font-family:Wingdings;color:#373737"><span style="mso-list:Ignore">§<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">The 7.5% AGI floor for itemized deductions is being raised to 10% (You can deduct your medical expenses if they exceed 7.5% of your Adjusted Gross Income and itemize deductions – that is being changed to more than 10% of your Adjusted Gross Income).<o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;background:white"><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737">I hope this article has helped you understand the law better and how it will affect your family and your insurance. I’m sure we will see more lawsuits and attempts to change portions of the law through legislation – if there are any major changes we will follow up with additional articles. <o:p></o:p></span></p> <p class="MsoNormal" style="mso-margin-top-alt:auto;background:white"><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#373737"><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">NOTE: If you are looking for more detailed information about the law I recommend you check out the following resources:<o:p></o:p></span></p> <p class="MsoListParagraphCxSpFirst" style="text-indent:-.25in;mso-list:l0 level1 lfo5"> <![if !supportLists]><span style="font-size:12.0pt;line-height:115%;font-family:Symbol;color:#373737"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif";color:#373737">HealthCare.gov – this website contains the most comprehensive information about the ACA: <a href="http://www.healthcare.gov/index.html">http://www.healthcare.gov/index.html</a>. <o:p></o:p></span></p> <p class="MsoListParagraphCxSpLast" style="text-indent:-.25in;mso-list:l0 level1 lfo5"> <![if !supportLists]><span style="font-size:12.0pt;line-height:115%;font-family:Symbol;color:#373737"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif";color:#373737">Gruber wrote a book titled <i>Health Care Reform: What It Is, Why It’s Necessary, How It Works</i>. This is actually a good book for understanding the ACA, and best of all, it is written in comic-book format. It’s worth checking out from your local library.<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal">Ryan H. Law, M.S., CFP®, AFC<span style="color:#1F497D">®</span><o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">Personal Financial Planning Department<o:p></o:p></p> <p class="MsoNormal">Office for Financial Success Director <o:p></o:p></p> <p class="MsoNormal">University of Missouri Center on Economic Education Director<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">162 Stanley Hall<o:p></o:p></p> <p class="MsoNormal">University of Missouri<o:p></o:p></p> <p class="MsoNormal">Columbia, MO 65211<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">573.882.9211 (office)<o:p></o:p></p> <p class="MsoNormal">573.884.8389 (fax)<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> </div> <div style="mso-element:footnote-list"><br clear="all"> <hr align="left" size="1" width="33%"> <div style="mso-element:footnote" id="ftn1"> <p style="background:white"><a style="mso-footnote-id:ftn1" href="#_ftnref1" name="_ftn1" title=""><span class="MsoFootnoteReference"><span class="MsoFootnoteReference"><span style="font-size:12.0pt;font-family:"Times New Roman","serif";mso-fareast-language:EN-US">[1]</span></span></span></a> <span style="font-size:11.5pt;font-family:"Helvetica","sans-serif";color:#373737"> <a href="http://www.pbs.org/healthcarecrisis/uninsured.html">http://www.pbs.org/healthcarecrisis/uninsured.html</a><o:p></o:p></span></p> </div> <div style="mso-element:footnote" id="ftn2"> <p style="background:white"><a style="mso-footnote-id:ftn2" href="#_ftnref2" name="_ftn2" title=""><span class="MsoFootnoteReference"><span class="MsoFootnoteReference"><span style="font-size:12.0pt;font-family:"Times New Roman","serif";mso-fareast-language:EN-US">[2]</span></span></span></a> <span style="font-size:11.5pt;font-family:"Helvetica","sans-serif";color:#373737"> <a href="http://www.supremecourt.gov/Search.aspx?FileName=/docketfiles/11-393.htm">http://www.supremecourt.gov/Search.aspx?FileName=/docketfiles/11-393.htm</a><o:p></o:p></span></p> </div> <div style="mso-element:footnote" id="ftn3"> <p class="MsoFootnoteText"><a style="mso-footnote-id:ftn3" href="#_ftnref3" name="_ftn3" title=""><span class="MsoFootnoteReference"><span class="MsoFootnoteReference"><span style="font-size:10.0pt;font-family:"Calibri","sans-serif";mso-fareast-language:EN-US">[3]</span></span></span></a> <span style="font-size:11.5pt;font-family:"Helvetica","sans-serif";color:#373737"> Gruber, J., Health Care Reform: What It Is, Why It’s Necessary, How It Works, 2011 ISBN: 0809053977</span><o:p></o:p></p> </div> <div style="mso-element:footnote" id="ftn4"> <p class="MsoFootnoteText"><a style="mso-footnote-id:ftn4" href="#_ftnref4" name="_ftn4" title=""><span class="MsoFootnoteReference"><span class="MsoFootnoteReference"><span style="font-size:10.0pt;font-family:"Calibri","sans-serif";mso-fareast-language:EN-US">[4]</span></span></span></a> <span style="font-size:11.5pt;font-family:"Helvetica","sans-serif";color:#373737"> <a href="http://www.thedailybeast.com/newsweek/2012/08/19/niall-ferguson-on-why-barack-obama-needs-to-go.html">http://www.thedailybeast.com/newsweek/2012/08/19/niall-ferguson-on-why-barack-obama-needs-to-go.html</a></span><o:p></o:p></p> </div> <div style="mso-element:footnote" id="ftn5"> <p class="MsoFootnoteText"><a style="mso-footnote-id:ftn5" href="#_ftnref5" name="_ftn5" title=""><span class="MsoFootnoteReference"><span class="MsoFootnoteReference"><span style="font-size:10.0pt;font-family:"Calibri","sans-serif";mso-fareast-language:EN-US">[5]</span></span></span></a> <span style="font-size:11.5pt;font-family:"Helvetica","sans-serif";color:#373737"> <a href="http://www.washingtonpost.com/blogs/wonkblog/post/cbo-health-reform-to-cut-deficit-by-50-billion-more-than-we-thought/2011/08/25/gIQAXgPSES_blog.html">http://www.washingtonpost.com/blogs/wonkblog/post/cbo-health-reform-to-cut-deficit-by-50-billion-more-than-we-thought/2011/08/25/gIQAXgPSES_blog.html</a></span><o:p></o:p></p> </div> <div style="mso-element:footnote" id="ftn6"> <p class="MsoFootnoteText"><a style="mso-footnote-id:ftn6" href="#_ftnref6" name="_ftn6" title=""><span class="MsoFootnoteReference"><span class="MsoFootnoteReference"><span style="font-size:10.0pt;font-family:"Calibri","sans-serif";mso-fareast-language:EN-US">[6]</span></span></span></a> <span style="font-size:11.5pt;font-family:"Helvetica","sans-serif";color:#373737"> <a href="http://www.cbo.gov/publication/43472">http://www.cbo.gov/publication/43472</a></span><o:p></o:p></p> </div> </div> MU Financial Successhttp://www.blogger.com/profile/14117781251967743442noreply@blogger.com6tag:blogger.com,1999:blog-5256277661009921780.post-85394612614711336832012-12-13T13:53:00.000-08:002012-12-14T03:00:01.872-08:00Survey about Financial Tip<div class="WordSection1"> <p class="MsoNormal">First, we wish you and your family a happy holiday season from all of us at the University of Missouri.