Poor, sweet Toxie

Hey everyone, Marcie here!

While I was perusing through NPR's business section this morning, I came across a little video. While humorous and mildly cute, I watched the story of Planet Money's "Toxie." As an experiment, Planet Money bought a toxic housing asset to, literally, "watch it die." (Yeah, they named it "Toxie," and she wears a cute little bow.) And while it's a little morbid in a dark humor type of way, watching Toxie's video and inevitable death, actually sheds a lot of light for us normal folk as to what really happened with the economic collapse a couple years ago and also what's still happening today.

So, how did "Toxie" the little toxic asset with the cute bow fare? Listen for yourself! Oh, and if you want to watch the video of the cute floofball asset (which I highly recommend), click here.

We wish you a financially happy new year

How many times did you hear this phrase this weekend?

"Happy New Year!"

Did you say it? Did family, friends or people at the store say it to you? I think I sent and received dozens of messages, emails, and texts with that exact phrase. We say "Happy New Year" so easily, but making resolutions, having dreams of a new start year after year, does that really make us happy?

Dr. Henry Cloud, a clinical psychologist, says no, but he gives several helpful hints to happiness in his interview on CNN's American Morning.

So, how does this relate to finances? We hear from many friends, clients and acquaintances about issues with their finances, especially pertaining to the economy. We empathize with what's happening now and we understand. It's hard for some of you. But we want to encourage and remind everyone it doesn't need to affect your overall happiness or outlook on life.

There are items that Dr. Cloud says that align perfectly with achieving financial peace of mind:

1. Make goals. They don't need to be lofty goals. Begin your goals at square one and work from there. For example, achieving a goal of saving 10% of all income for retirement in one year seems really hard. So, start at 5% and work from there.

2. Concentrate on what you can control. We can't control the stock market or the unemployment rate. But we can control  making good spending decisions and educated choices.  Doing research, asking for help and making goals can help achieve peace of mind.

We know that this new year won't be perfect. But it's nice to know that despite the cloudy days, there are decisions we can make to give us sunshine through the clouds. If you have questions about any goals you'd like to make, feel free to give us a call!

And we wish you peace and true happiness, in all aspects of your life!


1/3/11, 3:46pm edit: Dr. Cloud himself responded to our blog on his Facebook page. His words: 


It is incredible how much of this material affects people's finances. Several of the practices are related to people making more money, and at the same time, not needing to make more in order to feel happy. The happy ones do better, but know that happiness does not come from material circumstances. And, many of these practices, like gratitude, for example, mitigate against stupid spending and financial problems. Take the one about comparing oneself to others. If people just would follow that one principle, they would often save a LOT of money not trying to keep up with the Jones'.


You can follow Dr. Henry Cloud on his Facebook page!

Payroll Tax Relief and What it Means to YOU

If you haven’t heard, President Obama signed a new tax bill last week. One of the items that will affect all employees is the 2% point reduction in an employee’s share of Social Security portion of the FICA Tax, from 6.2% to 4.2%. What exactly does that mean for you?
The table below illustrates the change and savings. FICA limits are currently adjusted for inflation and are currently set at $106,800. The tax savings is currently only available for 2011.


Pay             2010 Tax (6.2%)     2011 Tax (4.2%)     Savings


$30,000      $1,860                    $1,260                     $600
$50,000      $3,100                    $2,100                     $1,000
$80,000      $4,960                    $3,360                     $1,600
$100,000    $6,200                    $4,200                     $2,000
$106,800    $6,621                    $4,485                     $2,136


This is a huge opportunity for every employed person to increase their 401k contributions or contribute to an IRA or a Roth IRA in 2011.  This is FREE money, folks.  Using it for retirement is a very wise move. 


Please call me if you need more information or want to take advantage of the extra money in your pocket by smart retirement investing. 

2010's Big Tax Bill Explained (Part 1)

13 pages of summaries are what comprises the new Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010.

My daunting task, should I accept it (and let's face it, I am accepting it because I'm writing this), was to wade through the jargon to find what would be useful to the average tax payer, like you and me.

There are 7 main parts to this bill, but today we are covering what's just under the first section called the "Temporary Extension of Tax Relief."

What's found in this section of the bill is a lot of tax break extensions from 2001 and 2003 that were set to expire, but are being extended through 2012. (You may feel some deja vu, but this is what the American Recovery and Reinvestment Act did last year for 2009 as well.)

