I am proud of our country and our citizens in how we as a nation have stepped up with our time, talent and financial resources to help the folks in Haiti. It has been very gratifying to see the outpouring of prayers and donations for this most impoverished country. Haiti's pain has truly captured the hearts of America and we have responded generously.
I am pleased to say that the House passed a bill yesterday that will allow all donations to Haiti Relief organizations to be considered charitable contributions on tax returns for 2009. Senate approval is expected as well. This applies to donations made after January 11th, 2010 and before March 1, 2010. Even though most of us give from our hearts and not because of tax reasons, it is nice to know that we get to reduce our 2009 taxes and help out Haiti as well.
If you are considering making a financial gift to Haiti, please do so by end of February and lower your 2009 taxes!
Wednesday, January 20, 2010
Monday, November 16, 2009
Worker, Homeownership and Business Assistance Act of 2009
We have another tax bill! This was signed by Pres Obama on 11/6/2009 in order to help stimulate the housing market. This bill has huge opportunities for first time homebuyers and existing long term homeowners. Even if it doesn't apply to you, chances are someone in your family, workplace or network of friends will definitely be able to qualify and utilize these generous tax credits. Here are the nuts and bolts:
1. FIRST TIME HOMEBUYERS---the credit of $8000 is extended for purchases made before 5/1/2010. The defintion of first time homebuyer is a taxpayer who has not owned a principal residence at any time during the previous 3 years. Taxpayers must have entered into a written binding contract by 5/1/2010 and close escrow before 7/1/2010.
2. EXISTING HOMEOWNERS--A taxpayer is eligible for a credit up to $6500 ($3250 if single) if they purchase a personal residence AFTER 11/6/2009 and before 5/1/2010. The same rule applies in that the taxpayer must enter into a written binding contract by 5/1/2010 and close escrow before 7/1/2010. The taxpayer must have owned the same principal residence for any five consecutive years during the 8 year period ending on the date of purchase. In addition, the maximum purchase price of the home is $800,000 or less. The taxpayer also needs to attach the closing statement to his/her tax return for either 2009 (purchase home after 11/6/2009) or 2010 return (purchase home before 5/1/2010 and close before 7/1/2010).
Bottom line is that if you are thinking of buying a first time home or changing residences, this is the time to start looking around and do it. Home prices have fallen 30-60% in the past two years and the time may never be better!
1. FIRST TIME HOMEBUYERS---the credit of $8000 is extended for purchases made before 5/1/2010. The defintion of first time homebuyer is a taxpayer who has not owned a principal residence at any time during the previous 3 years. Taxpayers must have entered into a written binding contract by 5/1/2010 and close escrow before 7/1/2010.
2. EXISTING HOMEOWNERS--A taxpayer is eligible for a credit up to $6500 ($3250 if single) if they purchase a personal residence AFTER 11/6/2009 and before 5/1/2010. The same rule applies in that the taxpayer must enter into a written binding contract by 5/1/2010 and close escrow before 7/1/2010. The taxpayer must have owned the same principal residence for any five consecutive years during the 8 year period ending on the date of purchase. In addition, the maximum purchase price of the home is $800,000 or less. The taxpayer also needs to attach the closing statement to his/her tax return for either 2009 (purchase home after 11/6/2009) or 2010 return (purchase home before 5/1/2010 and close before 7/1/2010).
Bottom line is that if you are thinking of buying a first time home or changing residences, this is the time to start looking around and do it. Home prices have fallen 30-60% in the past two years and the time may never be better!
Bookmark this post: | 
|
Thursday, October 1, 2009
Being Overconfident
This is part 7 of 8 blogs on what today's smart investors need to know in order to create sustainable wealth for you and your family.
Our ancient ancestors needed to be overconfident in order to survive because life was short and food was scarce. That served them well then but today, it can cause us costly investment mistakes. Because overconfident investors often forget past mistakes yet always remember past successes.
Remember the bull market of the 90's. It was almost impossible to have not made money in the stock market, especially the technology sector. Investors got overconfident and thought they were geniuses. Many shifted all of their stock portfolio to tech stocks and then got burned when that sector tanked in early 2000.