<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">Second, we are looking for some feedback from you, our readers. We have put together a small survey that asks some simple questions. All feedback is a gift; we would like to know what you want to read more about, what format you would like the information in, and, finally, anything else you would like to pass on to us. <o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">Here is the survey: <a href="http://goo.gl/PcZ8I">http://goo.gl/PcZ8I</a> <o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">Thank you for reading our tips this year, and we look forward to offering even more in the New Year based on your feedback.<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">Personal Financial Planning Department<o:p></o:p></p> <p class="MsoNormal">University of Missouri<o:p></o:p></p> </div> MU Financial Successhttp://www.blogger.com/profile/14117781251967743442noreply@blogger.com1tag:blogger.com,1999:blog-5256277661009921780.post-34977686743309951992012-12-06T13:07:00.000-08:002012-12-07T03:00:03.826-08:00Safe Holiday Shopping Online<div class="WordSection1"> <p class="MsoNormal">By Ryan Law<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">Black Friday and Cyber Monday have come and gone and according to the stats, it appears it was (another) record-breaking weekend:<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoListParagraphCxSpFirst" style="text-indent:-.25in;mso-list:l0 level1 lfo1"> <![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>The National Retail Federation reports that we spent about $52 billion on Black Friday.<a style="mso-endnote-id:edn1" href="#_edn1" name="_ednref1" title=""><span class="MsoEndnoteReference"><span class="MsoEndnoteReference"><span style="font-size:11.0pt;font-family:"Calibri","sans-serif";mso-fareast-language:EN-US">[i]</span></span></span></a><o:p></o:p></p> <p class="MsoListParagraphCxSpLast" style="text-indent:-.25in;mso-list:l0 level1 lfo1"> <![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>IBM, who tracks online transaction sales, reported that we spent between $1.5 and $2 billion on Cyber Monday.<a style="mso-endnote-id:edn2" href="#_edn2" name="_ednref2" title=""><span class="MsoEndnoteReference"><span class="MsoEndnoteReference"><span style="font-size:11.0pt;font-family:"Calibri","sans-serif";mso-fareast-language:EN-US">[ii]</span></span></span></a><o:p></o:p></p> <p class="MsoNormal">I personally am not a big fan of Black Friday, especially now that it is creeping onto Thanksgiving. I went through the ads and nothing really jumped out at me (except a ShopVac that I bought from Lowe’s, on Black Friday, but I purchased it online and they shipped it for free to my house), and I am not a fan of standing in line for hours in the cold or being trampled or assaulted by people fighting over a phone, but that’s beside the point.<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">Today’s Tip is about the remaining shopping that you will be doing. A lot of people will shop online for gifts, and I want to make sure you do so safely.<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">Here are five tips for sale holiday online shopping:<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoListParagraph" style="text-indent:-.25in;mso-list:l1 level1 lfo2"><![if !supportLists]><span style="mso-list:Ignore">1.<span style="font:7.0pt "Times New Roman""> </span></span><![endif]>Be sure the website’s purchase page is secure. It doesn’t matter if the rest of the site is secure or not, but be sure the page where you enter your credit card is secure. Here’s how you can tell – the browser should say https instead of http, and you should see a lock icon somewhere on the page. Here is what the Amazon.com sales page looks like:<o:p></o:p></p> <p class="MsoNormal"><!--[if gte vml 1]><v:shapetype id="_x0000_t75" coordsize="21600,21600" o:spt="75" o:preferrelative="t" path="m@4@5l@4@11@9@11@9@5xe" filled="f" stroked="f"> <v:stroke joinstyle="miter" /> <v:formulas> <v:f eqn="if lineDrawn pixelLineWidth 0" /> <v:f eqn="sum @0 1 0" /> <v:f eqn="sum 0 0 @1" /> <v:f eqn="prod @2 1 2" /> <v:f eqn="prod @3 21600 pixelWidth" /> <v:f eqn="prod @3 21600 pixelHeight" /> <v:f eqn="sum @0 0 1" /> <v:f eqn="prod @6 1 2" /> <v:f eqn="prod @7 21600 pixelWidth" /> <v:f eqn="sum @8 21600 0" /> <v:f eqn="prod @7 21600 pixelHeight" /> <v:f eqn="sum @10 21600 0" /> </v:formulas> <v:path o:extrusionok="f" gradientshapeok="t" o:connecttype="rect" /> <o:lock v:ext="edit" aspectratio="t" /> </v:shapetype><v:shape id="Picture_x0020_1" o:spid="_x0000_s1026" type="#_x0000_t75" style='position:absolute;margin-left:82.5pt;margin-top:4.85pt;width:315pt;height:28pt;z-index:-251657216;visibility:visible;mso-wrap-style:square;mso-width-percent:0;mso-height-percent:0;mso-wrap-distance-left:9pt;mso-wrap-distance-top:0;mso-wrap-distance-right:9pt;mso-wrap-distance-bottom:0;mso-position-horizontal:absolute;mso-position-horizontal-relative:text;mso-position-vertical:absolute;mso-position-vertical-relative:text;mso-width-percent:0;mso-height-percent:0;mso-width-relative:page;mso-height-relative:page'> <v:imagedata src="cid:image001.jpg@01CDD3C3.6B140510" o:title="" /> <w:wrap type="through"/> </v:shape><![endif]--><![if !vml]><a href="http://2.bp.blogspot.com/-5DaRTkohFvY/UMHMNNCuz3I/AAAAAAAAAGU/gXi5zktnGnU/s1600/image002-703826.jpg"><img src="http://2.bp.blogspot.com/-5DaRTkohFvY/UMHMNNCuz3I/AAAAAAAAAGU/gXi5zktnGnU/s320/image002-703826.jpg" border="0" alt="" id="BLOGGER_PHOTO_ID_5819156720750874482" /></a><![endif]><o:p></o:p></p> <p class="MsoNormal" style="margin-left:.5in"><o:p> </o:p></p> <p class="MsoNormal" style="text-indent:.5in"><o:p> </o:p></p> <p class="MsoNormal" style="text-indent:.5in">You can see both the https and the lock icon, which means it is a secure page.<br> <br> <o:p></o:p></p> <p class="MsoListParagraphCxSpFirst" style="text-indent:-.25in;mso-list:l1 level1 lfo2"> <![if !supportLists]><span style="mso-list:Ignore">2.<span style="font:7.0pt "Times New Roman""> </span></span><![endif]>Don’t purchase items from e-mails unless you can verify where they came from. I get deals in my inbox from Walmart, Target, Amazon and many other reputable companies. E-mail marketing is cheap and effective. However, I also get deals like this one:<br> <br> “Get the New 32GB iPad Sold for $31.08!”<br> <br> This is from an e-mail send by “Adison Greg” from some website that no one has ever heard of. When you get those emails don’t click any links in them, including the “unsubscribe” link. Delete them immediately! They are Spam and many have some kind of virus. If you don’t click on them you will be safe. <br> <br> <o:p></o:p></p> <p class="MsoListParagraphCxSpMiddle" style="text-indent:-.25in;mso-list:l1 level1 lfo2"> <![if !supportLists]><span style="mso-list:Ignore">3.<span style="font:7.0pt "Times New Roman""> </span></span><![endif]>Use your credit card to purchase online. Never trust a website that doesn’t accept credit cards, or that encourages you to pay using Western Union or something like that. Your credit card has protection built in, as do websites like PayPal. If you never receive the item, you can file a dispute and your credit card company won’t charge you for the item.<br> <br> <o:p></o:p></p> <p class="MsoListParagraphCxSpMiddle" style="text-indent:-.25in;mso-list:l1 level1 lfo2"> <![if !supportLists]><span style="mso-list:Ignore">4.