How Can I Keep My Money from Slipping Away?
Financial Advisor Minnesota - Joe Swanson
As with virtually all financial matters, the easiest way to be successful with a cash management program is to develop a systematic and disciplined approach.
By spending a few minutes each week to maintain your cash management program, you not only have the opportunity to enhance your current financial position, but you can save yourself some money in tax preparation, time, and fees.
Any good cash management system revolves around the four As — Accounting, Analysis, Allocation, and Adjustment.
Accounting quite simply involves gathering all your relevant financial information together and keeping it close at hand for future reference.
Gathering all your financial information — such as mortgage payments, credit card statements, and auto loans — and listing it systematically will give you a clear picture of your overall situation.
Analysis boils down to reviewing the situation once you have accounted for all your income and expenses. You will almost invariably find yourself with either a shortfall or a surplus.
One of the key elements in analyzing your financial situation is to look for ways to reduce your expenses. This can help to free up cash that can either be invested for the long term or used to pay off fixed debt.
For example, if you were to reduce restaurant expenses or spending on non-essential personal items by $100 per month, you could use this extra money to prepay the principal on your mortgage. On a $130,000 30-year mortgage, this extra $100 per month could enable you to pay it off 10 years early and save you thousands of dollars in interest payments.
Allocation involves determining your financial commitments and priorities and distributing your income accordingly. One of the most important factors in allocation is to distinguish between your real needs and your wants.
For example, you may want a new home entertainment center, but your real need may be to reduce outstanding credit card debt.
Adjustment involves reviewing your income and expenses periodically and making the changes that your situation demands.
For example, as a new parent, you might be wise to shift some assets in order to start a college education fund for your child.
Using the four As is an excellent way to help you monitor your financial situation to ensure that you are on the right track to meet your long-term goals.
© 2006 Emerald Publications
Principal Financial Group
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11100 Wayzata Blvd, Suite 161
•
Minnetonka, MN
•
55305
Phone: (952) 277-4259Toll Free: 800 626 7095
•
Fax: (952) 277-4301
www.joeswanson.com
•
swanson.joe@principal.com
PLEASE NOTE: The information being provided is strictly as a courtesy. When you link to any of these web-sites provided here, you are leaving this site. Princor makes no representation as to the completeness or accuracy of information provided at these sites. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising
Joe Swanson is licensed in Minnesota, Wisconsin, Oregon, and Ohio (additional states can be made available) to offer insurance products, and life insurance (including variable life), annuities (including variable annuities), securities and if applicable - investment advice. This site is not a solicitation of interest in any of these products in any other state. IMPORTANT CONSUMER INFORMATION: Joe Swanson may only transact business in a particular state after licensure or satisfying qualifications requirements of that state, or only if (s)he is excluded or exempted from the state's registration requirements. Follow-up, individualized responses to consumers in a particular state by Joe Swanson that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, shall not be made without first complying with the state's requirements, or pursuant to an applicable state exemption or exclusion. For information concerning the licensure status or disciplinary history of a broker-dealer, investment advisor, BD agent or IA representative or any financial institution (s)he represents, contact your state securities law administrator. Principal Life Insurance Company, Des Moines, IA 50392. Principal Life maintains certificates of authority to transact insurance in all 50 states. Its NAIC identification number is 61271.
The words Financial Planning and Financial Advisor make no claims. Please see form ADV for disclosures. 401k plans and quotes are intended for Minnesota only and may be administered by other vendors including Fidelity, John Hancock, Principal Life, Nationwide Bisys, American Funds and others.
Sunday, April 29, 2007
Friday, April 13, 2007
Did You Miss the News?
In May 2006, a new tax law passed that has the potential to affect investors of all stripes. Because the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) received only brief attention from the news media, you may have overlooked some of the changes.
It’s important to understand how this new tax law applies to your situation. The fact that you are reading this means you will almost certainly be affected by some of the major provisions.
Dividends and Capital Gains
The centerpiece of TIPRA is a two–year extension of the temporary lower tax rates on dividends and capital gains (through 2010). Dividends and long–term capital gains are taxed at a maximum 15% rate for Americans in the upper marginal income tax brackets. For taxpayers in the 10% and 15% brackets, the tax rate is 5% through 2007 and zero through 2010. Without the extension, dividend income would have been subject to rates up to 35%, and long–term capital gains would have been taxed at a maximum 20% rate in 2009.
AMT Relief
An exemption that helped many middle–income taxpayers avoid the alternative minimum tax in 2005 was increased and extended through 2006. The new exemption levels are $62,550 for joint filers and $42,500 for single filers. Also extended was a provision that allows some taxpayers to claim many nonrefundable personal credits to offset AMT liability. These include the dependent–care credit, the credit for the disabled and elderly, the credit for interest on certain home mortgages, and the Hope and Lifetime Learning credits for qualified education expenses.
Roth IRAs
Currently, only joint and single filers with modified adjusted gross incomes of $100,000 or less are eligible to convert a traditional IRA to a Roth IRA; income taxes are due on the amount converted. TIPRA changed the eligibility rules: Beginning in 2010, individuals will be able to convert a traditional IRA to a Roth IRA regardless of income or filing status. The new law also allows taxpayers who make the conversion in 2010 to spread the tax liability over two years (in 2011 and 2012).
