Thursday, September 15, 2016

The Biggest Loser Part 1

Would you be surprised if we told you that:

  1. 2 out 3 adults are considered to be overweight or obese, and that
  2. More than 1/2 of Americans say they are financially insecure.

In other words most Americans are fat and broke.

A sage family doctor once advised that losing/gaining weight was all about math. Consume less calories than you burn, you’ll lose weight and consume more calories than you burn, you’ll gain weight. Apparently we (Americans) have mastered the latter and need to work on the former. In other words, eat less, move more. Problem solved.

The second problem is not much different than the first and could be solved by another KISS principle: spend less, earn more, which is 1 of the 4 principles to achieving financial security:

  1. Spend less than you earn.
  2. Pay yourself first.
  3. Avoid consumer debt.
  4. Be a generous giver.

Spend less than you earn. Whatever amount of money you earn over some period of time, spend less than that during that same period of time. So if you earn $5,000 per month spend less than $5,000 per month. Now as simple as this sounds, not adhering to this simple principle is the fundamental cause of financial instability.

It is just like consuming more calories than you burn. Now if you just read that last sentence and you said to yourself "I don't consume calories, I eat food."; that's a potential problem.  You can't begin to know how much food you can eat daily without gaining weight unless you know how many calories are in the food you eat. You don't burn food, you burn calories. As soon as McDonald's started posting the number of calories that was in their value meals was the day that I stopped eating at McDonald's because I couldn't afford it. Prior to this, I measured the cost of the meal in dollars, now I also became aware of the cost in calories. It was a sad day.

Of course we all know how much something costs in dollars, but unless we understand how much we can spend each month and be willing to commit to spending no more than that amount we will find ourselves creating debt. So how do you accomplish this herculean task? You create a budget. What is a budget? It is simply a listing of all of your monthly expenses broken down by categories. The best way to develop a budget is to look at your expenses for the previous 2 or 3 months to establish recurring categories (i.e. mortgage, electric, water & sewer….) and amounts. (There are some really good FREE online Budget Apps) for helping you with this.) Some of those expenses are fixed as to the amount each month, and others vary. Some are needs and others are wants. As you look to manage the budget you will find that reviewing the “wants” items will be where you can most easily make changes to bring your budget in line with your goals. For example, if your mortgage is $1,500 per month, changing that is not going to be easy. Low hanging fruit will be items like dining out, 2,600 channel cable bills, etc… By the way if you have a separate category for Rita’s for the past 3 months there is a pretty good chance you are struggling with Problem #1 above (1 regular size swedish fish with chocolate custard = 550 calories). Yikes, that’s like 20% of your total allowed daily calories. We’re not judging; we’re just saying.

You can manage only what you measure, and what you measure you can improve.

So what’s the deal with the title of this posting “The Biggest Loser”?  Well, we are looking into creating a contest for our clients to see who can be the “biggest loser of debt” over the next year with a prize to the winner. Please subscribe to our blog for future details and for a discussion on the other 3 principle of financial security.

Spend less than you earn. Create a budget as both a road map and a tool for being a net saver each month. We have a lot more to say about this subject, so feel free to call or email us. As a reminder we are offering, until the end of the year, FREE Basic Financial Planning services to our clients and referrals of our clients. Go to our webpage at Your Personalized Financial Analysis and follow the instructions to get started or call us at 717.295.8881.

Thursday, September 1, 2016

When to take a Multi Vitamin?

So I was speaking with one of my children who lives in Cambodia in a very rural area (I won't mention her name because I don't want to embarrass her). Being the concerned father that I am, I asked her if she was taking a good multi vitamin. "Sure" she said. Usually when she was starting to feel sick. But she didn't think they worked very well because she usually still got sick.

Okay, so let me think about this... private school from pre-k to 12th grade, 4 years at an academically sound private college (and yes she graduated, I saw her walk) and this is her take away for good health: Take a vitamin when you feel like you're getting sick? Hmmm.

But then it started to make sense to me, and I realized that she was not alone. No, I am no longer talking about vitamins, but that could be true also. What I am talking about is that Ed and I have often had a client call us about a need to review their financial situation which involved a "sudden" concern. Now the topics of the "sudden" concern ranges from how to pay for college, having enough money for retirement, is their enough money for my wife and kids if/when I die, how will we pay the bills if I become disabled, will I have enough money if I have to go into a nursing home, etc...

Now I have to tell you Ed and I always feel a little good about this new found wisdom of our clients because these are common issues that we alert our clients to quite often. Did I mention "often". Yes, good because it is very often. But that warm, satisfied feeling sometimes doesn't last long when the college fund is for Johnnie who is starting his senior year at high school, or the retirement funding is for Bill and Marsha who would like to retire in 5 years, or Francis who is now very concerned about the cost of long term care because she is having a hip replacement in 4 weeks, etc..

Just like a multi vitamin which is most effective taken well in advance of and as a preventative to getting sick, financial solutions are best developed and implemented well in advance of the time they become "sudden concerns".

For the rest of this year, Ed and I are offering FREE financial consulting and a FREE Basic Financial Plan to all of our clients and to anyone referred by an existing client. Please contact us for details at 717.295.8881, or go to our website at Crosswalk Investments (Click on "Financial Analysis" under the "About Us" section to begin creating your individualized Financial Plan.)