<span style="font:7.0pt "Times New Roman""> </span></span><![endif]>This is a tip I almost learned the hard way – I got an email saying that my purchase of 2 Nexus 7 tablets being sent to California from Walmart had been cancelled because they couldn’t verify the shipping address. Concerned, I logged into my Walmart account and sure enough, there was an order for two Nexus 7 tablets that were scheduled to be sent to some random address in California. After doing some research I found that this isn’t uncommon – hackers get into the databases of these websites and can try to order things using your account. This only works if your credit card is stored on the website. Walmart.com, for example, stores your card without asking if you want it stored – they do it automatically. <br> <br> I immediately changed my password and deleted my credit card from their system. I no longer store credit cards on any websites – it only takes a minute to enter the card number and I feel more secure that way. Each time I purchase on Walmart.com now I immediately go to my account and delete the credit card number.<br> <br> <o:p></o:p></p> <p class="MsoListParagraphCxSpLast" style="text-indent:-.25in;mso-list:l1 level1 lfo2"> <![if !supportLists]><span style="mso-list:Ignore">5.<span style="font:7.0pt "Times New Roman""> </span></span><![endif]>Consider purchasing pre-paid shopping cards to purchase online. I know some people don’t like to use their personal credit card online, so they purchase pre-paid shopping cards and use that for all their Holiday shopping. A bonus is that you can set your limit and not spend any more than that.<o:p></o:p></p> <p class="MsoNormal">Like many of you I do quite a bit of online shopping and will continue to do so. If you will follow today’s tips (especially tips 1-4) you can shop online with confidence.<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">Ryan H. Law, M.S., CFP®, AFC<span style="color:#1F497D">®</span><o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">Personal Financial Planning Department<o:p></o:p></p> <p class="MsoNormal">Office for Financial Success Director <o:p></o:p></p> <p class="MsoNormal">University of Missouri Center on Economic Education Director<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">162 Stanley Hall<o:p></o:p></p> <p class="MsoNormal">University of Missouri<o:p></o:p></p> <p class="MsoNormal">Columbia, MO 65211<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">573.882.9211 (office)<o:p></o:p></p> <p class="MsoNormal">573.884.8389 (fax)<o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> </div> <div style="mso-element:endnote-list"><br clear="all"> <hr align="left" size="1" width="33%"> <div style="mso-element:endnote" id="edn1"> <p class="MsoEndnoteText"><a style="mso-endnote-id:edn1" href="#_ednref1" name="_edn1" title=""><span class="MsoEndnoteReference"><span class="MsoEndnoteReference"><span style="font-size:10.0pt;font-family:"Calibri","sans-serif";mso-fareast-language:EN-US">[i]</span></span></span></a> <a href="http://www.nrf.com/modules.php?name=News&op=viewlive&sp_id=1260">http://www.nrf.com/modules.php?name=News&op=viewlive&sp_id=1260</a> <o:p></o:p></p> </div> <div style="mso-element:endnote" id="edn2"> <p class="MsoEndnoteText"><a style="mso-endnote-id:edn2" href="#_ednref2" name="_edn2" title=""><span class="MsoEndnoteReference"><span class="MsoEndnoteReference"><span style="font-size:10.0pt;font-family:"Calibri","sans-serif";mso-fareast-language:EN-US">[ii]</span></span></span></a> <a href="http://www.pfsweb.com/blog/cyber-monday-2012-the-results/">http://www.pfsweb.com/blog/cyber-monday-2012-the-results/</a> <o:p></o:p></p> </div> </div> MU Financial Successhttp://www.blogger.com/profile/14117781251967743442noreply@blogger.com3tag:blogger.com,1999:blog-5256277661009921780.post-88081012322571666662012-11-29T13:19:00.000-08:002012-11-30T03:00:02.451-08:00Is the Fiscal Cliff a Double-Black Diamond?<div class="WordSection1"> <p class="MsoNormal"><span style="font-size:12.0pt">In my younger years, I did not ski. In my mid-forties, I finally learned to ski and loved it - before my knees began to whine. When you ski, you begin on the easiest slopes; those marked with a green circle, progress to blue squared, intermediate slopes and then to those marked with a black diamond. Only the very accomplished skiers, however, ski the double-black diamond trails. I recall looking down these trails and thinking that they looked like a cliff, going straight down. I marveled, however, at how exceptionally talented skiers could traverse the mountain on these trails and succeed in making it to the bottom. The United States, I believe, is like the experienced skier, when dealing with fiscal challenges.<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt"><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt">We face what the media is calling a “fiscal cliff”. While the “cliff” is a formidable challenge with a FY 2012 federal budget deficit of $1.1 trillion (7.3% of gross domestic product (GDP)) and total public debt of 72.8% of GDP. Projected growth in costs, under current benefits, in Medicare, Social Security, and Medicaid is projected by the Congressional Budget Office to create a federal budget deficit that grows from 7.3% to 12% of gross domestic product by 2022 – adding to total federal public debt<sup>*</sup>. Does this mean we will soon be thrust off the fiscal cliff or will we learn to traverse the steep and dangerous trail in front of us? I believe we will do the latter. Why?<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt"><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt">If last year’s Budget Control Act takes effect, federal discretionary spending will drop from 8.3% in 2012 to a post World War II low of 5.6% in 2022. Regardless, total federal outlays will continue to grow, as a result of entitlements, and reach 21.3% of GDP in 2018-19. If this is addressed with tax increases, the entitlement squeeze will be deferred but not eliminated. Moreover, total federal revenue will approach 20% of GDP, compared to 15.5%, currently. Budget deficits will shrink and federal debt will fall, until the growth in Medicare and Medicaid expenditures overtakes the tax increases. Thus, we have not averted disaster. We have simply passed it on to our children. We turn our skis….<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt"><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt">Alternatively, we defer all spending cuts, let discretionary spending grow with GDP, and watch total federal outlays approach 25% of GDP by 2022. If this is coupled with no tax increases for those making less than $250,000 with upper-income and investment income tax rates rising, as is currently scheduled to occur in 2013, we would see federal revenues rise. Under this scenario, total federal debt will continue to grow at a rate faster than the economy, although the annual budget deficit would decrease due to the growth in revenues. As we’ve seen in our European cousins, the rising overall debt burden will cripple the economy, especially if interest rates begin to increase with a strengthening economy. Thus, we must turn our skis….