Distributions from traditional IRAs are taxed as ordinary income and may be subject to an additional 10% federal income tax penalty if taken prior to reaching age 59½. To qualify for the tax–free and penalty–free withdrawal of earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59½ or be due to death, disability, or a first–time home purchase (up to a $10,000 lifetime maximum).
For the past several years, tax–law changes have occurred with surprising regularity. To benefit from them, it’s important to stay informed and to understand how you may be affected.
Principal Financial Group
print this page
11100 Wayzata Blvd, Suite 161
•
Minnetonka, MN
•
55305
Phone: (952) 277-4259
•
Fax: (952) 277-4301
www.joeswanson.com
•
swanson.joe@principal.com
PLEASE NOTE: The information being provided is strictly as a courtesy. When you link to any of these web-sites provided here, you are leaving this site. Princor makes no representation as to the completeness or accuracy of information provided at these sites. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising
Joe Swanson is licensed in Minnesota Wisconsin Oregon and Ohio (additional states can be made available) to offer insurance products, and life insurance (including variable life), annuities (including variable annuities), securities and if applicable - investment advice. This site is not a solicitation of interest in any of these products in any other state. IMPORTANT CONSUMER INFORMATION: Joe Swanson may only transact business in a particular state after licensure or satisfying qualifications requirements of that state, or only if (s)he is excluded or exempted from the state's registration requirements. Follow-up, individualized responses to consumers in a particular state by Joe Swanson that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, shall not be made without first complying with the state's requirements, or pursuant to an applicable state exemption or exclusion. For information concerning the licensure status or disciplinary history of a broker-dealer, investment advisor, BD agent or IA representative or any financial institution (s)he represents, contact your state securities law administrator. Principal Life Insurance Company, Des Moines, IA 50392. Principal Life maintains certificates of authority to transact insurance in all 50 states. Its NAIC identification number is 61271.
California 401k www.quote401ks.com
In May 2006, a new tax law passed that has the potential to affect investors of all stripes. Because the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) received only brief attention from the news media, you may have overlooked some of the changes.
It’s important to understand how this new tax law applies to your situation. The fact that you are reading this means you will almost certainly be affected by some of the major provisions.
Dividends and Capital Gains
The centerpiece of TIPRA is a two–year extension of the temporary lower tax rates on dividends and capital gains (through 2010). Dividends and long–term capital gains are taxed at a maximum 15% rate for Americans in the upper marginal income tax brackets. For taxpayers in the 10% and 15% brackets, the tax rate is 5% through 2007 and zero through 2010. Without the extension, dividend income would have been subject to rates up to 35%, and long–term capital gains would have been taxed at a maximum 20% rate in 2009.
AMT Relief
An exemption that helped many middle–income taxpayers avoid the alternative minimum tax in 2005 was increased and extended through 2006. The new exemption levels are $62,550 for joint filers and $42,500 for single filers. Also extended was a provision that allows some taxpayers to claim many nonrefundable personal credits to offset AMT liability. These include the dependent–care credit, the credit for the disabled and elderly, the credit for interest on certain home mortgages, and the Hope and Lifetime Learning credits for qualified education expenses.
Roth IRAs
Currently, only joint and single filers with modified adjusted gross incomes of $100,000 or less are eligible to convert a traditional IRA to a Roth IRA; income taxes are due on the amount converted. TIPRA changed the eligibility rules: Beginning in 2010, individuals will be able to convert a traditional IRA to a Roth IRA regardless of income or filing status. The new law also allows taxpayers who make the conversion in 2010 to spread the tax liability over two years (in 2011 and 2012).
Distributions from traditional IRAs are taxed as ordinary income and may be subject to an additional 10% federal income tax penalty if taken prior to reaching age 59½. To qualify for the tax–free and penalty–free withdrawal of earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59½ or be due to death, disability, or a first–time home purchase (up to a $10,000 lifetime maximum).
For the past several years, tax–law changes have occurred with surprising regularity. To benefit from them, it’s important to stay informed and to understand how you may be affected.
Principal Financial Group
print this page
11100 Wayzata Blvd, Suite 161
•
Minnetonka, MN
•
55305
Phone: (952) 277-4259
•
Fax: (952) 277-4301
www.joeswanson.com
•
swanson.joe@principal.com
PLEASE NOTE: The information being provided is strictly as a courtesy. When you link to any of these web-sites provided here, you are leaving this site. Princor makes no representation as to the completeness or accuracy of information provided at these sites. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising
Joe Swanson is licensed in Minnesota Wisconsin Oregon and Ohio (additional states can be made available) to offer insurance products, and life insurance (including variable life), annuities (including variable annuities), securities and if applicable - investment advice. This site is not a solicitation of interest in any of these products in any other state. IMPORTANT CONSUMER INFORMATION: Joe Swanson may only transact business in a particular state after licensure or satisfying qualifications requirements of that state, or only if (s)he is excluded or exempted from the state's registration requirements. Follow-up, individualized responses to consumers in a particular state by Joe Swanson that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, shall not be made without first complying with the state's requirements, or pursuant to an applicable state exemption or exclusion. For information concerning the licensure status or disciplinary history of a broker-dealer, investment advisor, BD agent or IA representative or any financial institution (s)he represents, contact your state securities law administrator. Principal Life Insurance Company, Des Moines, IA 50392. Principal Life maintains certificates of authority to transact insurance in all 50 states. Its NAIC identification number is 61271.
California 401k www.quote401ks.com
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