Two of the most popular New Years resolutions are to save money and get out of debt.
Two of the most popular resolutions to be broken during the New Year will be saving and getting out of debt.
Don't let that statistic be you! Professional financial counseling and planning can help you reach your target.
How can you be sure you'll get it right without professional help?
As we or our loved ones age, it can become necessary for someone to help manage daily finances, pay bills and make deposits. It may be tempting to use a joint account or to transfer assets. Before you do, there are some things you should consider.
1. Titling an account or property jointly is a transfer of legal title. Unless you specify otherwise, the property will likely be treated as joint tenants with right of survivorship. This means that at the passing of one account holder, the surviving account holder owns all of the money or property. Jointly held accounts and property avoid probate and do not pass under the Will or Trust. So there is no obligation for the surviving owner to share the account or property with other heirs or beneficiaries. This can create all sorts of tension and questions later because it may not have been the intent.
2. It’s not always a good idea to move accounts and property around to qualify for Medicaid, Veterans Affairs benefits or other public welfare assistance. Most government assistance programs have broad powers to look back for a period of 3 to 5 years to determine if assets were transferred. The government may refuse to pay for needed care if they find transfers. That can create an unexpected bind.
3. Gift and Estate Tax issues can arise. True, most Americans do not have to worry about Federal Estate Taxes. A slightly higher number will be affected by state Inheritance Taxes. However, Gift Taxes can be triggered by much smaller numbers, inviting unexpected headaches.
Professional guidance can help you avoid these pitfalls and keep things going smoothly.
The IRS warns of many tax scams targeting individuals. The IRS does not call, e-mail or use social media to collect taxes. The IRS does use regular mail, and scam artists and identity thieves know this.
In one of the newer scams, you may receive a letter in the mail on official-looking IRS letterhead claiming that you owe a balance. However, it is fairly easy to learn if this is a scam or an official letter. When the IRS requests payment, they will have you make the check payable to the U.S. Treasury and mail it to an official IRS address. Anything else, such as payment to the IRS or I.R.S. or payment to be made online or with debit cards, is an obvious scam.
You can easily verify whether a notice is fake or official by looking up the address or calling the IRS directly and asking if they sent a notice to you. You can also ask your tax professional.
Because tax scams try to take your money, it is important that you protect yourself and verify the authenticity of the notice before giving out any information or making any payments.
Have you maxed out your retirement contributions? Are you contributing to your HSA?
Health savings accounts enjoy tax-deductible contributions and tax-free distributions for qualified health care related expenses. Think you might have some medical expenses in retirement? Max out contributions to your HSA now. In retirement, you can withdraw funds from the HSA to pay for medical expenses tax-free. And unlike Flexible Spending Arrangements, you keep all the money contributed to an HSA.
If you have the ability to pay for medical expenses from other funds, preserve your HSA for use in retirement. It’s an opportunity that can cost you if you overlook it.
This is especially important now because elimination of the deduction for making HSA contributions is currently being discussed in Washington’s tax reform bill before the Congress Ways and Means Committee.
What is identity theft and why is it so important to protect against? You’ve heard about the recent Equifax security breach, but why is it such a big deal?
Identity theft occurs when someone wrongfully gains access to your personally identifiable information – Social Security Number, date of birth, address, driver license number and credit history. That information can be used to file a fraudulent tax return in your name, open a credit card account, or create a fake driver license. They can even purchase property and take out a mortgage in your name, or worse, give your information to the police if arrested.
Another level of identity theft is stealing your credit card information or getting access to your online bank account, Paypal, Amazon and other accounts from which they can either take money or make fraudulent purchases.
Any one of these things can have damaging effects on you. The three credit bureaus – Equifax, Experian and Trans Union – each maintain databases with your personally identifiable information, credit histories and account numbers. So when their database is compromised, the damage can be widespread and long-lasting.
So, here it is about a month after the Equifax breach. My wife opened her credit card statement to find ... you guessed it, a fraudulent charge made right around the time of the Equifax breach.
