Well Qualified Buyer

If you've ever seen a car sales commercial, they often end by saying a finance rate of X%, for “well qualified buyers". If you aren’t considered to be well qualified, you’ll have to pay a higher finance rate.  Why is that?

Let’s say you know two people, both of whom want to borrow money from you. Person A is really reliable. She has a high paying job, and has worked for the same company for over 10 years. She always pays her bills on time, and does not owe very much money.

Person B is pretty much the opposite of A. He just started a new job and doesn’t make very much money. You know that he is often late making payments, and some loans were never paid off and went into collection.

You see that there is a higher risk that person B won’t pay you back, compared to A. So, if you lend money to B you would want to be compensated for the higher risk of him not paying you back or making late payments.

That compensation comes in the form of the loan's interest rate. Lenders view you as a risk.  The higher risk you are, the higher the finance rate you’ll be charged.  So if you want the best finance deals available, pay your bills on time, and don’t owe much money.

Brycast Financial Planning in Austin Texas --- We Can Help
Income Tax Preparation in Austin Texas
contact: service@brycast.com http://www.brycast.com/
Enrolled Agent; Investment Advisor Representative

Eating Out, But Can’t Seem to Save Money?

Eating out is a lot more fun to do that putting your money in a savings account. Usually, all you have to do is sit down, look at the menu and order whatever you want. The food is normally delicious, and didn't require that you put any effort into its preparation. What's not to like?

One of the things I've seen is that most people don't realize how much they spend on eating out. If you use a credit card to pay for your meals, look at your credit card statements for the last three months and add up amounts paid to restaurants. Multiply by 4 to get an estimate of how much you spend in a year.

Is the number impressive? I'm not asking you to stop eating out, and put all of that money in a savings account. It may work in the short-term, but eventually you may return to your old ways. But, you should ask yourself if you can reduce your restaurant bill by either limiting the number of times you eat out, or by setting a "dining out" budget.

If you find that you are averaging $200 per month, try setting a budget of $180 per month and putting the $20 in a savings account. After a year, you'll have an additional $240 in your savings account.

Brycast Financial Planning in Austin Texas --- We Can Help
Income Tax Preparation in Austin Texas
contact: service@brycast.com http://www.brycast.com/
Enrolled Agent; Investment Advisor Representative

Trying to Hit a Moving Target -- Estate Planning

It would seem that estate planning would be easy, right? After all, events in your life should have calmed down by then. Well, unfortunately Congress has other ideas. Estate Tax laws seem to change frequently, making it hard to put together an efficient estate plan.
For people dying in 2010, there was no estate tax (if they opted for this treatment). If they had died in 2009, estate assets over $3.5 million would have been taxed at a 45% rate. For 2011, the exemption amount is $5 million, and more importantly $10 million for married couples. Also, the maximum tax rate is 35%.
How can you setup an estate plan when the rules keep changing? Well, mimic NASA. You do all of your calculations with the most accurate information you have, and launch. And just as important, you make periodic adjustments along the way.
There is no way to know what the estate tax laws will be when you die.  Estate tax laws seem to change yearly, and you probably don’t know when you are going to die. By the way, you’re personal situation could be entirely different several years from now (more kids, married, divorced, etc.).
So, set up a good estate plan today, but revisit it regularly. And talk to financial advisor about the need to alter your estate plan.
Brycast Financial Planning in Austin Texas --- We Can Help
Income Tax Preparation in Austin Texas
contact: service@brycast.com http://www.brycast.com/
Enrolled Agent; Investment Advisor Representative

Are You New to Owning a Home? Consider Itemizing Your Deductions.

If it is you first time owning a house as your main residence, you may not know about some deductions that you can take on your tax return. If you took out a loan to buy your house, then the interest paid on that loan is deductible, up to a limit. If your filing status is NOT married filing separately, and the loan is $1 million or less, the full amount of interest paid in the tax year is deductible. Real estate taxes, loan origination points, and mortgage insurance premiums may also be deductible.

If you are under 65 and your filing status is married filing jointly, then your standard deduction for tax year 2011 will be $11,600. Your itemized deductions could easily exceed the standard deduction and conequently reduce your tax bill.

Brycast Financial Planning in Austin Texas --- We Can Help
Income Tax Preparation in Austin Texas
contact: service@brycast.com http://www.brycast.com/
Enrolled Agent; Investment Advisor Representative

Types of Property Ownership - Community Property

There are several types of property ownership.  Most of the southwest and western states are known as Community Property states.  Community property is a type of ownership that is exclusively for spouses. Each spouse is considered to have contributed and owns 50% of the property acquired during marriage. Community property cannot be divided without the consent of both spouses.  Additionally, all income earned by either spouse is considered to be generated equally by both spouses.  For example, if only one spouse works and makes $100,000 per year, both spouses are considered to have contributed $50,000 to the pool of money. Either spouse can own property separately. But, in most cases it must be inherited, received as a gift or acquired before marriage.       