Also, investors may invest heavily in their own employer stock because they think they have insider knowledge of the company. Think Enron!
To create true wealth and avoid being overconfident, investors must be non-emotional and disciplined investors. Having a little humility helps.
Bottom line: Don't make the mistake of being overconfident in your investing skills.
Our ancient ancestors needed to be overconfident in order to survive because life was short and food was scarce. That served them well then but today, it can cause us costly investment mistakes. Because overconfident investors often forget past mistakes yet always remember past successes.
Remember the bull market of the 90's. It was almost impossible to have not made money in the stock market, especially the technology sector. Investors got overconfident and thought they were geniuses. Many shifted all of their stock portfolio to tech stocks and then got burned when that sector tanked in early 2000.
Also, investors may invest heavily in their own employer stock because they think they have insider knowledge of the company. Think Enron!
To create true wealth and avoid being overconfident, investors must be non-emotional and disciplined investors. Having a little humility helps.
Bottom line: Don't make the mistake of being overconfident in your investing skills.
Bookmark this post: |
|
Monday, September 14, 2009
Information Overload
This is part 6 of 8 blogs on what today's smart investors need to know in order to create sustainable wealth for you and your family.
What sources of information do you use when considering an investment? Most people make investments based on emotion--a hot tip from a co-worker, family member or friend. They jump in to buy the stock because they think they have "inside information".
Or they listen to all the cable news shows like MSNBC or Fox money reports. Many of these so called money and finance commentators are nothing more than theatrical performers.
Some people read several of the many trade publications that tout the latest and greatest. The problem with all the information out there is that it is way too much information for any one person to absorb. There is simply too much white noise.
Trying to accumulate vast amounts of information in order to make intelligent and rational investment decisions is way beyond the time and resources of most people.
An astute investor is careful to limit the amount of information he/she uses to make decisions or they hire out this important work to a trusted advisor.
Bottom line is that basing your investment decisions on tons of information is not the best way to generate wealth.
What sources of information do you use when considering an investment? Most people make investments based on emotion--a hot tip from a co-worker, family member or friend. They jump in to buy the stock because they think they have "inside information".
Or they listen to all the cable news shows like MSNBC or Fox money reports. Many of these so called money and finance commentators are nothing more than theatrical performers.
Some people read several of the many trade publications that tout the latest and greatest. The problem with all the information out there is that it is way too much information for any one person to absorb. There is simply too much white noise.
Trying to accumulate vast amounts of information in order to make intelligent and rational investment decisions is way beyond the time and resources of most people.
An astute investor is careful to limit the amount of information he/she uses to make decisions or they hire out this important work to a trusted advisor.
Bottom line is that basing your investment decisions on tons of information is not the best way to generate wealth.
Bookmark this post: |
|
Monday, August 24, 2009
Relief for Struggling Small Businesses
The Small Business Administration (SBA) has announced a new loan program as part of the American Recovery and Reinvestment Act of 2009 (ARC). ARC loans are available to small businesses that need short term assistance to make principal and interest payments on existing qualifying debt.
The loans are interest free and carry no fees. The maximum amount of the loan is $35,000. Business owners can defer loan payments for up to one year after the loan is received. And the loan can be repaid over 5 years.
Get more information at www.sba.gov and type ARC in the search field.
The loans are interest free and carry no fees. The maximum amount of the loan is $35,000. Business owners can defer loan payments for up to one year after the loan is received. And the loan can be repaid over 5 years.
Get more information at www.sba.gov and type ARC in the search field.
Bookmark this post: |
|
Monday, August 17, 2009
Truly Diversifying Your Portfolio
This is part 5 of 8 blogs on what today's smart investors need to know in order to create sustainable wealth for you and your family.
Most investors know that it's smart to diversify. However, most investors are not nearly as diversified as they should be. Investing in the S&P 500 (the 500 largest stocks in the US) is not a diversified portfolio. Did you know that the US represents less than 50% of the developed global markets in the world??? By avoiding international stocks, an investor is missing out on a lot of opportunities.