The bill...

·        Continues the reduction in income tax brackets for 10%, 25%, 28%, 33% and 35%

·        Extends the capital gains and dividend rates

·        Increased extension of credit from $500 to $1000 for the Child Tax Credit

·        Extends the marriage penalty relief

·        Gives incentives for families and children

o   Expanded tax credit for child care  costs for children under 13 and special needs dependents

o   Tax credits for qualified adoption expenses

o   Tax breaks for employers purchasing or building a child care facility for their employees

o   Continuing the 45% tax credit for working families' first $12,570 worth of income

·        Education incentives for those going to school

o   Coverdell savings accounts remain tax exempt

o   Employee can exclude up to $5,250 worth of income for employer provided education assistance

o   Student loan interest deduction up to $2,500

o   Excludes scholarships from income

·        Bond exclusion

·        American Opportunity Tax Credit extended (Rebate of up to $2,500 of tuition or education related expenses)

Top 10 Financial Tips for Newlyweds

My dear niece is getting married in March, 2011, to a wonderful young man.  As I have been thinking of this wedding and the two wonderful people that will be starting a life together, I cannot help but think of the financial advice that I can offer them so they can have a prosperous life together.

Here are the top ten ways to keep financially sane, today and for the rest of your life together:

1. The power of compounding interest is truly a miraculous thing but it takes time.  Start saving now when you have nothing but time ahead of you and your money will grow exponentially.
2. Always save 10% of your income—each and every year—no exceptions.
3. Go slow on large purchases and always consult with each other.  Set a dollar limit that each can spend on his/her own. 
4. Avoid credit card debt like the plague.  Only charge what you can pay off when you get your monthly statement. 
5. Have money set aside for emergencies and believe me, they will happen.  A rule of thumb is approximately 3 months of your monthly earnings. 
6. Be generous.  Sit down together and decide what annual amounts you want to give your church or charities so that others can be blessed. 
7. Contribute to your employer retirement plans so that you always get the match.  If your employer has no plan or no match, consider contributing to an IRA or a Roth IRA.  Remember… compounding interest is phenomenal. 
8. Buy term life insurance only.  Check with your employer about group term life, it is almost always the cheapest way to go. 
9. If you are having trouble with more expenses than income, seriously look at cutting out the extras such as expensive cell phone plans, cable TV, eating out etc… Taking lunches to work saves a lot of money! 

And, of course, number 10...

   10. Seek the wise counsel of your Aunt Judy.  She knows what she is talking about!

 

Journey to Haiti (Part 2)

It has been only been three weeks from my experience in Haiti...The devastation and hopelessness that I witnessed will haunt me forever.  However, I left a big chunk of my heart in Haiti and know that someday I will return.  I pray for world leaders to unite and truly help Haiti become a viable country with exports and manufacturing.   

The people are willing—they want to work and have a better life.  They don’t need money to be dumped into the country…they need education and training and jobs that they can perform.  They need dignity and empowerment.  Haiti desperately needs leaders to rise up who care only about Haiti and how to make it better and not their own selfish ambitions.  The Non Government Agencies (NGO’s) and churches of all faiths are the hope of Haiti.  These are the people who truly care about the beautiful and resilient Haitian people.  

 

I am so proud of my church, Generation in Oceanside that is going back to Haiti for two more trips in 2011 to help a local church expand in size and thereby be a blessing to more people in the community that it serves.  This church currently cares for 20 orphans that lost their parent(s) in the earthquake.  I personally met each one of these children and each child is imprinted on my heart forever.   They will be taken care of and educated by Pastor Pierre’s church until they are self sufficient.  They are the Hope of Haiti.  

These photos are courtesy of Jonathan Moyer. We invite you to explore his Haiti Photo Gallery. Thank you, Jonathan!

Top Five Year End Tax Saving Strategies

We are only two and a half months away from 2011! Some families are realizing that they do not have a lot of time to enact some tax savings before the year is out. We're here to help! It appears that 2011 is headed for higher taxes, below are the top five ways to do some tax saving before the year is over:

1. Sell stock. A smart tax strategy is to sell some highly appreciated stock/stock funds before the end of the year and pay capital gains at the lower rates in 2010.  Often, the tax bite can be mitigated by also selling some of your “losers” at the same time, thereby offsetting some of the gains with the losses. 