So, what can you do? First, monitor your credit report and statements from your bank and credit cards to make sure no one is stealing from you or opening accounts in your name. Scrutinize every charge. Everyone should be getting their statements about now which will reflect any fraudulent charges resulting from the Equifax breach. If there is something you don't recognize, call your bank or credit card company to report it. You usually only have 30-60 days to report fraudulent charges.
You also want to monitor whether new accounts were created. This is done by frequently checking your credit report. If you see fraudulent activity, especially by someone opening a new loan account, you may need to report it to the local police.
Second, you can put a stop to all activity on your credit history and have some peace of mind by getting a credit freeze. It can be inconvenient, but it puts a stop to any attempts to fraudulently open new accounts. This doesn't prevent fraudulent charges on existing accounts, which is why you still need to be vigilant.
J.D. Walt commented on George Barna’s research that we have learned to grow churches without really growing people. We can get people into the church, but we can’t get them into Christ.
While there may be many possible reasons, may I suggest that at the heart of this symptom lies a familiar culture that has blurred the line between holiness and sin? Sin isn’t really all that bad, and holiness is easier to achieve than Christ makes it appear.
When we’re trusting in Visa, the stock market and a paycheck, it should be no surprise that we’re worried about sin. Trusting in the culture holds us back from genuinely pleasing God.
What we do with faith determines what we do with money. But what we do with money can seriously undermine our faith. A familiar culture blurs the lines when faith matters most.
Mary DeMuth attributes idolatry to control. If we pray to the rain god and it rains, then we feel we are in control over our environment. Perhaps if we appease the gods with our best food, we will someday be blessed with fortune, and that will make our starvation worthwhile. If I put one more month’s of bills on Visa, surely next month God will do something special.
But control is an illusion when we’re not honoring God. While we think we are controlling our circumstances through charging daily living needs, our lives are headed off the cliff. If I’m really in control of my life, then it shouldn’t be headed in that direction ... or it doesn’t say much about my ability to be in control.
“Idolatry is always the reason we ever do anything wrong,” wrote Timothy Keller in Counterfeit Gods.
Why do we ever disobey? Isn’t it because we desire something other than what God commands? When one of my children refuses to do homework, it is usually because they would rather be playing. The desire to play beats out the cost of doing homework. But stopping all play does not remedy the problem. The homework must be done.
Keller writes that we can’t simply forsake our idols (whether they be materialism, achievement, lust, the desire to please, food, porn, reputation, or anything else). Instead, we must worship that which is higher.
Our spiritual lives get off track when we allow something, even if it is small, to create separation between us and God. Then, we go on living, expecting that God will be okay with what we’ve done. We go on attending church, Bible studies, prayer groups, revival services, and missions events as if the tiny mark on the chalk board did not exist.
And then the tiny mark begins to silently grow.
When we explain away our disobedience, our spiritual lives become stagnant, even if we never stop going to church. But Christ finds the lukewarm heart repulsive. Revelation 3:16 We are lukewarm when we are not opposed to Christ but not completely sold out to Him. We don’t want to openly reject Him, but we aren’t going to give Him our all either.
So, why are you following God in 2017? If prayer doesn’t work like it used to, if your faith lacks power, or God seems far away, it could be an indication something is wrong. We can’t really call ourselves followers of Christ when we allow sin to separate us from Him.
HRAs Make a Comeback
A couple weeks before Christmas, Congress passed the 21st Century Cures Act. Quietly slipped in at the very end of the Act is a section reuathorizing the Health Reimbursement Arrangement for employers with less than 50 employees.
The Affordable Care Act eliminated this key business planning opportunity and employee benefit for all but the sole proprietor who had no other employees.
The Health Reimbursement Arrangement is an account funded only by the employer for use by the employee. The employee may withdraw the funds for qualified health care related expenses on a tax-free basis. This includes using the funds to pay for health insurance premiums and long-term care insurance premiums.
There are some new rules to keep in mind that did not apply to previous HRAs.
The employer must not already offer a group health plan for its employees. If the employer already offers group health insurance, it cannot also offer an HRA.
The HRA must be made available to all eligible employees. In determining who is an eligible employee, the employer may exclude all employees who have been employed for less than three years.
