01/04/2007
Financially Prepare for 2007
January is a great time to get your finances in order to enjoy a stress-free financial life in 2007. Dealing with money and finances can be the most troublesome and stressful thing you manage from day to day – if you let it be that way. Let’s discuss some key things you can do to release financial stress in 2007 in three primary areas of income, expenses, and taxes.
First of all, April is just around the corner. I suggest you label a folder for 2006 Taxes and put everything you get related to your 2006 taxes in it. In January, you will receive your mortgage statements, your dividend, checking, savings, & CD interest statements, your donations statements from your church and charitable organizations, your W-2 from your employer, and miscellaneous Form 1099s from other companies that you provided services to during 2006. Preparing your taxes will be much easier if you have everything in one place.
Now let’s discuss your income. Take a look at what you made in 2006 from your primary employer. Look at the gross, or pre-tax amount, and look at the net, or take-home amount. Are you expecting a salary increase in 2007? Most cost of living increases for 2007 will be based on the national index of 2.7%. This basically means that a 2.7% pay increase will allow you to stay even with inflation. If you get more than 2.7%, how much more you get is called a merit increase and is usually based on good performance. Check with the payroll administrator at your work to see if you need to update your Form W-4 for any family changes in 2006 or you need to update your tax withholding amounts from your paychecks in 2007.
Finally, look at your expenses for 2006. Did you spend more than you made last year? If so, cut expenses where you can and use this savings to reduce any credit card debts first, then other personal debts you may have. When these are cleared pay an extra 10% on your mortgage each month to shave thousands of dollars and years off of your total housing costs. And don’t forget to pay yourself! Start an emergency fund and add to it frequently until you get three to six months of living expenses set aside.
I hope you enjoy a prosperous and stress-free financial life in 2007!
01/11/2007
Is the housing market back?
There has been plenty of media coverage regarding the housing market since mid-2006. Most of it has been doom and gloom for builders, buyers and sellers. I’ve learned over the years to read as much as I can, believe one-half of what I hear, and do enough self-discovery to back up my own opinion. Let’s discuss the origin of some of the data that gets extrapolated into reports that become feeding frenzy material for the media.
Much of what we read and hear in the media regarding the housing market is based on reports derived from areas experiencing the highest growth rates, highest house prices, and largest activity in new sales and re-sales. These reports might not be from regional sections of the country, but desirable areas, such as ‘coastal properties’. The boom and bust numbers from such areas are more dramatic, therefore, more newsworthy. If, for example, housing in coastal properties increased by 5,000% over a three year period, the media would report boom, boom, boom. However, if the same market sees a 300% decline in sales for a trailing year, that decline appears to be a bust – even though the overall market is still ahead of where it was a few years ago by 4700%.
The most recent catch-phrase regarding the housing market is ‘phantom rebound’. This term is reserved for those times when the government data collected might not be inclusive of all factors affecting the housing industry. For instance, the Census Bureau reports the number of contracts for house sales. This data is used in reports about movement in the housing market. However, these figures do not include the number of cancellations of house contracts where people walked away and didn’t buy the houses. This overstates the number of contracts for the reporting period while it understates the housing inventory for the same period. So if you read about a ‘phantom rebound’, you now know that it is true reporting that does not include all of the necessary data for a true result.
Finally, most of the reports you read concern builders on a national level where counting contracts and cancellations on a large scale is commonplace. Locally, we need to consider how our new sales and re-sales are performing to get an idea of how our housing market is doing. Looking at the growth in our area, I think we’re on the up-swing.
01/25/2007
Fight the rising cost of health insurance premiums
The cost of health care today is ever increasing and insurance plans to cover these costs are more complex than ever. If your employer pays all or a portion of your monthly premium, you’re lucky. The group health insurance plans for companies to offer employees have become more regulated and expensive than ever, thus causing many employers to make it available only at the employees’ expense. This stems from increasing pressure on corporate America to keep profits going higher and shareholders happy. Let’s talk about a way to reduce your health insurance premiums and also gain some tax advantages.
Health savings accounts (HSAs) were introduced in 2004 as an alternative to use in fighting the increasing costs of health insurance. They are designed to provide you a tax-free way to save and pay for current and future medical expenses. To qualify for an HSA, you must also be enrolled in a high-deductible health plan (HDHP). This simply means that the group plan you participate in from your employer will carry a higher deductible, which lowers your monthly premiums. Your HSA works for you by paying your medical expenses, including doctor visits and prescription drugs on a tax-free basis. Amazingly, your higher deductible amount will (sometimes) match your HSA investment limit.
To qualify for an HSA, you must be enrolled in an HDHP that does not cover all of your medical expenses, you cannot be covered under another health insurance plan (including Medicare-with some exceptions), and you cannot be claimed as a dependent on another person’s tax return.
Your HSA account is triple tax-advantaged! The contributions you make are pre-tax (annual contribution limits apply), all earnings and interest on your HSA are tax-free, and withdrawals for qualifying medical expenses are tax-free. You can even make non-medical withdrawals after age 65 with no penalties and only be taxed at your current tax rate. Your HSA acts like an IRA because it can be rolled over to another custodian because you own the account outright. Depending on your contributions versus your qualified withdrawals, your HSA grows and benefits from the power of compound interest. Unlike an IRA, there are no required minimum distributions at any age. Also unlike an IRA, you’re not limited by income restrictions for participation.
Does your employer offer an HSA/HDHP group health insurance option? Ask about it!