<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt"><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt">The way before us is steep, if we accept the inference that our federal budget is on a dangerous path. There are wide differences of opinion with respect to answers. The population voted with President Obama to increase taxes on the high income but revenues need to increase to over 20% of GDP in the early 2020s to avert disaster. The population will likely not accept this scenario, if they think others are benefiting at their expense. Thus, compromise must follow.<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt"><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt">Taxes will be increased and the growth in entitlement spending will be slowed. Benefits for expenditures such as Medicare, Medicaid, and Social Security, will be slowed. This will be done, regardless of the effect on the electability of our representatives. Eventually, leadership will arise in our “leaders” and hard decisions made. Areas of discretionary expenditures, such as the military, education, basic research, agriculture, among others will be forced to experience slower levels of growth, while some entitlement spending is reduced or, perhaps eliminated – such as increasing the age for Medicare and Social Security eligibility. This approach – to combine the “left” leg (tax increases) with a parallel move by the “right” leg (spending decreases) will allow our nation to safely negotiate this slippery slope. We will safely descend the mountain and avert financial and political disaster. <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt"><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt">We have no choice.<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt"><o:p> </o:p></span></p> <p class="MsoNormal"><sup><span style="font-size:12.0pt">*</span></sup><span style="font-size:12.0pt"> Much of these data came from Alan Levenson, Chief Economist at T. Rowe Price. It is contained in the T. Rowe Price Report Number 117, from fall 2012.<o:p></o:p></span></p> <p class="MsoNormal" align="center" style="mso-margin-bottom-alt:auto;text-align:center;line-height:18.0pt"> <b><span style="font-size:10.0pt;font-family:"Verdana","sans-serif";color:#1F497D">"Coming together is a beginning. Keeping together is progress. </span></b><b><span style="font-size:10.0pt;font-family:"Verdana","sans-serif";color:#1F497D"><br> </span></b><b><span style="font-size:10.0pt;font-family:"Verdana","sans-serif";color:#1F497D">Working together is success." </span></b><b><span style="font-size:10.0pt;font-family:"Verdana","sans-serif"">— Henry Ford</span></b><o:p></o:p></p> </div> MU Financial Successhttp://www.blogger.com/profile/14117781251967743442noreply@blogger.com0tag:blogger.com,1999:blog-5256277661009921780.post-6928573235766328852012-11-13T10:41:00.000-08:002012-11-16T03:00:03.528-08:00Buying a home? Consider homebuyer assistance programs<div class="WordSection1"> <p class="MsoNormal"><i><span style="font-size:10.0pt;line-height:115%">Graham McCaulley, Extension Associate, MU Personal Financial Planning Extension <o:p></o:p></span></i></p> <p style="line-height:140%;background:white"><span style="font-size:10.0pt;line-height:140%;font-family:"Calibri","sans-serif"">You’ve examined your monthly budget and determined how much home you can afford. You’ve been house hunting and have an idea of what you’re looking for. You’ve even begun to shop mortgages. All these are necessary steps that most people take before buying a home, but not everyone checks into homebuyer assistance programs. For certain people, such as first-time homebuyers, those with low- to moderate incomes, veterans, or those living in rural areas, these programs can make getting into a home a little less costly.<o:p></o:p></span></p> <p style="line-height:140%;background:white"><span style="font-size:10.0pt;line-height:140%;font-family:"Calibri","sans-serif"">Overall, the main benefit most homebuyer assistance programs provide for homebuyers are lower down payments, lower interest rates, and lower mortgage insurance costs than some may encounter with traditional mortgages. For example, with traditional financing (e.g., bank or credit union not participating in a homebuyer assistance program) you will usually have to come up with a minimum of 3% of a home’s value for a down payment as well as various closing costs ranging from about 1-4% of a home’s price. Also, if your down payment is less than 20%, you will have to pay for private mortgage insurance (PMI). The </span><span style="font-size:10.0pt;line-height:140%;font-family:"Calibri","sans-serif"">PMI premium is paid monthly as part of your mortgage payment and will be more expensive </span><span style="font-size:10.0pt;line-height:140%;font-family:"Calibri","sans-serif"">the smaller your down payment is. </span><span style="font-size:10.0pt;line-height:140%;font-family:"Calibri","sans-serif""><o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:10.0pt;line-height:115%">The chart below outlines some homebuyer assistance programs that help cut down on the costs associated with buying a home:<o:p></o:p></span></p> <table class="MsoTableGrid" border="1" cellspacing="0" cellpadding="0" width="678" style="margin-left:-17.1pt;border-collapse:collapse;border:none"> <tbody> <tr> <td width="84" valign="top" style="width:63.0pt;border:solid windowtext 1.0pt;background:#D9D9D9;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" align="center" style="margin-bottom:0in;margin-bottom:.0001pt;text-align:center;line-height:normal"> <b><span style="font-size:9.0pt">Program<o:p></o:p></span></b></p> </td> <td width="90" valign="top" style="width:67.5pt;border:solid windowtext 1.0pt;border-left:none;background:#D9D9D9;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" align="center" style="margin-bottom:0in;margin-bottom:.0001pt;text-align:center;line-height:normal"> <b><span style="font-size:9.0pt">Backed By<o:p></o:p></span></b></p> </td> <td width="132" valign="top" style="width:99.0pt;border:solid windowtext 1.0pt;border-left:none;background:#D9D9D9;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" align="center" style="margin-bottom:0in;margin-bottom:.0001pt;text-align:center;line-height:normal"> <b><span style="font-size:9.0pt">Benefits<o:p></o:p></span></b></p> </td> <td width="138" valign="top" style="width:103.5pt;border:solid windowtext 1.0pt;border-left:none;background:#D9D9D9;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" align="center" style="mso-margin-top-alt:0in;margin-right:8.15pt;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;text-align:center;line-height:normal"> <b><span style="font-size:9.0pt">Who’s Eligible?