From 1993 through 2008, if you examine the countries with the best equity returns each year, the US was only a top-five performer three times in the last 16 years.
Bottom Line: Don't make the mistake of focusing solely on US securities!
Most investors know that it's smart to diversify. However, most investors are not nearly as diversified as they should be. Investing in the S&P 500 (the 500 largest stocks in the US) is not a diversified portfolio. Did you know that the US represents less than 50% of the developed global markets in the world??? By avoiding international stocks, an investor is missing out on a lot of opportunities.
From 1993 through 2008, if you examine the countries with the best equity returns each year, the US was only a top-five performer three times in the last 16 years.
Bottom Line: Don't make the mistake of focusing solely on US securities!
Bookmark this post: |
|
Monday, July 27, 2009
Understanding the Difference between Income and Cash Flow
This is part 4 of 8 blogs on what today's smart investors need to know in order to create sustainable wealth for you and your family.
Income and cash flow are not the same thing even though most people think they are.
Most people think in terms of how much they can safely take from their portfolio for living expenses. The correct way to think is how much they can safely spend from their portfolio for living expenses.
It is a big mistake to think that you should get the cash flow that you need only from portfolio income (dividends and interest) without ever touching your principal. This is an emotional issue that is sometimes hard for folks to overcome. By doing this, you can pay more taxes than necessary.
Investors need to focus on the total after-tax return of their portfolios. Selling stocks when they are have appreciated and using that money for living expenses is a far more tax advantageous way of creating the cash necessary for lifestyle.
Bottom line: The way in which you generate income can have a tangible effect on the growth of your assets as well as on the taxes you pay.
Income and cash flow are not the same thing even though most people think they are.
Most people think in terms of how much they can safely take from their portfolio for living expenses. The correct way to think is how much they can safely spend from their portfolio for living expenses.
It is a big mistake to think that you should get the cash flow that you need only from portfolio income (dividends and interest) without ever touching your principal. This is an emotional issue that is sometimes hard for folks to overcome. By doing this, you can pay more taxes than necessary.
Investors need to focus on the total after-tax return of their portfolios. Selling stocks when they are have appreciated and using that money for living expenses is a far more tax advantageous way of creating the cash necessary for lifestyle.
Bottom line: The way in which you generate income can have a tangible effect on the growth of your assets as well as on the taxes you pay.
Bookmark this post: |
|
Tuesday, July 21, 2009
Managing and Judging Risk
This is part 3 of 8 blogs on what today's smart investors need to know in order to create sustainable wealth for you and your family.
Many investors do not understand risk when investing. Generally, the longer the time horizon, the more risk you can take.
If you need money in the next 5 years, you should not be taking on long term risk. Best to keep the money in CDs and bonds so that it will be there when you need it. Don't put your financial future at risk by "betting the house"
Conversely, many investors also take too little risk. They focus on the short term volatility of the market rather than the long term growth potential. These folks typically invest in only money markets, CDS, short term Treasuries etc... even thought their time horizon is 20 or 30 years out. The result is that their portfolios may not even keep up with inflation so their purchasing power is greatly eroded. They will not achieve their desired lifestyle.
A good financial advisor can help you evaluate the risks in your life and design an asset allocation strategy based on your goals, time horizon and the amount of risk that is needed to achieve your desired outcome.
Bottom Line: Understanding your exposure to risk---as well as your time horizon and goals---can help you better protect your portfolio and make better investment decisions.
Many investors do not understand risk when investing. Generally, the longer the time horizon, the more risk you can take.
If you need money in the next 5 years, you should not be taking on long term risk. Best to keep the money in CDs and bonds so that it will be there when you need it. Don't put your financial future at risk by "betting the house"
Conversely, many investors also take too little risk. They focus on the short term volatility of the market rather than the long term growth potential. These folks typically invest in only money markets, CDS, short term Treasuries etc... even thought their time horizon is 20 or 30 years out. The result is that their portfolios may not even keep up with inflation so their purchasing power is greatly eroded. They will not achieve their desired lifestyle.