Now I am wondering what else I didn't teach my kids. Is there a statute of limitations for parenting?

Please subscribe to our Blog by entering your email in the section to the right of this article where it says "Follow by Email". Please also comment or make suggestions for future blogs. Remember we are new at this, so be brutally honest with your comments and creatively brilliant about issues you would like us to write about. Thanks,

Disclaimer: The daughter referred to in this blog may or may not have actually said the exact words attributed to her and I may or may not have taken a little literary license

Monday, August 22, 2016

Don't fall for these Scams! Please!

A voice mail from a caller claiming to be with the IRS stating that you are delinquent on your Income Taxes and demanding that you call back to make payment over the telephone or else face fines and possible jail time. 

A call in the middle of the night telling you that your grandson is in trouble and you need to send money now for his bail. And don't tell his parents!

The convincing caller informing you that you have just won $100,000 in a foreign lottery but that you need to send $5,000 to claim your prize.

Three different scams but  two things in common. They prey on peoples' fear or greed. Over the past several years we have had clients and friends fall victim to all three of these scams resulting in the loss of tens of thousands of dollars and strong feelings of shame and embarrassment for having been duped. Over the last two weeks we have had 3 incidences of the IRS scam. Fortunately the only loss was loss of sleep until they could talk with us the next day.

So lets talk a little about the IRS phone scam.

The IRS has had over 90,000 complaints about the IRS Phone Scam and has identified over 1,100 victims who have lost an estimated $5 million.

According to the IRS:
  1. The IRS's first contact will be written correspondence delivered through US mail.
  2. The IRS will never ask for credit card, debit card or prepaid card information over the telephone.
  3. The IRS will never insist that a taxpayer use a specific payment method to pay tax obligations.
  4. The IRS will  never request immediate payment over the telephone.
What to do if you receive one of these calls:

If you know that you owe Federal Income Taxes (meaning you have filed your Income Tax returns and had a balance due that you did not pay) but have not received any correspondence from the IRS, don't panic. Hang up the call (or don't return the voice message) and call the IRS at 800.829.1040 to help resolve your payment issue. You can also call us to review your situation and options.

If you don't believe you owe Federal Income Taxes, hang up the call (or don't return the voice message) and report the incident to TIGTA (Treasury Inspector General for Tax Administration) at 800.366.4484.

Some additional basics:
  1. Never give account information or your social security number over the telephone to someone you don't know and trust.
  2. Never be coerced into making a payment by telephone by a caller demanding that you do so and threatening you if you do not. HANG UP the call! If you are frightened, tell a friend or someone you trust. If they are not available, call or email us (hopefully you will consider us both a friend and someone you can trust.)
  3. If it sounds too good to be true, it probably is. If you never bought a ticket for the Irish Sweepstakes it is VERY unlikely that you won.
  4. If a caller tells you not to tell anyone else about your making the payment that the caller is telling you to make, HANG UP! Tell someone that you just received such a call.
So now you know some of what we know. Please share your stories or any additional wisdom that you have so that we can all know more than we currently know.

Wednesday, August 17, 2016

What happens to my student loans if I die?

Have you ever wondered as a college student or as a parent of a college student, what happens to all of your student loans at death? “God forbid!”  Here’s the good news and bad news.

The good news: The Federal government has a great deal for you. Now the bad news; you have to die first.

If your student loans are through a federal government agency then generally speaking, those loans will be discharged (forgiven) at your death.  That is to say, that any federal student loan debt that you have at your death will not pass on to any heirs. No one will be left holding the bag for your unpaid federal student loans.  Well, actually every US citizen who pays Federal Income Taxes will be left holding the bag, but we don't need to go down that path at the moment.

What about Parent Plus loans? So as you know, Parent Plus Loans are an obligation of the parent of a student and not the student. The good news is that federal Parent Plus Loans are also discharged at either the death of the student or the parent. That’s the good news. The bad news is that if the discharged loans are due to the death of the student, then the Parents will have to pay Federal Income Taxes on the loan amount forgiven. The IRS will issue a Form 1099-C (Forgiveness of Debt Form) to the Parents for the year that the debt was discharged. For example, let’s say your Parent’s have a balance on a Parent Plus Loan of $30,000. If you were to die, the Parents would receive a 1099-C reporting $30,000 (the balance of the loan) as Miscellaneous Income. They would have to include that on their Federal Income Tax return and pay income taxes on that phantom income. So if they are in the 25% tax bracket they would have to pay $7,000 in additional income taxes.

Keep in mind we are only talking about Federal Student Loan obligations. If you have private student loans then you need to check your Loan Documents to determine whether they provide for any such discharge at death. Most do not, but there are some that do.

If you are considering consolidating/refinancing your Federal Student Loans with a private student loan you should at least take the above discussion in consideration.

So, if you have Federal Student Loans you now have one less thing to worry about, which gives you more time to focus your worrying on how to pay back all of those loans.

We believe that all of us together know more than any one or two of us, so if you have any additional information on this subject please add to the discussion. So now you know something of what we know. Please share it with someone you know who needs to know it too. 

Lee and Ed
The Financial Guys