<o:p></o:p></span></b></p> </td> <td width="84" valign="top" style="width:63.0pt;border:solid windowtext 1.0pt;border-left:none;background:#D9D9D9;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" align="center" style="margin-bottom:0in;margin-bottom:.0001pt;text-align:center;line-height:normal"> <b><span style="font-size:9.0pt">Down Payment Requirement<o:p></o:p></span></b></p> </td> <td width="150" valign="top" style="width:112.5pt;border:solid windowtext 1.0pt;border-left:none;background:#D9D9D9;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" align="center" style="margin-bottom:0in;margin-bottom:.0001pt;text-align:center;line-height:normal"> <b><span style="font-size:9.0pt">General<o:p></o:p></span></b></p> <p class="MsoNormal" align="center" style="margin-bottom:0in;margin-bottom:.0001pt;text-align:center;line-height:normal"> <b><span style="font-size:9.0pt">Requirements<o:p></o:p></span></b></p> </td> </tr> <tr> <td width="84" valign="top" style="width:63.0pt;border:solid windowtext 1.0pt;border-top:none;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">Good Neighbor Next Door Program <o:p></o:p></span></p> </td> <td width="90" valign="top" style="width:67.5pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">US Department of Housing and Urban Development (HUD)<o:p></o:p></span></p> </td> <td width="132" valign="top" style="width:99.0pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">HUD owned homes in revitalization areas may be purchased for only 50% of their appraised value.<o:p></o:p></span></p> </td> <td width="138" valign="top" style="width:103.5pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">Law enforcement officers, teachers (pre-Kindergarten through 12th grade) firefighters/emergency medical technicians.<o:p></o:p></span></p> </td> <td width="84" valign="top" style="width:63.0pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">If you qualify for any FHA-insured mortgage program, your down payment is only $100 and you may finance closing costs.<o:p></o:p></span></p> </td> <td width="150" valign="top" style="width:112.5pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">You must commit to living in the home as your sole residence for 3 years. During this time, you must have a second mortgage and note for the discount (i.e., 50% of the home’s value), although no interest or payments are required. After 36 months the second mortgage is released.<o:p></o:p></span></p> </td> </tr> <tr> <td width="84" valign="top" style="width:63.0pt;border:solid windowtext 1.0pt;border-top:none;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">First Place Homebuyer Program (Missouri)<o:p></o:p></span></p> </td> <td width="90" valign="top" style="width:67.5pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">Missouri Housing Development Commission<o:p></o:p></span></p> <p class="MsoNormal" align="center" style="margin-bottom:0in;margin-bottom:.0001pt;text-align:center;line-height:normal"> <span style="font-size:9.0pt"><o:p> </o:p></span></p> </td> <td width="132" valign="top" style="width:99.0pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">Two types of loans offered:<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">1) Cash Assistance: 3% of house price to use towards down payment or closing costs<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">2) Non-Cash Assistance: no cash assistance, but loan offers a lower interest rate (currently 3% on 30-yr fixed loan). <o:p></o:p></span></p> </td> <td width="138" valign="top" style="width:103.5pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">First-time homebuyers and qualifying veterans who meet household income limits and have qualifying credit.<o:p></o:p></span></p> </td> <td width="84" valign="top" style="width:63.0pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">None for cash assistance loan.<o:p></o:p></span></p> </td> <td width="150" valign="top" style="width:112.5pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal;text-autospace:none"> <span style="font-size:9.0pt">Must live in home for 5 years. Cash assistance will be in the form of a 0% interest second mortgage that requires no payments and will be forgiven after 5 years of occupancy.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt"><o:p> </o:p></span></p> </td> </tr> <tr> <td width="84" valign="top" style="width:63.0pt;border:solid windowtext 1.0pt;border-top:none;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">Rural Development Loans<o:p></o:p></span></p> </td> <td width="90" valign="top" style="width:67.5pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">US Department of Agriculture (USDA)<o:p></o:p></span></p> </td> <td width="132" valign="top" style="width:99.0pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">Low- and moderate-income individuals purchasing homes in rural areas.</span><span style="font-size:9.0pt"><o:p></o:p></span></p> </td> <td width="138" valign="top" style="width:103.5pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">100% financing, lower interest rates, and low cost PMI. The USDA offers guaranteed loans (for more moderate-income borrowers) as well as direct loans (for lower-income borrowers).<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt"><o:p> </o:p></span></p> </td> <td width="84" valign="top" style="width:63.0pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">No down payment requirement. Loan amount can include 100% of purchase price as well as closing costs<o:p></o:p></span></p> </td> <td width="150" valign="top" style="width:112.5pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">Home must be in an eligible rural area, as determined by the USDA. It’s important to note that </span><span style="font-size:9.0pt;color:#535353">many areas just outside major metropolitan areas will still qualify as rural. </span><span style="font-size:9.0pt">You will have to pay a one-time USDA fee of 3.5% of the loan amount, which can be added to the loan.<o:p></o:p></span></p> </td> </tr> <tr> <td width="84" valign="top" style="width:63.0pt;border:solid windowtext 1.0pt;border-top:none;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">HomePath<o:p></o:p></span></p> </td> <td width="90" valign="top" style="width:67.5pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">Fannie Mae<o:p></o:p></span></p> </td> <td width="132" valign="top" style="width:99.0pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">Available to those who will live in the homes as well as investors (occupiers have the chance to purchase homes before investors). <o:p></o:p></span></p> </td> <td width="138" valign="top" style="width:103.5pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">HomePath mortgages are available on homes owned by Fannie Mae (usually foreclosed homes). These loans offer </span><span style="font-size:9.0pt;color:#535353">a low down payment, no lender-requested appraisal and no mortgage insurance</span><span style="font-size:9.0pt"><o:p></o:p></span></p> </td> <td width="84" valign="top" style="width:63.0pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">3%<o:p></o:p></span></p> </td> <td width="150" valign="top" style="width:112.5pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">If buying the home as an owner-occupier (i.e., buying before investors are allowed to), you must live in the home as your primary residence for 1 year. <o:p></o:p></span></p> </td> </tr> <tr style="height:154.3pt"> <td width="84" valign="top" style="width:63.0pt;border:solid windowtext 1.0pt;border-top:none;padding:0in 5.4pt 0in 5.4pt;height:154.3pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">VA Home Loan Program<o:p></o:p></span></p> </td> <td width="90" valign="top" style="width:67.5pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;height:154.3pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">US Department of Veterans Affairs (VA)<o:p></o:p></span></p> </td> <td width="132" valign="top" style="width:99.0pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;height:154.3pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">Veterans, active duty personnel, certain reservists and National Guard members, surviving spouses of persons who die on active duty or die as a result of service-connected disabilities, and certain spouses of active duty personnel<o:p></o:p></span></p> </td> <td width="138" valign="top" style="width:103.5pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;height:154.3pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal;text-autospace:none"> <span style="font-size:9.0pt">100% financing and no PMI required. VA rules also limit the amount you can be charged for closing costs.