11/27/2009
Top 10 Ways to Keep Your Cool in a Crazy Market
Keeping your cool can be hard to do when the market goes on a periodic roller-coaster ride. It's useful to have strategies in place that prepare you both financially and psychologically to handle market volatility. Here are 10 tips to help you keep from making hasty decisions that could have a long-term impact on your ability to achieve your financial goals.
1. What’s your game plan? Having predetermined guidelines that recognize the potential for turbulent times can help prevent emotion from dictating your decisions. Diversification can offset the risks of certain holdings with those of others. Exercising trading discipline helps too. For example, you might determine in advance that you will take profits when a security or index rises by a certain percentage, and buy when it has fallen by a set percentage.
2. Know what you own and why you own it: When the market goes crazy, knowing why you originally made a specific investment can help you evaluate whether your reasons still hold, regardless of what the overall market is doing. Understanding how a specific holding fits in your portfolio can help, especially if you're considering replacing your current holding with another investment.
3. Remember, everything's relative: Variance in the returns of different portfolios can be attributed to their asset allocations. A well-diversified portfolio that includes multiple asset classes should be compared to relevant benchmarks for performance. If you find that your investments are performing in line with those benchmarks, this might help you feel better about your overall strategy.
4. Tell yourself that this too shall pass: The financial markets are cyclical. Even if you regret buying too early or selling too soon, you may well get another chance at some point. Stick out the tough times with your chin up.
5. Learn from your mistakes: Anyone can look good during bull markets, but even the best aren't right all the time. If an earlier choice now seems crazy, sometimes the best strategy is to take a tax loss, learn from the experience, and apply the lesson to future decisions.
6. Play defense: Many investors reexamine their allocations during turbulent markets. Holdings that produce regular dividends can help cushion the impact of price swings.
7. Continue to save: Regularly adding to an account designed for a long-term goal may cushion the emotional impact of market swings. If you're using dollar-cost averaging--investing a specific amount regularly regardless of fluctuating price levels--you may be getting a bargain by buying when prices are down.
8. Cash can ease your mind: Cash can be the financial equivalent of taking deep breaths to relax. It can enhance your ability to make thoughtful decisions instead of impulsive ones. Having a cash cushion coupled with a disciplined investing strategy can change your perspective on market volatility.
9. Stay on course: Solid asset allocation is the basis of sound investing. One of the reasons a diversified portfolio is so important is that strong performance of some investments may help offset poor performance by others. Drastic decisions could get you off track.
10. Look in the rear-view mirror: Sometimes it helps to take a look back and see how far you've come. Though past performance is no guarantee of future returns, the stock market's long-term direction has historically been up.
Consult your friendly home town banker for all of your investment needs. Together we’ll plan a strategy taking gradual steps to spread your risk over time, survive market volatility, and achieve your financial goals.
11/19/2009
Special Additions to the First-time Homebuyer Credit
On November 6, 2009, President Obama signed into law the Worker, Homeownership, and Business Assistance Act of 2009.
The Act extends and modifies the first-time homebuyer tax credit with the following provisions:
- Extends the first-time homebuyer credit to principal residences purchased before May 1, 2010. The credit is extended to principal residences purchased before July 1, 2010 if a written binding contract is entered into prior to May 1, 2010.
- Increases the income limits that apply to the credit. For the purchase of a principal residence after November 6, 2009 the credit is reduced if modified adjusted gross income (MAGI) exceeds $125,000 or $225,000 if married filing a joint return. It is completely eliminated if MAGI reaches $145,000 or $245,000 if married filing a joint return.
- Eliminates the first-time homebuyer credit if the purchase price of a principal residence exceeds $800,000.
- Expands eligibility by allowing some existing homeowners to qualify for the credit when they purchase a new principal residence. An individual and spouse who have maintained the same principal residence for at least five consecutive years in the eight-year period ending on the date that a subsequent principal residence is purchased, will be considered a first-time homebuyer for purposes of the credit. In such a case, the maximum amount of the credit is $6,500 and $3,250 for a married individual filing separately.
For purposes of the credit, qualifying purchases in 2009 can be treated as if they were made on December 31, 2008, and qualifying purchases in 2010 can be treated as if they were made on December 31, 2009.
On purchases made after November 6, 2009:
- No credit is allowed unless the taxpayer is 18 years of age on the date of purchase. A taxpayer who is married is treated as meeting the age requirement if the taxpayer or the taxpayer's spouse meets the age requirement.
