Could Your Tax Refund Be Costing You Money?

Time Business & Money posted an interesting article earlier this week titled “This Simple Tax Error Is Costing You $2,800”.  The article covers the relevant topic of tax refunds and discusses how having a large tax refund could actually be detrimental.  Read below to review key points of the article, or click here to read the article in its entirety.

Did you know?  Over 68% of Americans prefer to pay more taxes than they owe so they can receive a larger tax refund.

The average tax refund for 2012 was $2,803, which means an overpayment in taxes by about $54 per week per individual.

It seems many people use overpaying into their taxes as a sort of “forced-savings plan”.  Over 2/3 of those who receive a tax refund choose to either save/invest it, or they use it to pay off their debts, rather than simply spending the money.

Unfortunately, nearly 50% of people who pay the correct amount in taxes throughout the year, and thus have more take-home pay, actually end up spending the extra money rather than saving or investing it.

So what is the recommendation?  Pay the correct amount of taxes throughout the year and set up an automatic monthly withdrawal for the additional money.  The funds can either be transferred into a savings account or it can be used to pay down debt.

In a savings account, the money will earn interest, whereas sitting in Uncle Sam's pocket until tax-time earns you nothing.  Also, these funds will be accessible if needed for big expenses or an emergency situation, which will also help to avoid increasing debt (with high interest) to pay for these occurences.

Another option is to transfer the funds to pay down debts, and thus lower interest charges.  This maneuver could actually add up to an average savings of almost $200 a year, which can make a huge difference over time.

How The Economic Machine Works

Narrated by American businessman Ray Dalio, this video explains the economy and its cycles in a simple and helpful way.  Dalio is the founder of Bridgewater Associates, one of the largest hedge fund investment management firms with nearly $120 billion under management.  Dalio was also listed as one of "Bloomberg Markets' 50 Most Influencial" people in 2011 and 2012.

 

Is Your Money Safe?

During the financial crisis, which nearly cripples the entire financial and banking system, the Federal Government and Federal Reserve were forced to act and protect banks on Wall Street and Main Street. Risky practices such as low/no documentation mortgage loans, the use of extraordinarily high leverage, and tax oversight have created a banking climate that has deepened and lengthened the Great Recession.

Are your savings at risk? What can you do to protect your family, business, or non-profit organization?

In this video Dan Danford, MBA, CRSP of Family Investment Center, gives brief information about the safety and insurance issues for Family
Investment Center clients.

To be updated on new videos feel free to subscribe to Dan's youtube channel at http://www.youtube.com/dandanford.

Bankruptcy filings rising

Bankruptcy filings are up - but this isn't necessarily dire economic news. The Economist used this chart to show the trend. See the spike in 2005? That was right before bankruptcy reforms were introduced. Many people rushed to file prior to that in anticipation that they would not be able to file later. Well, it's taken some time, but we're really just right back where we used to be. It takes any industry - and in this case, the bankruptcy industry - time to recover from reforms. Believe me, bankruptcy attorneys and businesses have spent the past five years researching ways around the new reforms, and it's taken five years, but they've apparently found them.

Here's what The Economist says about this:

BANKRUPTCY filings rose 20% in the year to June 30th compared with the previous 12-month period, according to statistics released on August 17th by the Administrative Office of the US Courts. This takes quarterly filings to their highest point since tougher bankruptcy laws were introduced at the end of 2005. That change brought a spike of bankruptcies, as companies and individuals rushed to declare themselves broke under the more lenient old regime. The data suggest that an older trend is reasserting itself. This could be more bad news for America—or it could just mean that creative destruction is alive and well.

We're agreeing with that last part of The Economist's post: creative destruction is alive and well.

And, as always, let this serve as a reminder not to amass too much debt, even when times are good.

http://www.economist.com/node/16843119?story_id=16843119&fsrc=rss

Social Security changes can affect retirees wallets

By Robyn Davis Sekula

Ask anyone in their 30s if they expect to receive Social Security upon retirement, and you'll find that almost all of us think it won't be around for us. Some of us, like me, are saving aggressively for retirement to make up for it.