<o:p></o:p></span></p> </td> <td width="84" valign="top" style="width:63.0pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;height:154.3pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">No down payment requirement.<o:p></o:p></span></p> </td> <td width="150" valign="top" style="width:112.5pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;height:154.3pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">You will be charged a VA funding fee that will range from .5 to 3.3%. This fee can be included in your loan amount. If you receive service-connected disability payments each month, you're exempt from the fee. You must live in the home as your primary residence. </span><span style="font-size:9.0pt"><o:p></o:p></span></p> </td> </tr> <tr style="height:154.3pt"> <td width="84" valign="top" style="width:63.0pt;border:solid windowtext 1.0pt;border-top:none;padding:0in 5.4pt 0in 5.4pt;height:154.3pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">FHA 203(b) Mortgage Insurance<o:p></o:p></span></p> </td> <td width="90" valign="top" style="width:67.5pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;height:154.3pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">Federal Housing Administration (FHA)<o:p></o:p></span></p> </td> <td width="132" valign="top" style="width:99.0pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;height:154.3pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">Provides mortgage insurance for those purchasing or refinancing a principal residence. The mortgage loan is funded by a lending institution, and the mortgage is insured by the FHA (which is part of HUD) so your lender can offer you a better deal.</span><span style="font-size:9.0pt"><o:p></o:p></span></p> </td> <td width="138" valign="top" style="width:103.5pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;height:154.3pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">Wide availability- You don't have to have a perfect credit score to get an FHA mortgage. In fact, even if you have had credit problems, such as a bankruptcy, it's easier for you to qualify for an FHA loan than a conventional loan.</span><span style="font-size:9.0pt"><o:p></o:p></span></p> </td> <td width="84" valign="top" style="width:63.0pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;height:154.3pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">3.5% of purchase price.<o:p></o:p></span></p> </td> <td width="150" valign="top" style="width:112.5pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;height:154.3pt"> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal"> <span style="font-size:9.0pt">FHA does not provide direct financing nor does it set the interest rates on the mortgages it insures. For more information find an FHA approved lender in your area by going to: </span><span style="font-size:9.0pt"><a href="http://www.hud.gov/ll/code/llslcrit.html" target="new">http://www.hud.gov/ll/code/llslcrit.html</a></span><span style="font-size:9.0pt"><o:p></o:p></span></p> <p class="MsoNormal" align="center" style="margin-bottom:0in;margin-bottom:.0001pt;text-align:center;line-height:normal"> <span style="font-size:9.0pt"><o:p> </o:p></span></p> </td> </tr> </tbody> </table> <p class="MsoNormal"><span style="font-size:9.0pt;line-height:115%"><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:10.0pt;line-height:115%">The above chart is not an exhaustive list of homebuyer assistance programs. Home loan and down payment assistance programs </span><span style="font-size:10.0pt;line-height:115%">vary by state, as many</span><span style="font-size:10.0pt;line-height:115%"> are </span><span style="font-size:10.0pt;line-height:115%">sponsored by state/local governments or other organizations. For a list of specific programs by state, visit </span><a href="http://www.hud.gov/buying/localbuying.cfm"><span style="font-size:10.0pt;line-height:115%">http://www.hud.gov/buying/localbuying.cfm</span></a><span style="font-size:10.0pt;line-height:115%">. <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:10.0pt;line-height:115%">No matter where you are in the home buying process, it’s a good idea to familiarize yourself with common buying and financing procedures as well as to think critically about how much home you can afford. You can find articles on these issues in the housing section of MU HES Extension’s <i>Money Matters </i>website (</span><a href="http://missourifamilies.org/features/financearticles/housing.htm"><span style="font-size:10.0pt;line-height:115%">http://missourifamilies.org/features/financearticles/housing.htm</span></a><span style="font-size:10.0pt;line-height:115%">). <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:10.0pt;line-height:115%">For more information on the assistance programs outlined above, including how to apply for the programs, visit the following links:<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:10.0pt;line-height:115%">HUD “Good Neighbor Next Door” Program: </span><a href="http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/reo/goodn/gnndabot"><span style="font-size:10.0pt;line-height:115%">http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/reo/goodn/gnndabot</span></a><span style="font-size:10.0pt;line-height:115%"><o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:10.0pt;line-height:115%">MHDC “First Place Homebuyer Program: </span><a href="http://www.mhdc.com/homes/firstplaceloans/index.htm"><span style="font-size:10.0pt;line-height:115%">http://www.mhdc.com/homes/firstplaceloans/index.htm</span></a><span style="font-size:10.0pt;line-height:115%"> <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:10.0pt;line-height:115%">Federal Housing Administration (FHA) Mortgage Insurance:<o:p></o:p></span></p> <p class="MsoNormal"><a href="http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/ins/sfh203b"><span style="font-size:10.0pt;line-height:115%">http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/ins/sfh203b</span></a><span style="font-size:10.0pt;line-height:115%"> <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:10.0pt;line-height:115%">USDA Rural Development Loans: </span><a href="http://www.rurdev.usda.gov/hsf_sfh.html"><span style="font-size:10.0pt;line-height:115%">http://www.rurdev.usda.gov/hsf_sfh.html</span></a><span style="font-size:10.0pt;line-height:115%"> <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:10.0pt;line-height:115%">VA Loans: </span> <a