- The definition of purchase excludes property being bought from a person related to the person buying the property or the spouse of the person buying the property, if married.
- No credit is allowed to any taxpayer if the taxpayer is a dependent of another taxpayer.
- No credit is allowed unless the taxpayer attaches to the relevant tax return a properly executed copy of the settlement statement used to complete the purchase.
Special provisions extending the time to claim the credit are included for members of the military and others who receive government orders for qualified official extended duty service.
Contact your friendly home town bank’s residential mortgage lending professionals who can help you determine if you are qualified for the credit in time to finance the purchase of your new home.
11/12/2009
You’re having a Baby!
Parenting may be one of the most rewarding experiences you'll ever have. As you prepare for life with your baby, here are a few things to consider.
Adjust your budget now for expenses you will incur. Buying the gear to furnish a nursery is the easy part. The ongoing expenses of baby formula, diapers, clothing, and baby-sitters, will impact your monthly budget in a big way. Redo your budget to figure out how much your total monthly expenses will increase after the birth of your baby.
Decide if both of you will continue to work. Run the numbers on expenses you will incur should both remain working and compare these to the savings you could enjoy by one parent staying at home. Weigh this against the peace of mind you would get from having one spouse stay home with the baby.
Review your health insurance. Medical expenses increase during the pregnancy and delivery, so check your maternity coverage. Don’t forget you'll have another person to insure after the birth. Good medical coverage for your baby is critical, because health-care costs can really add up over time.
Life insurance protects your family's financial security if something unexpected happens to you. Your spouse can use the death benefit to support your child and meet other expenses. Even if you already have life insurance, you should consider buying more now that you have a baby to care for.
You and your spouse should update your wills with the help of an attorney. You'll need to address what will happen if an unexpected tragedy strikes. Who would be the best person to raise your child if you and your spouse died at the same time? If the person you choose accepts this responsibility, you'll need to designate him or her in your wills as your minor child's legal guardian. Guardianship typically involves managing money and other assets that you leave your minor child.
Set up a college fund to save for your child's education.
Having children costs money. However, you may be entitled to some tax breaks that can help defray the cost of raising your child. There are exemptions and credits that may apply to your federal tax situation, but you’ll need to get your child a social security number to start the process.
Consult your friendly home town banker for your financial planning needs, or for personal referrals to legal and tax professionals.
11/05/2009
Helping Grandchildren with College Costs
Helping pay for a grandchild's college education is a smart way for grandparents to pass on wealth without having to pay gift and estate taxes. Let’s discuss some ways to accomplish this goal.
One way to help with college costs is to make a gift of cash or securities, but this method has drawbacks. A gift of more than the annual federal gift tax exclusion amount--$12,000 for individual gifts, $24,000 for joint gifts--might have gift tax and generation-skipping transfer tax (GSTT) consequences.
A 529 plan is an excellent way to contribute to a grandchild's college education, while simultaneously paring down your own estate. Contributions grow tax deferred, and withdrawals used for qualified education expenses are completely federal and state tax free.
There are two types of 529 plans: college savings plans and prepaid tuition plans. College savings plans are individual accounts offered by most states and managed by financial institutions. Funds can be used at any accredited college in the United States or abroad. Prepaid tuition plans allow prepayment of tuition at today's prices for the colleges that participate in the plan.
Grandparents can open a 529 account and name a grandchild as beneficiary, but only one grandparent can be the account owner. Grandparents can contribute to an existing 529 account with a lump sum or in smaller, regular amounts. Lump-sum gifts have a big advantage in 529 plans because individuals can make a lump-sum gift of up to $60,000 ($120,000 for joint gifts by married couples) and avoid federal gift tax. A special election must be made to treat the gift as if it were made in equal installments over a five-year period, and no additional gifts can be made to the beneficiary during this time. This money is considered removed from your estate, even though one grandparent can still retain control over the funds if he or she is the 529 account owner. Note that if the donor were to die during the five-year period, a prorated portion of the contribution would be "recaptured" into the estate for estate tax purposes. Under current law, a grandparent-owned 529 plan won't impact a grandchild's chances of qualifying for federal aid. Note that funds in a grandparent-owned 529 plan may still be included when determining Medicaid eligibility, unless these funds are specifically exempted by state law.
Your home town banker can help you create a plan to help grandchildren pay for college.