2. Charitable giving. Charitable giving is always a great way to save on taxes and do some good! Gifting appreciated stocks to your favorite charity(s) is also a great tax savings tool.  The charity gets the fair market value of the stock transferred and you get the tax deduction and it saves you the capital gains taxes. 

3. Tax sheltered giving. Tax sheltered plans are one of the best gifts that Uncle Sam has ever given us.  A person 50 and older can defer $22,000 into his/her 401k, 403b, and 457 plans for 2010 and everyone else can defer $16,500.  This results in significant tax savings for you, the investor.  Check your current pay slip and see how much you are on track to contribute for 2010.  If you will not meet the above maximums, ask your HR department to increase the monthly amount so that you can take advantage of these limits and save BIG on taxes. 

4. Invest in a Roth Conversion. Roth conversions are in the news this year.  For the first time ever, folks making $100,000 or more can covert their traditional IRAs to Roths this year.  Yes, taxes will be due on the converted money but Uncle Sam has also given us another nice gift.  You can pay the taxes over a 2 year period.  That really helps take the sting out of the tax bite.  An interesting provision in the recently signed Small Business Bill is that employer tax sheltered plans can now allow their employees to do Roth Conversions of their 401k, 403b and 457 plans.  If this is of interest to you, check with your HR department for the details.

5. 2010 Tax Energy Credits. The personal energy tax credits expire at the end of 2010.  If you are planning on getting more energy efficient windows and/or doors or installing heating or cooling units, then please do so before the end of 2010 and get up to 30% of the purchase price as a tax credit for the year.  Credit tops out at a generous $1500. 

Please feel free to contact us for more information if you need any more information or assistance on how to implement any of these tax savings strategies.  

Journey to Haiti (Part 1)

Hello everyone! This is Marcie filling in for Judy today. As some of you may know, Judy has taken some time this week to visit Haiti with her church, Generation Church. This trip is a scouting mission trip of sorts, to see where Generation Church can make an impact in the rebuilding of Haiti. So far, it has been a strenuous and hard trip. Phone calls and texts are hard to come by, so the team has been emailing and posting thoughts and photos to Facebook. Below are some words that Judy sent to her family. 

This is indeed a tough trip. The sights are so overwhelming.  People living like this are beyond words.  The people are so resilient.  All kinds of tents set up everywhere --they sleep in there at night and may work out of their shack/homes during the day.  But they are so scared to be indoors at night.  The wreckage is hard to describe.  It just doesn't seem like much has been done. 

Supermarket collapse in Haiti

Today is Sunday and we arrived at Pastor Pierre's church at 8:30am and left around 2:00pm.  Church and worship lasted over 3 hours in a small room filled with people (crammed in) and only a few fans. Pastor Pierre is a small man--very rotund--with a booming voice and infectious joyful personality.  We loved him and his wife and 10 children.  They live in a small area over the church--7 boys in one bedroom probably half the size of one of our bedrooms and the 3 girls in with the parents. Church was filled with songs and clapping and preaching and joyful praising.  One of the most memorable church services I have ever been to.  Shawn preached and of course, we had a translator.  

Pastor Pierre and his family

Daybreak and Generation Church are going to talk about sending construction teams to expand the church building for him.  He has an opportunity to buy the three rooms attached.  Trust me--it needs to be bigger!!! It is absolutely stifling here and very little water pressure.  Showers are a trickle.  Tomorrow, we go and visit the 20 orphan kids that Pierre's church is taking care of. 

Church in Haiti - needs to be bigger!

 All I can do to get past this overwhelming hopelessness is to know that 20 kids are being cared for, educated and loved and will grow up to be a light in this part of the world.  And that Pastor Pierre can make a difference in his community thru his church and be a light.  If I cannot cling to this and focus on it--I would be overcome with despair." 

We will have more thoughts and photos, hopefully today, depending on the availability of the Internet, of course. Thank you for reading and your continued support. Please feel free to comment below, I will send any comments to Judy via our next corresponding email.