href="http://www.benefits.va.gov/homeloans/lp.asp"><span style="font-size:10.0pt;line-height:115%">http://www.benefits.va.gov/homeloans/lp.asp</span></a><span style="font-size:10.0pt;line-height:115%"><o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:10.0pt;line-height:115%">Fannie Mae HomePath Mortgage: </span><a href="http://www.homepath.com"><span style="font-size:10.0pt;line-height:115%">http://www.homepath.com</span></a><span style="font-size:10.0pt;line-height:115%"> <o:p></o:p></span></p> <p class="MsoNormal"><o:p> </o:p></p> </div> MU Financial Successhttp://www.blogger.com/profile/14117781251967743442noreply@blogger.com12tag:blogger.com,1999:blog-5256277661009921780.post-11505198973980190432012-11-08T12:03:00.000-08:002012-11-09T03:00:02.843-08:00The Fiscal Cliff<div class="WordSection1"> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">by Ryan Law<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">With President Obama’s re-election a number of news articles are saying one of his first challenges is to deal with the upcoming “fiscal cliff”. Today’s article will attempt to explain what that means in simple terms and what it can mean in your life.<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">The “Fiscal Cliff” will begin on January 1, 2012 and means $7 trillion in tax increases and spending cuts over the next ten years. On the front-end that may not sound like a bad thing, but it could be crippling to the economy the way it is set up.<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><b><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Spending Cuts<o:p></o:p></span></b></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">In 2011 the Budget Control Act was passed that increased the debt ceiling and called for a bipartisan debt-reduction deal or there would be automatic spending cuts. No deal was reached, so the following spending cuts begin in 2013:<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoListParagraphCxSpFirst" style="text-indent:-.25in;mso-list:l0 level1 lfo1"> <![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>Defense - $50 billion is cut from discretionary defense spending each year for the next ten years. Some military officials have said these cuts would be “devastating”<a style="mso-endnote-id:edn1" href="#_edn1" name="_ednref1" title=""><span class="MsoEndnoteReference"><span class="MsoEndnoteReference"><span style="font-size:12.0pt;font-family:"Times New Roman","serif";mso-fareast-language:EN-US">[i]</span></span></span></a><o:p></o:p></p> <p class="MsoListParagraphCxSpLast" style="text-indent:-.25in;mso-list:l0 level1 lfo1"> <![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>Non-defense – a similar amount would be cut each year from non-defense spending. Some programs, like Medicaid, Social Security, civil and military employee pay and veterans benefits, are protected, but everything else, including education and air traffic safety, will be affected.<o:p></o:p></p> <p class="MsoNormal"><b><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Tax Increases<o:p></o:p></span></b></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">The Bush Tax cuts would be eliminated, which means specifically:<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoListParagraphCxSpFirst" style="text-indent:-.25in;mso-list:l0 level1 lfo1"> <![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>Marginal tax rates will increase – they will go from current levels of 10, 15, 28, 33 and 35% to 15, 28, 31, 36 and 39.6%, respectively. <o:p></o:p></p> <p class="MsoListParagraphCxSpMiddle" style="text-indent:-.25in;mso-list:l0 level1 lfo1"> <![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>Capital gains rates will increase from 15% to 20% <o:p> </o:p></p> <p class="MsoListParagraphCxSpMiddle" style="text-indent:-.25in;mso-list:l0 level1 lfo1"> <![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>Child tax credit will decrease from $1000 per child down to $500<o:p></o:p></p> <p class="MsoListParagraphCxSpMiddle" style="text-indent:-.25in;mso-list:l0 level1 lfo1"> <![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>The marriage penalty relief will expire<o:p></o:p></p> <p class="MsoListParagraphCxSpLast" style="text-indent:-.25in;mso-list:l0 level1 lfo1"> <![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman""> </span></span></span><![endif]>The estate tax exemption will go from $5 million to $1 million<o:p></o:p></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">In addition, the payroll tax holiday will expire, taking your payroll taxes from 4.2% to 6.2%, which means someone earning $30,000 will pay an extra $50 per month in payroll taxes<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><b><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">The Challenges<o:p></o:p></span></b></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Experts have commented that there are two big challenges Congress and the President face:<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">1. If all tax cuts stay where they are and no cuts are made in federal spending we will continue to face a mounting deficit of $1 trillion per year, which is unsustainable.<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">2. If all the cuts go into effect the economy could be thrown back into a recession (cuts often mean job elimination or pay cuts and those with jobs will pay higher taxes).<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Neither option is a good one – obviously Congress and the President need to work together to figure out the best path. Both parties have expressed that they plan to work together to come up with a solution. <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">While the country faces difficult economic challenges and has a long road ahead to get on solid financial ground, you can take steps to stabilize your own financial situation. As we always preach, learn to live on a budget, get out of debt and set up an emergency fund. These three steps can lead to financial peace of mind.<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Ryan H. Law, M.S., CFP®, AFC<span style="color:#1F497D">®</span><o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Personal Financial Planning Department<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Office for Financial Success Director <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">University of Missouri Center on Economic Education Director<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">162 Stanley Hall<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">University of Missouri<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Columbia, MO 65211<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">573.882.9211 (office)<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">573.884.8389 (fax)<o:p></o:p></span></p> <p class="MsoNormal"><o:p> </o:p></p> </div> <div style="mso-element:endnote-list"><br clear="all"> <hr align="left" size="1" width="33%"> <div style="mso-element:endnote" id="edn1"> <p class="MsoEndnoteText"><a style="mso-endnote-id:edn1" href="#_ednref1" name="_edn1" title=""><span class="MsoEndnoteReference"><span class="MsoEndnoteReference"><span style="font-size:10.0pt;font-family:"Times New Roman","serif";mso-fareast-language:EN-US">[i]</span></span></span></a> <a href="http://www.defense.gov/news/newsarticle.aspx?id=118450">http://www.defense.gov/news/newsarticle.aspx?id=118450</a> <o:p></o:p></p> </div> </div> MU Financial Successhttp://www.blogger.com/profile/14117781251967743442noreply@blogger.com3tag:blogger.com,1999:blog-5256277661009921780.post-52716709809805788162012-11-01T10:55:00.000-07:002012-11-02T03:00:04.389-07:00Be Prepared<div class="WordSection1"> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">NOTE: This article was originally written by Dr. Weagley and published as a Financial Tip in May 2011 after the tornado in Joplin, Missouri. With the recent devastation in the Eastern United States with Superstorm Sandy and the tragic loss of life and destruction of property we felt it was appropriate to re-emphasize it this week.