11/27/2009
Top 10 Ways to Keep Your Cool in a Crazy Market
Keeping your cool can be hard to do when the market goes on a periodic roller-coaster ride. It's useful to have strategies in place that prepare you both financially and psychologically to handle market volatility. Here are 10 tips to help you keep from making hasty decisions that could have a long-term impact on your ability to achieve your financial goals.
1. What’s your game plan? Having predetermined guidelines that recognize the potential for turbulent times can help prevent emotion from dictating your decisions. Diversification can offset the risks of certain holdings with those of others. Exercising trading discipline helps too. For example, you might determine in advance that you will take profits when a security or index rises by a certain percentage, and buy when it has fallen by a set percentage.
2. Know what you own and why you own it: When the market goes crazy, knowing why you originally made a specific investment can help you evaluate whether your reasons still hold, regardless of what the overall market is doing. Understanding how a specific holding fits in your portfolio can help, especially if you're considering replacing your current holding with another investment.
3. Remember, everything's relative: Variance in the returns of different portfolios can be attributed to their asset allocations. A well-diversified portfolio that includes multiple asset classes should be compared to relevant benchmarks for performance. If you find that your investments are performing in line with those benchmarks, this might help you feel better about your overall strategy.
4. Tell yourself that this too shall pass: The financial markets are cyclical. Even if you regret buying too early or selling too soon, you may well get another chance at some point. Stick out the tough times with your chin up.
5. Learn from your mistakes: Anyone can look good during bull markets, but even the best aren't right all the time. If an earlier choice now seems crazy, sometimes the best strategy is to take a tax loss, learn from the experience, and apply the lesson to future decisions.
6. Play defense: Many investors reexamine their allocations during turbulent markets. Holdings that produce regular dividends can help cushion the impact of price swings.
7. Continue to save: Regularly adding to an account designed for a long-term goal may cushion the emotional impact of market swings. If you're using dollar-cost averaging--investing a specific amount regularly regardless of fluctuating price levels--you may be getting a bargain by buying when prices are down.
8. Cash can ease your mind: Cash can be the financial equivalent of taking deep breaths to relax. It can enhance your ability to make thoughtful decisions instead of impulsive ones. Having a cash cushion coupled with a disciplined investing strategy can change your perspective on market volatility.
9. Stay on course: Solid asset allocation is the basis of sound investing. One of the reasons a diversified portfolio is so important is that strong performance of some investments may help offset poor performance by others. Drastic decisions could get you off track.
10. Look in the rear-view mirror: Sometimes it helps to take a look back and see how far you've come. Though past performance is no guarantee of future returns, the stock market's long-term direction has historically been up.
Consult your friendly home town banker for all of your investment needs. Together we’ll plan a strategy taking gradual steps to spread your risk over time, survive market volatility, and achieve your financial goals.
11/19/2009
Special Additions to the First-time Homebuyer Credit
On November 6, 2009, President Obama signed into law the Worker, Homeownership, and Business Assistance Act of 2009.
The Act extends and modifies the first-time homebuyer tax credit with the following provisions:
- Extends the first-time homebuyer credit to principal residences purchased before May 1, 2010. The credit is extended to principal residences purchased before July 1, 2010 if a written binding contract is entered into prior to May 1, 2010.
- Increases the income limits that apply to the credit. For the purchase of a principal residence after November 6, 2009 the credit is reduced if modified adjusted gross income (MAGI) exceeds $125,000 or $225,000 if married filing a joint return. It is completely eliminated if MAGI reaches $145,000 or $245,000 if married filing a joint return.
- Eliminates the first-time homebuyer credit if the purchase price of a principal residence exceeds $800,000.
- Expands eligibility by allowing some existing homeowners to qualify for the credit when they purchase a new principal residence. An individual and spouse who have maintained the same principal residence for at least five consecutive years in the eight-year period ending on the date that a subsequent principal residence is purchased, will be considered a first-time homebuyer for purposes of the credit. In such a case, the maximum amount of the credit is $6,500 and $3,250 for a married individual filing separately.
For purposes of the credit, qualifying purchases in 2009 can be treated as if they were made on December 31, 2008, and qualifying purchases in 2010 can be treated as if they were made on December 31, 2009.
On purchases made after November 6, 2009:
- No credit is allowed unless the taxpayer is 18 years of age on the date of purchase. A taxpayer who is married is treated as meeting the age requirement if the taxpayer or the taxpayer's spouse meets the age requirement.
