Category Archives: Uncategorized

Danger Signs That Personal Financial Disaster Might Be Ahead

Posted on by

There was a link on Yahoo to an article that pointed out five of the danger signs that financial instability might be in the future of a person or family. The link to that article is Five Danger Signs that may signal financial disaster may be on the horizon.

HAVING TOO MANY CREDIT CARDS WITH LIMITS HIGHER THAN CAN BE PAID OFF MONTHLY is an indicator that a person is digging a hole for themselves. Also it affects your credit score dramatically with a large number of different credit cards are approved for you and your spouse. The credit rating services take into consideration that the person could charge the maximum on each card which dramatically affect their ability to pay other debts. Also if the person is paying interest on the cards it is usually at a very high rate as high as 13% up to over 30%.

BEWARE OF ZERO INTEREST CREDIT OFFERS FOR UP TO A YEAR OR SOMETIMES EVEN LONGER. There are transaction fees associated with transferring balances from other cards or from writing checks that are charged to the credit card to pay bills. The transaction fee may be anywhere from 3% to 10% of the total amount paid using the zero interest credit card offer. Also you must be sure to pay the credit card on time monthly. A delinquent payment after the specified payment date will cause the card to revert to normal interest rates usually going back to the inception date of the amount borrowed.

FINANCIAL EMERGENCIES MAY NECESSITATE BORROWING MORE MONEY THAN YOU PROJECTED IN YOUR FAMILY BUDGET. If it is necessary to borrow a larger amount than your monthly budget can handle. Determine the amount you can pay back on the necessary amount monthly. It might be wise to go to the bank or credit union and request a loan to pay this debt. The interest rate will almost always be significantly less than the credit card rates. A signature loan is preferable. If it is necessary to offer collateral for the loan, than possibly another alternative needs to be investigated. Possibly an emergency loan from a retirement fund or insurance policy if those options are available in your case. Many times only medical emergencies are a reason to borrow from a retirement fund or insurance policy. An exception is if an insurance policy permits sometimes it might be advantageous to borrow to help with the down payment on the purchase of a home.

THE MAIN ADVICE IS TO USE GOOD JUDGEMENT AND DO NOT PANIC IF AN EMERGENCY OCCURS. A SOUND PLAN HAS PULLED A LOT OF FAMILIES OUT OF UNEXPECTED EMERGENCIES. PEOPLE MAY HAVE A TEMPORARY LAPSE IN GOOD JUDGEMENT AND NEED TO ADJUST THEIR BUDGET TO COMPENSATE FOR THIS ADVENT.

TAKE ADVANTAGE OF 401-K, 403-B, IRA, AND 457 FEDERAL RETIREMENT PROGRAMS IF ELIGIBLE

Posted on by

It is generally beneficial to invest in the individual retirement program (401-K) offered by your employer which is usually a corporation or private employer, or partnership. If you or your spouse work for an educational employer or a State institution, usually you are eligible to invest in a 403-B Program. Government employees are usually eligible to invest in a 457-B Program. You will find that there are many different 401-K programs designed and set up for the various employers. The 403-B programs have several major financial companies that offer a variety of variable mutual fund options or a fixed a annuity option.

I was a stockbroker specializing in municipal bonds and the full spectrum of stocks for seven years. I was also a financial consultant marketing variable and fixed annuities to employees of school districts, colleges, and state institutions for five years.