Back to President's Articles
01/04/2007
Financially Prepare for 2007
January is a great time to get your finances in order to enjoy a stress-free financial life in 2007. Dealing with money and finances can be the most troublesome and stressful thing you manage from day to day – if you let it be that way. Let’s discuss some key things you can do to release financial stress in 2007 in three primary areas of income, expenses, and taxes.
First of all, April is just around the corner. I suggest you label a folder for 2006 Taxes and put everything you get related to your 2006 taxes in it. In January, you will receive your mortgage statements, your dividend, checking, savings, & CD interest statements, your donations statements from your church and charitable organizations, your W-2 from your employer, and miscellaneous Form 1099s from other companies that you provided services to during 2006. Preparing your taxes will be much easier if you have everything in one place.
Now let’s discuss your income. Take a look at what you made in 2006 from your primary employer. Look at the gross, or pre-tax amount, and look at the net, or take-home amount. Are you expecting a salary increase in 2007? Most cost of living increases for 2007 will be based on the national index of 2.7%. This basically means that a 2.7% pay increase will allow you to stay even with inflation. If you get more than 2.7%, how much more you get is called a merit increase and is usually based on good performance. Check with the payroll administrator at your work to see if you need to update your Form W-4 for any family changes in 2006 or you need to update your tax withholding amounts from your paychecks in 2007.
Finally, look at your expenses for 2006. Did you spend more than you made last year? If so, cut expenses where you can and use this savings to reduce any credit card debts first, then other personal debts you may have. When these are cleared pay an extra 10% on your mortgage each month to shave thousands of dollars and years off of your total housing costs. And don’t forget to pay yourself! Start an emergency fund and add to it frequently until you get three to six months of living expenses set aside.
I hope you enjoy a prosperous and stress-free financial life in 2007!
01/11/2007
Is the housing market back?
There has been plenty of media coverage regarding the housing market since mid-2006. Most of it has been doom and gloom for builders, buyers and sellers. I’ve learned over the years to read as much as I can, believe one-half of what I hear, and do enough self-discovery to back up my own opinion. Let’s discuss the origin of some of the data that gets extrapolated into reports that become feeding frenzy material for the media.
Much of what we read and hear in the media regarding the housing market is based on reports derived from areas experiencing the highest growth rates, highest house prices, and largest activity in new sales and re-sales. These reports might not be from regional sections of the country, but desirable areas, such as ‘coastal properties’. The boom and bust numbers from such areas are more dramatic, therefore, more newsworthy. If, for example, housing in coastal properties increased by 5,000% over a three year period, the media would report boom, boom, boom. However, if the same market sees a 300% decline in sales for a trailing year, that decline appears to be a bust – even though the overall market is still ahead of where it was a few years ago by 4700%.
The most recent catch-phrase regarding the housing market is ‘phantom rebound’. This term is reserved for those times when the government data collected might not be inclusive of all factors affecting the housing industry. For instance, the Census Bureau reports the number of contracts for house sales. This data is used in reports about movement in the housing market. However, these figures do not include the number of cancellations of house contracts where people walked away and didn’t buy the houses. This overstates the number of contracts for the reporting period while it understates the housing inventory for the same period. So if you read about a ‘phantom rebound’, you now know that it is true reporting that does not include all of the necessary data for a true result.
Finally, most of the reports you read concern builders on a national level where counting contracts and cancellations on a large scale is commonplace. Locally, we need to consider how our new sales and re-sales are performing to get an idea of how our housing market is doing. Looking at the growth in our area, I think we’re on the up-swing.
01/25/2007
Fight the rising cost of health insurance premiums
The cost of health care today is ever increasing and insurance plans to cover these costs are more complex than ever. If your employer pays all or a portion of your monthly premium, you’re lucky. The group health insurance plans for companies to offer employees have become more regulated and expensive than ever, thus causing many employers to make it available only at the employees’ expense. This stems from increasing pressure on corporate America to keep profits going higher and shareholders happy. Let’s talk about a way to reduce your health insurance premiums and also gain some tax advantages.
Health savings accounts (HSAs) were introduced in 2004 as an alternative to use in fighting the increasing costs of health insurance. They are designed to provide you a tax-free way to save and pay for current and future medical expenses. To qualify for an HSA, you must also be enrolled in a high-deductible health plan (HDHP). This simply means that the group plan you participate in from your employer will carry a higher deductible, which lowers your monthly premiums. Your HSA works for you by paying your medical expenses, including doctor visits and prescription drugs on a tax-free basis. Amazingly, your higher deductible amount will (sometimes) match your HSA investment limit.
To qualify for an HSA, you must be enrolled in an HDHP that does not cover all of your medical expenses, you cannot be covered under another health insurance plan (including Medicare-with some exceptions), and you cannot be claimed as a dependent on another person’s tax return.
Your HSA account is triple tax-advantaged! The contributions you make are pre-tax (annual contribution limits apply), all earnings and interest on your HSA are tax-free, and withdrawals for qualifying medical expenses are tax-free. You can even make non-medical withdrawals after age 65 with no penalties and only be taxed at your current tax rate. Your HSA acts like an IRA because it can be rolled over to another custodian because you own the account outright. Depending on your contributions versus your qualified withdrawals, your HSA grows and benefits from the power of compound interest. Unlike an IRA, there are no required minimum distributions at any age. Also unlike an IRA, you’re not limited by income restrictions for participation.
Does your employer offer an HSA/HDHP group health insurance option? Ask about it!
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