Yearly Archives: 2012

­

Debt Reduction Important Step To Financial Freedom

If you are contributing to the $950 billion worth of outstanding credit card debt in America, you need to start digging your way out, and the sooner the better. Debt can stand between you and your financial goals, such as sending loved ones to college and retiring in comfort. It may take months or even years, but becoming debt free is your first step to true financial freedom. It is also a prudent move for individuals who are nearing retirement.

Get aggressive. The best approach to paying off debt is to become systematic and aggressive. Start with the card with the highest interest rate, and double or triple your monthly payments until you eliminate your balance. Then do the same thing with the next highest interest rate card, and so forth.

Pay debt first, invest later. Conventional wisdom states that if you can earn a higher after-tax return on your investments than the interest rate you are paying on your debt, you should invest. Otherwise you should pay off your debt.

As an example, say you have a credit card balance of $8,000 with a 14 percent interest rate. Given current market performance, paying off the card before investing seems obvious. But even if the stock market was experiencing an annual gain between 8 percent and 9 percent, paying off debt would still be your better bet.

Ask for a lower rate. You can accelerate the pay-down process by calling your card issuer and asking for a reduced interest rate. According to a survey conducted by the U.S. Public Interest Research Group, more than half (57 percent) of those who called and requested a lower interest rate were successful. On average, the rate was lowered between 7 and 10 percentage points.

© 2012 S&P Capital IQ Financial Communications. All rights reserved. Because of the possibility of human or mechanical error by S&P Capital IQ Financial Communications or its sources, neither S&P Capital IQ Financial Communications nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall S&P Capital IQ Financial Communications be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of the content.
Debt Reduction Important Step To Financial Freedom
By |December 4th, 2012|Financial Planning|

Arizona Income Tax Credits Help Schools and Working Poor

Arizona offers several tax credits for individuals paying state income tax. They include the Working Poor Tax Credit for donations to qualified charitable organizations, the Public School Tax Credit (including charter schools), and the Private School Tuition Tax Credit. The credits do not reduce your tax liability; rather they allow you to specify how your state income tax dollars are used. You are permitted to take advantage of any or all of these tax credits each year, which can equate to hundreds of your tax dollars being donated to the worthy charities and schools of your choice.

How does it work? It’s pretty simple.

You give money to the qualified organization – for example, $200 to the Salvation Army, for the working poor credit. Then you complete Arizona form 321, that transfers to line 26 on Form 140 and you get 100 percent credit against line 19 (as though you had paid through withholding or quarterly estimates).

If you do your own taxes, read through the Arizona instructions carefully. For the most part, you can look at your form 140 line 19 to determine the maximum credit. Keep in mind, you must pay taxes to receive the credit. In addition, your credits can not exceed what you pay. For example, if you only pay $300 in state income tax, you may only claim $300 in credits in the current year.

These credits are fairly simple to apply, however everyone’s situation is different, and the rules can and do change from year to year. Take the time to review and understand the credits and rules each year.  (For example, there are now two private school credits; please read through carefully if you’re taking advantage of both private school credits).

Most qualified organizations do a good job of explaining the process, as well, so take a moment to explore their websites for information and instructions. You may also wish to consult with your tax advisor or financial planner for additional information and filing requirements of the individual tax credits.

For more information on the public school (including charter schools) and private school tuition tax credit donations, click this link to the Arizona Department of Revenue official site.

For more about the working poor tax credit, including a list of qualifying charitable organizations, click here.

By |November 27th, 2012|Charitable Giving, Taxes|

Time for a Year-End Financial Review

The last few months of a year often prompt people to think about goals they want to pursue in the year ahead. If your goals include investment issues, an annual review with your financial advisor is an excellent opportunity to focus on what you need to do to pursue them. Every person’s goals are unique, but you may want to think about the following areas when preparing for your review.

Building Retirement Assets

Your advisor can help you calculate how much you need to save. If you are coming up short, funding an IRA may help you close the gap. For the 2012 tax year, you may contribute a maximum of $5,000 to a traditional or to a Roth IRA — plus a $1,000 catch-up contribution if you are age 50 or older. If you haven’t yet made your 2012 contribution, you may do so up until April 15, 2013.

Preparing for Education

College costs continue to increase faster than the rate of inflation, which presents a challenge for academically-minded families. In addition to saving as much as you can afford and pursuing financial aid, you may want to consider a Coverdell Education Savings Account. A Coverdell account permits you to save $2,000 annually per beneficiary. Withdrawals are tax-free as long as they are used for qualified expenses associated with elementary, secondary or higher education.

Assessing Your Asset Allocation

Your financial advisor can make sure your combination of stock funds, bond funds and cash investments is on target given your risk tolerance and time horizon. A more aggressive mix may be appropriate for goals that are 10 or more years away, while being more conservative may be desirable for shorter-term objectives.

There may be other areas you want to pursue, but these may provide initial food for thought. By capitalizing on the goal-setting opportunities of your annual review, you’ll improve your chances of making the coming year a building year for your financial future.

© 2012 S&P Capital IQ Financial Communications. All rights reserved. Because of the possibility of human or mechanical error by S&P Capital IQ Financial Communications or its sources, neither S&P Capital IQ Financial Communications nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall S&P Capital IQ Financial Communications be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of the content.
Time for a Year-End Financial Review

Operating a Home Business: Can It Work for You?

Estimates by the U.S. Bureau of Labor Statistics in 2010 show that more than 18 million businesses are run primarily out of a home. Given recent advances in mobile and wireless technology, as well as the cost-cutting realities of a low-growth economy, that number may be even higher. If you’re considering running a home business, there are a number of things you’ll want to consider.

Operating a Home Business

First, make sure your home business meets zoning regulations and that any required licenses or permits are obtained. Many municipalities and condominiums restrict home business activities. If customers will come to your home, you may need to consider parking, disability access and display of advertising. You may also need to amend your homeowner’s insurance policy to cover commercial activities.

The IRS may allow you to deduct certain expenses — such as phone, internet hookup, a portion of your rent or mortgage — based on the percentage of space in your home that the office occupies. To qualify, the home office must be used exclusively for business; a guest room or other shared space will not qualify. The key to claiming any of these deductions is to prove that they are necessary for and confined to business use.

Finally, you should also consider how the arrangement will impact your family. Will there be tension if you’re home all day? Will your work presence cramp your family’s daily activities? How will they interact with clients or employees? Make sure to give this issue serious thought and discuss it with your family.