- The definition of purchase excludes property being bought from a person related to the person buying the property or the spouse of the person buying the property, if married.
- No credit is allowed to any taxpayer if the taxpayer is a dependent of another taxpayer.
- No credit is allowed unless the taxpayer attaches to the relevant tax return a properly executed copy of the settlement statement used to complete the purchase.
Special provisions extending the time to claim the credit are included for members of the military and others who receive government orders for qualified official extended duty service.
Contact your friendly home town bank’s residential mortgage lending professionals who can help you determine if you are qualified for the credit in time to finance the purchase of your new home.
11/12/2009
You’re having a Baby!
Parenting may be one of the most rewarding experiences you'll ever have. As you prepare for life with your baby, here are a few things to consider.
Adjust your budget now for expenses you will incur. Buying the gear to furnish a nursery is the easy part. The ongoing expenses of baby formula, diapers, clothing, and baby-sitters, will impact your monthly budget in a big way. Redo your budget to figure out how much your total monthly expenses will increase after the birth of your baby.
Decide if both of you will continue to work. Run the numbers on expenses you will incur should both remain working and compare these to the savings you could enjoy by one parent staying at home. Weigh this against the peace of mind you would get from having one spouse stay home with the baby.
Review your health insurance. Medical expenses increase during the pregnancy and delivery, so check your maternity coverage. Don’t forget you'll have another person to insure after the birth. Good medical coverage for your baby is critical, because health-care costs can really add up over time.
Life insurance protects your family's financial security if something unexpected happens to you. Your spouse can use the death benefit to support your child and meet other expenses. Even if you already have life insurance, you should consider buying more now that you have a baby to care for.
You and your spouse should update your wills with the help of an attorney. You'll need to address what will happen if an unexpected tragedy strikes. Who would be the best person to raise your child if you and your spouse died at the same time? If the person you choose accepts this responsibility, you'll need to designate him or her in your wills as your minor child's legal guardian. Guardianship typically involves managing money and other assets that you leave your minor child.
Set up a college fund to save for your child's education.
Having children costs money. However, you may be entitled to some tax breaks that can help defray the cost of raising your child. There are exemptions and credits that may apply to your federal tax situation, but you’ll need to get your child a social security number to start the process.
Consult your friendly home town banker for your financial planning needs, or for personal referrals to legal and tax professionals.
11/05/2009
Helping Grandchildren with College Costs
Helping pay for a grandchild's college education is a smart way for grandparents to pass on wealth without having to pay gift and estate taxes. Let’s discuss some ways to accomplish this goal.
One way to help with college costs is to make a gift of cash or securities, but this method has drawbacks. A gift of more than the annual federal gift tax exclusion amount--$12,000 for individual gifts, $24,000 for joint gifts--might have gift tax and generation-skipping transfer tax (GSTT) consequences.
A 529 plan is an excellent way to contribute to a grandchild's college education, while simultaneously paring down your own estate. Contributions grow tax deferred, and withdrawals used for qualified education expenses are completely federal and state tax free.
There are two types of 529 plans: college savings plans and prepaid tuition plans. College savings plans are individual accounts offered by most states and managed by financial institutions. Funds can be used at any accredited college in the United States or abroad. Prepaid tuition plans allow prepayment of tuition at today's prices for the colleges that participate in the plan.
Grandparents can open a 529 account and name a grandchild as beneficiary, but only one grandparent can be the account owner. Grandparents can contribute to an existing 529 account with a lump sum or in smaller, regular amounts. Lump-sum gifts have a big advantage in 529 plans because individuals can make a lump-sum gift of up to $60,000 ($120,000 for joint gifts by married couples) and avoid federal gift tax. A special election must be made to treat the gift as if it were made in equal installments over a five-year period, and no additional gifts can be made to the beneficiary during this time. This money is considered removed from your estate, even though one grandparent can still retain control over the funds if he or she is the 529 account owner. Note that if the donor were to die during the five-year period, a prorated portion of the contribution would be "recaptured" into the estate for estate tax purposes. Under current law, a grandparent-owned 529 plan won't impact a grandchild's chances of qualifying for federal aid. Note that funds in a grandparent-owned 529 plan may still be included when determining Medicaid eligibility, unless these funds are specifically exempted by state law.
Your home town banker can help you create a plan to help grandchildren pay for college.