EXAMPLE OF A 401-K PROGRAM
Let’s say an employer offers to match the employees contribution at a 50% rate up to 3% with a maximum contribution of 6% by the employee for matching purposes. That means if the employee chooses to contribute 6% the employer will contribute 3%. If the employee contributes 2% the employer will contribute 1% to the employee’s account. The employee usually deals with one investment company the employer has chosen. The investment company gives the employee a prospectus outlining the investment option available to the employee. Usually several mutual funds are available that the employee can choose from. The more common choices are a STOCK INDEX FUND, A BALANCED FUND(meaning the fund is invested in stocks and bonds), EUROPEAN STOCK FUND, CORPORATE BOND FUND, TECHNOLOGY FUND, INTERNATIONAL FUND, etc. The employee can choose from the fund choices , usually the choice is limited to three funds from those offered with the right for the employee to allocate their contribution. An example might be contribute one third to each of three funds. The age and point in the employees working life influence the best choices of funds for an employee. If the employee is close to retirement , THE BALANCED FUND, that is more conservative than the STOCK INDEX FUND, might be a better choice. If an employee is planning to work for ten or more years , THE STOCK INDEX FUND , might be the best choice for them. Statistically, over a period of ten years most STOCK INDEX FUNDS have a positive performance record that out performs fixed interest type investments. Also an employee can invest more than 6% in most cases if they want to but the investment over 6% would not be matched and also it is possible that the employee might have to pay income tax on the the contribution above the allowed amount depending on the tax laws at the time of the investment. Usually the money invested in a 401-K program up to the allowed limit is tax deferred meaning that the employee does not pay tax on the investment at the time it is invested, they are liable for income taxes when they withdraw amounts from the 401-K which usually is in retirement years when their income is normally less than their working years. Also also this tax deferred money is generating income in most cases which is also not taxed until withdrawn. If an employee needs to withdraw money earlier than age 55 , they may incur a 10% penalty in addition to the income taxes for early withdrawal.

AN EXAMPLE OF A 403-B PROGRAM
If an employee is employed by a school district, college, university, non-profit organization, or some states, they will probably have a 403-B retirement program which they may participate in. There are several large companies that specialize in offering a variety of mutual funds with different investment goals that the employee can choose from There are percentage limits governing the amount the employee can contribute. In some cases the employer matches exactly the percentage the employee contributes, in some cases the employer contributes a larger percentage than the employee. There are withdrawal restrictions and a tax penalty would be incurred if funds are withdrawn before the age of 55. The employees are each given a prospectus by the company they are enrolled with for the 403-B Program. In some cases the employee may only change the contribution percentage once a year usually in September. Variable annuities offered under this program have investments in securities and bonds and fluctuate with the financial markets. Fixed annuities guarantee a fixed amount at retirement and the investments are in fixed securities that help protect the investment. Fixed annuities are sometimes called defensive investments for those close to retirement when the investor cannot afford to take a change that their retirement funds are going to decrease significantly in value.

AN EXAMPLE OF A 457 PROGRAM
Civil Service U.S. Government employees have different rules than the 403-B program and this program is called the section 457 program. Investment companies offering products eligible for the 457 Programs will have a prospectus and other historical data so the eligible employee can make decisions best for their age and future investment expectations.

IF YOU OR YOUR SPOUSE IS ELIGIBLE FOR ANY OF THESE PROGRAMS BE SURE TO MAKE AN EFFORT TO PARTICIPATE. IT WILL REALLY BE BENEFICIAL FOR YOUR RETIREMENT INCOME OR INCOME IF FOR SOME EMERGENCY MAKING IT NECESSARY TO MAKE SOME EARLY WITHDRAWALS EVEN
IF YOU HAVE TO PAY A 10% PENALTY IN ADDITION TO THE CURRENT TAX RATE AT THE TIME OF WITHDRAWAL.

Preparing To Live On A Tight Budget For Your Retirement Years

Posted on by

I am somewhat of a photography buff. All of the intro photos on Easy Personal Budget were taken by me. The above photo is of a 13,100 ft. elevation Buffalo Peak we see from our deck. We are able to view three peaks over 14,000 feet above sea level from our deck here in Colorado.

I began working at the age of nine selling newspapers to troop trains passing through Grand Junction, Colorado in 1946. That was followed by a newspaper route for the Denver Post , then with the Daily Sentinel. At age 14 , I began working in the mail room for the Daily Sentinel. My responsibilities included doing fire insurance inspections punching the times for the insurance companies, checking out carriers, preparing bundles for papers for vans distributing the newspaper to many nearby towns, and even some reporting on the weekends when the reporters were off. I have been eternally grateful for those experiences. I paid Social Security Tax for all of my earnings and surprisingly that was the reason I was able to receive the full amount of Social Security benefits due to me. I had worked for colleges in Colorado for twelve years and was eligible for a partial retirement from the Public Employees Retirement Assn. The requirement for receiving full Social Security is that the applicant must have paid Social Security Tax for a period of thirty years on significant earnings. With the five years I worked in at the newspaper that gave me thirty two years , therefore I could receive the full Social Security and also receive the amount due to me from the Public Employees Retirement Assn. If I had not had the thirty years plus , then my Social Security benefit would have been reduced significantly based on the amount received from other retirement benefit plans. My retirement benefits are not very much but surprisingly my wife and I are able to live on them with the life style we have chosen.