A good financial advisor can help you evaluate the risks in your life and design an asset allocation strategy based on your goals, time horizon and the amount of risk that is needed to achieve your desired outcome.
Bottom Line: Understanding your exposure to risk---as well as your time horizon and goals---can help you better protect your portfolio and make better investment decisions.
Bookmark this post: |
|
Thursday, July 16, 2009
Clear Investment Objectives
This is part 2 of 8 blogs on what today's smart investors need to know in order to create sustainable wealth for you and your family.
Most people invest their money with no clear investment objectives. Your personal portfolio must be in sync with your financial goals.
Specific strategies can be tailored to meet a single objective of a combination of several objectives.
For example.....If the goal is to grow your assets.....then your objective would be to have X number of dollars at a certain time point in your life.
If your goal is to have cash flow for your lifestyle and grow your assets .....then your objective is to have X number of dollars per year and have X number of dollars at then end of the time horizon
If a goal is to partially fund a child's college....then your objective is to save X number of dollars per year for that goal.
If your goal is to buy a house.....then your objective is to determine the down payment and have X number of dollars saved in the time frame.
Bottom Line: You can significantly increase your chances of investment success by starting with clear investment objectives
Most people invest their money with no clear investment objectives. Your personal portfolio must be in sync with your financial goals.
Specific strategies can be tailored to meet a single objective of a combination of several objectives.
For example.....If the goal is to grow your assets.....then your objective would be to have X number of dollars at a certain time point in your life.
If your goal is to have cash flow for your lifestyle and grow your assets .....then your objective is to have X number of dollars per year and have X number of dollars at then end of the time horizon
If a goal is to partially fund a child's college....then your objective is to save X number of dollars per year for that goal.
If your goal is to buy a house.....then your objective is to determine the down payment and have X number of dollars saved in the time frame.
Bottom Line: You can significantly increase your chances of investment success by starting with clear investment objectives
Bookmark this post: |
|
Thursday, June 25, 2009
Time Horizon for Your Assets
This is part 1 of 8 blogs on what today's smart investors need to know in order to create sustainable wealth for you and your family.
Many people simply underestimate the length of time that a portfolio is needed to carry them through their life. A person can work hard all his earnings years and then end up running out of money in his/her retirement years. The National Institutes of Health have shown that someone born in 1952 had a life expectancy of 68.6 years at birth. By 2006, that figure has risen to 77.9 years. My mom is 87 years old and according to the US Total Population Life Table 2007, she is expected to live to 93!
This trend towards longer life spans will only continue with rapid advances in health care and nutrition. There is no question that we will most likely live much longer than our parents and grandparents.
A Time Horizon should be thought of as the amount of time that your assets need to be working for you and generating the cash flow needed for your lifestyle. This will vary from investor to investor. For example, some people want their assets to last only for their lifetime and their spouse as well. Other investors have a strong desire to leave a legacy for their kids, in addition to meeting their own cash flow needs and some investors want all of the above as well as a vacation home, interesting vacations etc....
Bottom line: Don't put your retirement at risk by planning for too short a time horizon.
Many people simply underestimate the length of time that a portfolio is needed to carry them through their life. A person can work hard all his earnings years and then end up running out of money in his/her retirement years. The National Institutes of Health have shown that someone born in 1952 had a life expectancy of 68.6 years at birth. By 2006, that figure has risen to 77.9 years. My mom is 87 years old and according to the US Total Population Life Table 2007, she is expected to live to 93!
This trend towards longer life spans will only continue with rapid advances in health care and nutrition. There is no question that we will most likely live much longer than our parents and grandparents.
A Time Horizon should be thought of as the amount of time that your assets need to be working for you and generating the cash flow needed for your lifestyle. This will vary from investor to investor. For example, some people want their assets to last only for their lifetime and their spouse as well. Other investors have a strong desire to leave a legacy for their kids, in addition to meeting their own cash flow needs and some investors want all of the above as well as a vacation home, interesting vacations etc....
Bottom line: Don't put your retirement at risk by planning for too short a time horizon.
Bookmark this post: |
|
Subscribe to:
Posts (Atom)