Statistics actually show that Social Security may be around, just not at its current levels. Even those currently on Social Security (or getting ready to retire) are affected by the changes to the program.

It's a great idea to keep abreast of developments and changes in Social Security. Here's a great piece we found from Fidelity.com, posted on Yahoo.com, about Social Security income and how seniors will be affected by raising the eligible age to 70.

Here's an excerpt:

Social Security will, according to the last annual report from its trustees, be able to pay full benefits through 2037. Then, if there are no changes in the program in the meantime, the taxes collected will be enough to pay out only about 75 percent of benefits through 2083.

So while Social Security's finances are stable in the short term, most experts agree that the program needs to be bolstered for the long term. Among the proposals circulating is one from Representative John Boehner of Ohio, the House Republican leader, who recently suggested raising the retirement age to 70 for people at least 20 years from retirement.

Read the full article here:

http://finance.yahoo.com/focus-retirement/article/110241/social-security-jitters?mod=fidelity-readytoretire&cat=fidelity_2010_getting_ready_to_retire

Credit card issuers get sneaky

Didn't we all know this would happen?

As soon as the government cracked down on the credit card industry, card companies found new ways to bilk the unsuspecting public.

Those bulky Card User Agreements that they send you once a year or so with lots of tiny, tiny print? You need to read that.

You also need to read this story from The Wall Street Journal detailing some of the card companies' newest tricks.

Read this excerpt to get an idea of how the companies are getting sneaky:

The Card Act also stipulates that issuers can't jack up rates on existing balances unless a cardholder is at least 60 days late. But there is a creative maneuver around that: the so-called rebate card.

Citibank rolled out rebate-card offers to some of its customers last fall, offering to refund up to 70% of finance charges when customers pay on time. The problem: Rebate offers aren't governed by the Card Act, and an issuer can revoke them suddenly and hit cardholders with high charges.

The net result is the same as raising rates—and because it is perfectly legal, customers have little recourse. "Rebates on finance payments may seem like a good deal, but you could end up with a very high interest rate suddenly," says Mr. Frank, of the Center for Responsible Lending.

Read on for the full article:

http://finance.yahoo.com/banking-budgeting/article/110213/the-new-credit-card-tricks?mod=oneclick

WSJ: Small investors need to know about overhaul

President Barack Obama signed into law this week a large overhaul of the financial services industry. It would be easy for folks with ordinary portfolios to overlook this, but the Wall Street Journal advises that everyone needs to pay attention to this law, no matter how small their portfolio. For a good analysis, here's a link to the entire WSJ story.

http://online.wsj.com/article/SB10001424052748704682604575369750342795016.html?mod=WSJ_PersonalFinance_PF2

Wall Street reform passes Senate

By Robyn Davis Sekula

So the Senate finally passed Wall Street reforms. There was much cheering among those pushing the legislation. On the surface, it seems to be a good thing. I think we can all agree there is too much predatory lending out there.

However, I'm always a bit wary when government gets involved in private business.

Will this be a good thing? It could be. But it could have unintended consequences.

What do you think?

Read up on it and post a comment. We love to hear from our readers.

http://money.cnn.com/2010/05/20/news/economy/Wall_Street_reform/index.htm

Goldman Sachs: watch the language

Don McNay writes pieces for The Huffington Post, and this week, he addresses the Goldman Sachs hearings. He's right when he says that we'll be no closer to knowing the truth about Goldman Sachs when Congress is done with grilling company executives. Congressional hearings sound impressive, but they don't solve problems or get to any real truth.

What Goldman Sachs did sounds un-American. Just remember: investments are always buyer beware. A good fee-only investment advisor could save an investor from buying into something this crazy.

Read more here:

http://www.huffingtonpost.com/don-mcnay/goldman-sachs-and-the-gho_b_554573.html

New consumer watchdog group: what it means to you

Don't get us wrong: we like free markets. Capitalism is good, if not great. We believe it's how most of the wealth (if not all) is made in America.