OUR SUMMER HOME-Last year we sold our home that we had owned for ten years for slightly more than we paid for it, which was surprising. Two years ago we purchased a 2004 Model Everest Fifth Wheel that was just like new since the owner had only lived in it for six weeks in eight years. The fifth wheel is located on a quarter acre of pine tree covered land at 9,950 ft. elevation with a view of three 14,000 feet above sea level peaks. We bought the land and the trailer and added a deck that goes around half of the outside of the home at a cost of $6,500. We had two sheds, with metal roofs and porches, built and delivered for $2,500 each. We have two signs on them “Hers” and the “Dog House” for mine. Then we bought a used year 2000 model Rockwood popup trailer in great condition with air, heat, kitchen , which sleeps seven. The popup trailer is for our guests. The total cost for all of these items was approximately $58,000. The annual dues to the campground association for the use of the restrooms , water, electric, swimming pool, and clubhouse, is less than $600. The property taxes and insurance total approximately $600. Since we sold our home everything is paid for from the proceeds we received. Our home still had a $110,000 loan on it that we paid $550 a month on. Now our only expenses concerning the property is the $600 annual dues , insurance , and property taxes. That is a great change from $550 a month house payment, $600 for insurance , and a lot more maintenance expenses. THERE ARE A LOT OF PROPERTIES IN THE MOUNTAIN COUNTRY OF COLORADO THAT ARE AVAILABLE BECAUSE SPOUSES HAVE DIED AND THE OTHER PARTY WANTS TO GET RID OF THEM, OR THE KIDS INHERITED THESE MOUNTAIN PROPERTIES AND WANT TO SELL THEM TO GET THE MONEY, OR SOME PROPERTIES THAT ARE SELDOM USED. MANY ARE FOR SALE BY OWNER WHICH MAY PROVIDE A BETTER BARGAINING SITUATION. IN THE COMMUNITY ASSOCIATION AREA WHERE I LIVE, THERE ARE ABOUT FORTY PROPERTIES OUT OF EIGHT HUNDRED FOR SALE. We only plan on living here five to six months out of the year depending on the weather.

OUR WINTER HOME-We bought an older trailer in a 55 and over Mobile Home and RV park in Apache Junction AZ. The cost of the trailer was less then $5000, it came furnished with a new TV , furniture, stove, refrigerator, shed , carport , covered patio. The land is owned by the park so $375 lot rent has to be paid year round.When we moved in this unit last October , we considered two alternatives , junking the trailer , and moving in a better one or remodeling the existing 55 ft. single wide trailer. We decided to remodel. We put new plumbing, siding on the whole trailer, new stove, new refrigerator, complete bathroom replacement, new water heater, painted the interior white over dark brown paneling, new 10 X 12 ft shed , an low level fence made with skirting , and a gate so our dogs could be outside. All of this at a cost of less then $25,000. We have access to a beautiful swimming pool, hot tub, club house , restrooms and shower, and various game facilities. The monthly cost is about $550 a month for rent electric and water, when we are there , and $400 a month when we are in Colorado. We pay property taxes and insurance of about $500 a year. You might ask why did we not buy a lot? In the area surrounding Phoenix , AZ , Mesa, Apache Junction, Tempe, Scottsdale, it is difficult to buy land , it is too expensive. We plan on living in Arizona from mid-October to about the first of June when it is warm enough to return to Colorado.

USING THE ABOVE TWO CASES AS AN EXAMPLE , IT IS EVIDENT THAT A PERSON CAN HAVE THE BEST OF BOTH WORLDS DURING RETIREMENT LIVING AS A SNOWBIRD WITH A LIMITED INCOME.

Reviewing some of the opportunities to save money and acquire more effective treatments related to health, it might be beneficial to investigate essential oils.
A good source for pure therapeutic grade essential oils can be found here Pure Therapeutic Grade Essential Oils Explanations and a virtual catalog of available oils is accessible through the website.

I will be taking different scenarios for future blogs dealing with budgets for people at different stages in their working and retirement status. I was a CPA for many years working for Universities , Colleges, manufacturing facilities, and a CPA firm.