Thoughts from Atlanta

I am blogging from Atlanta while attending the NAPFA (National Assn Personal Financial Advisors) Core Competency Conference.  This morning we had an excellent speaker from the Atlanta Federal Reserve named Michael Hammill.  I will share with you some of the key ideas that I gleaned from his presentation:

• We are in a period of moderate economic growth (about 2.5%) since the first quarter of 2010.  While this is not a great number, at least we are moving in the right direction
• Consumer confidence is fairly pessimistic which translates to weak consumer spending.  Since consumer spending is 70% of GDP growth, you can see how this translates to the slow growth numbers cited above.  Wages drive consumer spending and when you consider the number of people unemployed or underemployed, it makes perfectly good sense that people are not spending because they cannot spend. And the savings rate is up sharply. When we went into this recesssion, the savings rate was negative.  It is now hovering around 7%.  As a financial planner who preaches a 10% savings rate for people, this makes me very happy.  Although the paradox is that we need people to spend in order to grow our economy. 
• Unemployment is around 9%.  However when you factor in the number of people who are underemployed (working part time instead of full time) and the folks who are so discouraged that they have actively stopped looking for work, this number should be doubled.  So, the TRUE unemployment rate is more like 18%.  Ouch!  We are adding about 100,000 jobs a month but when you consider that we were shedding more than 800,000 jobs a month during the recession (depression?), it will take us 5 more years to get back to pre-recession job growth.
• Business inventory levels are growing --a good thing!
• Housing market is very poor.  It was propped up with the generous tax credits but those have all expired.  The forecast is that housing market will remain very weak for the next four years.  It will take until 2012 to work thru the short sales and foreclosures clogging the market.  And until 2014 before housing prices start to rise. Bad news for people trying to sell their home.  Hardest hit areas are Florida, Calif, Nevada and Phoenix--the sunshine states where the biggest bubbles were.  No surprise there. 
• Inflation not expected to be an issue for several years--good news
• Financial markets adjusting to a new normal--stricter credit --weak loan demand.  Loan defaults (except for real estate) have peaked and are now declining. 
• Europe is working through their debt issues and not as much effect on US markets as expected. 

Well,  now you have the good, the bad and the ugly.  My bottom line take is that we are in for a long and slow recovery but we will recover. I am committed to helping you navigate the road ahead.  One of my colleagues said that he feels like Moses--leading his clients to the promised land of prosperity and recognizing that it may take the next 5 years to get there.  Great analogy.  Let me be your Moses!

New Financial Reform Bill: Progress Or Not?

If you have turned on the news, you probably have heard and re-heard reports on two events: the horrendous BP oil spill and the, newly passed, Financial Reform Bill. While I wish I had insight on how to fix the oil spill, I do have a few thoughts about the Reform Bill that was passed Thursday, July 15th.

So, what is in this Reform Bill?

Jill Schlesinger, author of "The Financial Decoder," and contributor to CBS' Moneywatch.com, wrote an article on June 25th, using with layman's terms, what the bill can and cannot do. She states, "the bill probably won't prevent the next crisis," but it will help consumers in some ways.

For example, there will be a new Consumer Financial Protection Bureau, which will help consumers by moderating the credit card and house mortgage industries. According to the Senate, the new Bureau will "finally [be] a watchdog to oversee financial products, giving Americans confidence that there is a system in place that works for them – not just big banks on Wall Street."  

Schlesinger says in another article about the new Bureau, "The new rules will prohibit mortgage brokers from steering customers into more expensive loans for a commission and will ban no-documentation or "liar" loans. It will also make credit card statements more readable and transparent, allowing consumers to more easily compare products."

She also notes where the new Bureau will not protect consumers in all things, namely auto dealer supervision and addressing the fiduciary standard: "Although the new consumer rules are a step forward, there are some noticeable omissions. During negotiations, two important consumer measures were left out: the oversight of auto dealers and the fiduciary standard. I'm particularly upset about the later, which would have made it law for financial professionals to put their customers' interests first."

I agree with Schlesinger about these omissions, namely about the fiduciary standard. We work very hard at Stewart Financial Services to address our client's needs first. There are many planners and institutions out there who base their financial advice simply on what funds would give them the biggest commission, or return... regardless if it's a good fit for their client's financial goals or dreams.

The SEC has been delegated to take care of an umbrella fiduciary standard for all financial advisors. We hope to see progress on this front, hopefully, within 6 months from now.

If you have a question about what the fiduciary standard is, please click on the orange button below. Stewart Financial Services is proud to follow all these guidelines for our clients' financial well being.

FocusonFiduciary.com

Also, if you have further questions about the Financial Bill Reform, you can click here to view Senate.gov's complete copy of the bill, or, as always, feel free to ask me. I feel the Consumer Financial Protection Bureau is a good step in the right direction... let's just keep making these steps!