But there are some sectors of our economic system that need some regulation, and unfortunately, the financial industry is one of those. There is now a proposal to create a new federal watchdog group that will (probably, we say cautiously) help consumers. The House of Representatives and Senate still have to negotiate and create one bill that can be passed that will address the need for financial regulation. If this passes, it could prohibit big pay-off fees often charged when high-interest mortgages are paid off early, and also allow consumers to go to court when they disagree with a credit card company, rather than be forced into mediation.

If you'd like to read up on this proposed legislation, check out this article on Money.cnn.com:

http://money.cnn.com/2010/04/06/news/economy/consumer_regulator/index.htm

457 plans redefined

Retirement plans that include employer contributions usually fall into three categories: 401(k), which covers most people who work, 403(b), which covers those who work for non-profis, and 457 plans, which applies to many people who work for government entities. For the most part, these plans work the same way, but we thought we'd take some time here to call your attention to recent changes in 457 plans. They have some particular rules that govern how they work and you need to pay special attention to these rules if you are investing in a 457 plan, particularly if you're getting close to retirement. You can make some catch-up contributions to 457 plans, but there are certain ways it has to be done.

If you need a quick primer, here's a great article we found on Investopedia, which is a terrific resource for people who need help with financial terms.

http://www.investopedia.com/articles/retirement/10/411-on-457-plans.asp

Health Care Reform: For or Against, it's here

It remains to be seen if health care reform is going to save you and your family money in the long run. Whether you're in favor of the changes or in opposition, your best course of action is to get up to speed on the changes, and fast. In some cases, families can see a reduction in costs.

Some of the most touted changes are that health insurance companies can't decline coverage for a family if there is a child who has a pre-existing condition. That's certainly favorable, and I imagine there are many parents with sick children applauding that change. Also, parents can keep children on their health insurance policy until the children are 26. That may help some adult kids, as more are living with their parents after college instead of branching out on their own.

If you want to read all about the changes, check out this article from The New York Times, which compares the House and Senate bills:

http://www.nytimes.com/interactive/2010/03/19/us/politics/20100319-health-care-reconciliation.html

The new rules of using credit cards

Geoff Williams is a financial writer who has interviewed Dan Danford a few times for pieces that he's written. Geoff has been posting recently on blog that promotes his new book, Living Well with Bad Credit. Dan's quoted in the book.

We want to point your way to the blog because it's got some great information. Geoff posted Monday about the Credit Card Act of 2009, which went into effect Monday, February 22. He hits a few of the highlights and provides good information. Take a look here:

http://livingwellwithbadcredit.hcibooks.com/

Government debt must be reduced

We want to thank the Kansas City Star's Dollars and Sense blog for bringing this great editorial to our attention. Thomas Hoenig of the Kansas City Federal Reserve wrote a great piece published in today's New York Post on why the U.S. must reduce its debt. You can read it here. It's a well-written piece that makes his point.

http://www.nypost.com/p/news/opinion/opedcolumnists/debt_tastrophe_hHD96KIH4LmuaIGUGrzDjO

Budget Obamination

By Dr. Jason White
Principal and Director of Investments
Family Investment Center

The White House delivered its proposed 2010 budget to Capitol Hill by forklift, which was an interesting visual to say the least. The economy is slowly clawing its way back from the worst recession since the Great Depression, or at least since 1980-81, depending on the measures used to evaluate our current circumstance. Either way, the situation has been grim, but there are signs of life.

The “green shoots” have sprouted into seedlings in various industry and geographic pockets in the United States, but I am far from declaring economic victory for the private sector. The proposed federal budget concerns me deeply.

The Obama budget, if approved as submitted (which will never happen), sets a new standard for fiscal irresponsibility and governmental intrusion. Fully 25 percent of Gross Domestic Product, $3.4 trillion of spending, will come from Washington, DC – far more than during any year of Dubya’s presidency. In fact, the projected 2010 budget deficit of $1.4 trillion is 9-times higher than is was in 2007. Unbelievable!