<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Our thoughts and prayers continue to go out to those affected by the storm and those who are working to continue to search for survivors and beginning clean-up. If you feel so inclined a lot of help is needed and can best be achieved through financial donations made directly to the Red Cross:<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><a href="http://www.redcross.org/charitable-donations">http://www.redcross.org/charitable-donations</a> <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">With that – here is this week’s Tip:<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">The Boy Scouts' motto is "Be Prepared". Once, Baden Powell, the founder of Boy Scouts, was asked the question, "Be prepared for what?" <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">He answered, "Be prepared for any old thing". <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">With a focus on financial success, how do we financially prepare for cataclysmic events? With all due respect to the author of an educational guide sheet on the subject (which can be found here<http://www.extension.org/pages/26397/money-management-in-times-of-disaster:-preparation>), a summary of ideas follows. <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">1) Household inventory – For insurance claims you must have proof of your loss. It is easy to take a digital recording of the contents of your house, while narrating descriptions about the contents. (Try to stay focused on the contents and not the life history of the items, though that might be interesting to your grandchildren.) Keep a list of what you own and keep it in a safety deposit box. If you have antiques, jewelry, or artwork, it is a good idea to have an appraisal of their actual value. Useful tools may be found at <a href="http://knowyourstuff.org">http://knowyourstuff.org</a>. <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">2) Insurance - Make sure you have the right amount of insurance on your home and your personal possessions. (Step 1 will help with determining the value of your possessions.) Make sure you understand the difference between standard coverage and replacement coverage. The former values your items at their current, used value, while the latter values your items at what it would cost to replace the possession. When you remodel, review your insurance coverage. Consider earthquake and flood insurance if you find these to be necessary and cost effective. Flood insurance must be purchased from the Federal Emergency Management Administration, although your insurance agent can provide access to FEMA coverage. <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">3) Emergency fund - I don't want to be too redundant but make sure you have three to six months living expenses in your emergency fund. Cash is king during a disaster and electronic access to sources cash may not be available. Some people keep an open line of credit on a credit card, just in case of an emergency – if they cannot learn to save money! <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">4) Documents – If something is not able to be replaced, keep it in your safety deposit box – with your household inventory. All stocks, bonds, birth certificates, discharge papers, wills, deeds of trust, trusts documents, special photos, passports, marriage certificates, and whatever you deem to be irreplaceable should be kept secure. <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">5) Of course, keep your smoke and carbon monoxide detectors in good working order. Keep dead limbs trimmed from your trees. Keep dried grasses from your home. Know where you are going to meet your family outside, in case of a fire, and where you need to take shelter, in case of a storm or earthquake. Practice these steps with your children. Do NOT just talk about it – do it with them. Then, when the siren blows or the earth shakes, you will all know what to do. Make sure your family knows how to turn off the gas line, water line, and electrical service. <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">6) Disaster Kit – At a minimum, your disaster kit should contain: <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">a. A supply of water that is less than six months old. Old, clean unbreakable containers can be recycled for this purpose. <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">b. Non-perishable food, such as canned goods or freeze-dried backcountry foods. If you use canned goods, please keep a non-electric can opener in your pantry. <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">c. Clothing, particularly rain gear and layers to keep warm. <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">d. Sleeping bags and blankets. If you camp, your tent could be quite handy, as well as cozy and warm. <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">e. A first aid kit with essential first aid items, mostly to prevent infections and treat mild sprains – including prescription medicines. Know enough first aid (e.g., Boy Scout training!) to be a resource to others. <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">f. A battery powered radio, flashlight with plenty of extra batteries. <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">g. Cash and credit cards. <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">h. Keys to your cars, house, garage, sheds, or other structures or vehicles. <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">i. Special items that might exist in your family for special people, such as mobility aids, feeding aids, and other items.<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif""><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman","serif"">Finally, nothing can prepare us for the aftermath of a disaster the caliber of Superstorm Sandy, the tornado that hit Joplin, New Orleans and Katrina, or Japan's recent earthquake and tsunami. I, however, do know something about the human spirit. If we are faced with disaster, we will be challenged but we will prevail. It is what we do. We survive to grow and to love, yet again. Being prepared just makes it easier for that human spirit to blossom anew.<o:p></o:p></span></p> </div> MU Financial Successhttp://www.blogger.com/profile/14117781251967743442noreply@blogger.com0