Curiously, community property does not have an automatic right of survivorship. Meaning that if one spouse dies, the surviving spouse does not automatically inherit the deceased spouse’s half.  The property must go through probate.  If the decedent does not have a will, Texans have a will prepared by the State. The State provided will  has a provision that allocates the decedent’s separate personal and real property as well as the decedent’s share of community property.    If you are uncomfortable with the state provided will, then you should consider having a will prepared for you.

The community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.

Brycast Financial Planning in Austin Texas --- We Can Help
Income Tax Preparation in Austin Texas
contact: service@brycast.com http://www.brycast.com/
Enrolled Agent; Investment Advisor

Making use of DRIPs

A DRIP is a dividend reinvesting plan.  Many corporations allow the cash dividends that they pay their stockholders to be reinvested in the corporation. This can be an effective way of increasing your stake in a corporation. Unlike when you normally purchase a stock, there is usually no charge with a DRIP and you can purchase fractional shares.

Brycast Financial Planning in Austin Texas --- We Can Help
Income Tax Preparation in Austin Texas
contact: service@brycast.com http://www.brycast.com/
Enrolled Agent; Investment Advisor

Inexpensive Way to Purchase Treasury Securites

Purchasing US Treasury securities is probably easier than you think. By creating an account at  http://www.treasurydirect.gov/, you can purchase T-Bills, T-Notes, T-Bonds, and TIPS.  There is no service fee, if you buy directly from treasurydirect.

The securities are sold at auction through either competitive or noncompetitive bidding. Although auctions are held weeky, not all securities are up for sale every week.

For more info, visit treasurydirect or contact Brycast.

Brycast Financial Planning in Austin Texas --- We Can Help
Income Tax Preparation in Austin Texas
contact: service@brycast.com http://www.brycast.com/
Enrolled Agent; Investment Advisor

Ever Want to Invest in Gold?

Over the past 5 years, the price of gold has almost tripled. Today, an ounce of gold sells for about $1500.  If you want to add gold to your investment portfolio, there are cost effective ways of doing it. There are several ETFs that track gold bullion and gold futures. Some gold ETF shares range from $10 to $150 per share. So, for a fraction of the cost of an ounce of gold, you can add gold to your portfolio.

Brycast Financial Planning in Austin Texas --- We Can Help
Income Tax Preparation in Austin Texas
contact: service@brycast.com http://www.brycast.com/
Enrolled Agent; Investment Advisor

The More You Spend, The More You Save??

Really? What a sales gimmick. Many retailers would have you believe that the more money you spend in their store, the more money you are saving. They entice you with 50% off sales on what supposedly would have cost $1000, now only costs $500. You just saved $500...right? Of course not; you spent $500.  Don't be fooled. You aren't saving money when you are spending. The real line should be, "The more you DON'T spend, the more you save:)
  
Brycast Financial Planning in Austin Texas --- We Can Help
Income Tax Preparation in Austin Texas
contact: service@brycast.com http://www.brycast.com/
Enrolled Agent; Investment Advisor

How to Reduce Your Cell Phone Bill by Half

The average cell phone bill is about $50 per month, or $600 per year. If you use less than 250 minutes per month, you might want to consider using a prepaid plan. T-mobile offers a plan where you can purchase 1000 minutes for $100. Over the course of a year, you could make 3 purchases for a total of $300 for 3000 minutes.  On a monthly basis, it's 3000/12 = 250 minutes @ $300/12 = $25 per month.

So, if you don't talk a lot on your cell phone, this may be a less expensive option for you.

Brycast Financial Planning in Austin Texas --- We Can Help
Income Tax Preparation in Austin Texas
contact: service@brycast.com http://www.brycast.com/
Enrolled Agent; Investment Advisor 

Ready to Withdraw from Your Roth IRA…Watch Out

I’m assuming that you know what a Roth IRA is, so I’m not going to talk about it from that perspective. But, if you are planning to withdraw funds from it, please read the rest of this article before you take a distribution.

There are two type of distributions, qualified and nonqualified.  As you might have guessed, in order to avoid taxes and penalties, you should be doing the qualified version. If you don’t, then you may be subject to tax and a 10% penalty on part of the distribution.  Here are the commonly known requirements of a qualified distribution.

1)      You are 59 ½ or older OR

2)      The distribution is attributable to you being  disabled OR

3)      The distribution is made to the owner’s estate or beneficiary on or after the owners death OR

4)      The distribution is for first-time home purchase (restrictions & limits apply)

However, there is an additional requirement that you may not know about.  The distribution must be made AFTER A 5-TAXABLE-YEAR-PERIOD.  The taxable year period begins on Jan 1 of whichever is earlier

1)      The first conversion contribution is made OR

2)      The first regular contribution is made.

So, if you think that you might want to convert your Traditional IRA into a Roth IRA in the undetermined future, then it might not be a bad idea to create a Roth IRA now with a small initial contribution, just to get the 5 year clock started.        

Brycast Financial Planning in Austin Texas --- We Can Help
Income Tax Preparation in Austin Texas
contact: service@brycast.com  http://www.brycast.com/
Enrolled Agent; Investment Advisor