As a practicing economist and financial professional, I truly do understand the continued need for federal deficit spending, given tepid demand in the consumer sector. In particular, states from coast to coast are struggling with budget imbalances and are looking to federal injections to help solve their own budget woes.

When the economy is mired in recession, Keynesian economists believe that the federal government can help mitigate conditions through deficit spending AND targeted tax cuts. The Obama administration has had no problem satisfying the deficit spending part of Keynesian expansionary policy, but tax cuts have been viewed as heretical and “not affordable,” according to the Democrats in power.

I will set aside a discussion of tax policy for a future column, but I do have a few comments on the federal budget Obamination.

At this moment, the National Debt of the United States of America stands at $12 trillion, $360 billion and some spare change. Our Debt-to-GDP ratio is 86.62 percent, thus if every dollar’s worth of goods and service produced in our great nation were funneled to pay down the national debt, it would take almost an entire year to retire it. This amounts to $40,051 per citizen, or more importantly, $113,113per taxpayer.

The data is staggering, sad and outrageous. The federal budget is completely and apparently deliberately out of control. One can only hope that the House of Representatives has the will to take a meat cleaver to this budget Obamination.

Cash for clunkers turns to appliances

By Robyn Davis Sekula

We've mentioned before that a Cash for Clunkers deal may be coming for household appliances. Well, it's here now, in some states, including Kansas. It's complicated, as most things involving the federal government usually are. The official site for information is here: http://www.applianceclunkerrebates.com/

We ran across a great article today on walletpop.com that explains the Cash for Clunkers program, and who can participate. First thing you need to know is that states are being phased in gradually. People in Kansas (nearby us) can participate already. Other states will be added in February, March and April, and some states will even get a second chance later this year.

Most important point: if you do not need a new major appliance, don't buy it. Americans get very confused when choosing needs and wants. If it works well, but you don't like the color, you do not need a new one. Period. I have a broken freezer shelf and a broken drawer in my refrigerator. I'm thinking it might be time for a new one, if I can find a good enough deal and pay cash. That's the second important note: don't finance this stuff. Once you pay a little interest, you've wiped out any savings from the Cash for Clunkers deal. And watch the delivery fees - use that as a negotiation point when purchasing.

Read more about the program here:

http://www.walletpop.com/blog/2010/01/26/cash-for-appliance-clunker-rebates-the-when-where-how-and-bes/?utm_source=twitterfeed&utm_medium=twitter

Confirm Ben Bernanke now

Editor's note: Dr. Jason White, our director of investments, writes a weekly column for the Maryville Daily Forum. We've posted this week's column, which focuses on why he thinks Ben Bernacke is a rock star, here. Disagree? Tell us why in the comments. We love a good discussion.

By Dr. Jason White

The Senate is scheduled to vote on the nomination of Ben Bernanke as Federal Reserve Board Chairman today. Like so many things in Washington, Bernanke’s confirmation has been bungled by both Republicans and Democrats who appear more interested in grandstanding to build their own political capital than in ensuring swift and deserved reappointment of the Chairman.

Bernanke has been the perfect leader of monetary policy initiatives designed to combat the financial meltdown and subsequent Great Recession which still plagues many parts of the economy.

It is well known that Bernanke is the preeminent living scholar of the Great Depression and the policy missteps that kept the United States, and the world, mired in economic misery from 1929 until the beginning of World War II. As an aside, the field of economics is oft referred to as the “dismal science” because those of us who practice it sometimes reach dark conclusions like war is a wonderful economic stimulus and jobs program, provided the conflict is not fought on our own soil. Twisted.

Sure, we’ve got problems in our economy – big ones! Some fear a double-dip recession. Others are concerned about the unemployment rate. A few are sniping about inflation risks. Still more are worried about the relative value of the dollar and the tsunami of Federal spending. Most of us are concerned about all these economic issues and more.

I support Ben Bernanke and call on the U.S. Senate to unite and confirm this worthy leader now!

Senators are the worst when it comes to Monday morning quarterbacking. Everyone now knows that Brett Favre should have run to set up a Minnesota last-minute field goal attempt in the NFC Championship game, but instead he threw an interception. If Congress were asked to confirm Favre as next year’s “Chairman” of the Vikings, you bet your last nickel that hearings would be held and that the focus would not be on the accomplishments of the team.

Similarly, Bernanke has endured grilling, belittling and second-guessing that has been unfair and ignored many of the game-winning plays he has called. In the fall of 2008, we were literally staring directly into a financial abyss that almost swallowed us whole. Bernanke pulled the economy back from the edge using extraordinary play-making ability, finesse and quiet confidence.

Markets have become understandably nervous as the Bernanke vote nears. The Dow fell about 4 percent just last week as political criticism of the Fed Chieftain roiled. As a student of Federal Reserve policy actions, it is clear to me that Bernanke’s economic policy calls have been mostly correct and mostly helpful. Apply the “but-for” test to the situation. But for the leadership of Ben Bernanke during the Great Recession, we would find our economy in much worse shape than it currently stands. We are on the right road, and we have the right driver behind the wheel.

Dr. Bernanke’s confirmation should be a slam-dunk. If there was a medal of honor for financial economics, he would have my vote.

On the Right Track

Jason T. White, MBA, Ph.D.
Director of Investments
Family Investment Center

Celebrating its 125th year, the Bureau of Labor Statistics (BLS), the data crunching arm of the U.S. Department of Labor, gave the nation an early Christmas present with its December 4 release of the latest employment statistics. The news was good!

The unemployment rate fell from 10.2 percent to 10 percent for the month of November. Job losses essentially slowed to zero, with a reported 11,000 job decrease in nonfarm payroll unemployment, the lowest job loss total since the recession officially began in December 2007.

From Fall 2008 to late Summer 2009, the economy was shedding jobs at a rate of over 400,000 per month, with the most severe monthly losses approaching 800,000 jobs in the Winter of 2009.

The economy is picking up steam, and I would not be at all surprised to see the December report be our first month of job GROWTH since December, 2007 – a welcome sign of rebounding employer confidence and general economic hope.

Even with this good news, the jobless picture is still sobering. There are 15.4 million Americans who are unemployed. BLS defines unemployed as those looking for work but unable to find it. The jobless total was 7.5 million, and the unemployment rate 4.9 percent, when the Great Recession began in December 2007.

The November unemployment rate among the “major worker groups” as defined by the BLS were as follows:

Adult Men 10.5%
Adult Women 7.9%
Teenagers 26.7%
Whites 9.3%
Blacks 15.6%
Hispanics 12.7%
Asians 7.3%

Job losses continued in the construction, manufacturing and information industries, while temporary labor and healthcare posted job growth. Of those individuals classified as “long-term” unemployed (those jobless for 27 weeks or more) rose by 293,000 to 5.9 million, and the employment-to-population ratio was unchanged at 58.5 percent.

It is clear to me that the economic recovery is gaining solid footing, and this is be reflected in the improved jobs picture. Look for the labor market to show increasing strength as we enter 2010.

New homebuyer credit: could it be renewed?

The tax credit for first-time homebuyers hasn't quite done what government officials had hoped. It's not quite boosted the real estate market as much as they'd like. So there's talk now of extending it and even perhaps making it larger.

Curious as to where things stand? Read on for more information:

From CNN: http://tinyurl.com/ykgxp7v

Health insurance premiums should be deductible for all

By Dan Danford

Politicians SAY they love small business. But often, they DO something different. Through what looks like to me a fluke in the law, self-employed people pay taxes on the money they spend on health insurance premiums. Anyone employed by any other type of business does not. Why should self-employed folks (I'm not self-employed) be the only people to pay tax on insurance premiums? It's been this way for years, and it make no sense at all. In a lot of ways, smaller businesses already carry a massive burden in our bad health care system. It's time to fix the system, and this is one necessary fix. Our economic system should encourage small businesses in every way possible. Our flawed health care system is a major impediment to rebuilding a small business culture in America.

Read more:

http://news.yahoo.com/s/bw/20090813/bs_bw/aug2009sb20090811026953