The employee must provide proof of coverage before funds may be disbursed for the payment or reimbursement of health care expenses.
The employee may withdraw a maximum of $4,950 per year ($10,000 for a family when the HRA covers the employee’s family members). There is some variation allowed in this figure based on the employee’s specific situation. The amount may be adjusted for inflation in future years, and the amount is also prorated when an employee is covered for less than the calendar year.
The employer is also required to provide employees with written notice, and the Act contains recommended language for the notice. Included must be a warning of the potential for the employee to be penalized for not maintaining adequate health insurance coverage, and a recommendation that the employee report the HRA to the Health Care Exchange when determining the amount of the employee’s premium tax credit amount.
Because the ACA eliminated the employer’s ability to offer tax-free assistance with their employees’s health insurance premiums, the new HRA may be just the ticket to help employees meet their health costs.
In the cool summer mountains of southwest Virginia, a medical missionary said to me, “Many people here are living on their credit cards and believe that God will one day show up and rescue them.”
There is no doubt in my mind that God works in the middle of our difficult circumstances. However, I have learned a few things about how God works when He does “show up.”
First, we have to be looking for Him. God promises to reveal Himself and intervene in our circumstances when we are seeking Him. “Ask, and it will be given to you; seek, and you will find; knock, and it will be opened to you.” Matthew 7:7 If you are not diligently seeking God, then your expectations will probably leave you disappointed. Mounting credit card debt while waiting on God would be a reliable indication of this deficiency.
Second, our commitment to God must ring true. We cannot bring to God what we think pleases Him and expect multiplied blessings from His hand. God does not owe us for anything we do. Matthew Henry said it well, “Many boast of their obedience to the command of God; but what mean then their indulgence of the flesh, their love of the world, their passion and uncharitableness, and their neglect of holy duties, which witness against them?” 1 Samuel 15:18-23
What do you want God to do in your life in 2017? Are you looking to Him for it? Are you committed to Him above all else?
The basic premise behind the economic stimulus packages put together by the federal government in recent years is that if the masses have money they will spend it. When they spend it, their money trickles up the corporate chain where it can be reinvested back into the economy through to grow businesses and, ultimately, lead to more jobs and increased salaries. At the same time, some tax rates are raised to recapture federal spending through taxation.
Does it work? Let’s take an example. In 2009, I bought a home and received a first time homebuyer credit (stimulus). Initially, that credit was deposited into a savings account. Over time, however, we used that money to replace the windows in our home, making it more energy efficient, and remodeled the kitchen, doing all the fabrication work myself.
Someone had to make the windows and install them. And someone had to make the plywood and materials for our kitchen cabinets and countertop, transport them to the store, and sell them at the local retail level. In theory, the credit we received did trickle up through the economy.
However, most of the goods we purchased (not sure about the windows) were manufactured on foreign soil. So other than profit to the store, the cost of the goods left our country.
Added to that, many global corporations with domestic operations or headquarters have increasingly utilized off shore strategies to shelter income from taxation. So the money trickled up, but some of it left our shores to foreign manufacturers and some of it was sheltered from taxation.
This means a good portion of the funds that trickled up are out of reach of federal taxation (will not replenish funds used in the stimulus) and were not reinvested into the economy, either because they stayed off shore or they were kept was profit.
Trickle up assumes that every dollar the government pumps into the economy will eventually work to expand businesses, jobs and salaries which will eventually replenish government spending through taxation. But when much of the money goes to pay for imports and is sheltered from taxation in off shore entities, trickle up fails to restart the economy or replenish government coffers.
If it created more jobs on domestic soil and kept more of the money on domestic soil, then trickle up economics would probably have been more successful at restarting the stalled economic engine. And it would have created long-term, sustainable growth, after which the government could withdraw its hand and leave the economy to run on its own power. Instead, we are still seeing artificial intervention through, as an example, zero or near zero interest rates at the Federal Reserve.
The design of trickle up economics is to put more money into the hands of the very wealthy and trust that they will reinvest the additional wealth in domestic production. But it only works if the money trickling up stays within our borders and is available for taxation.
Trickle down is equally a government economic stimulus package. The thrust behind trickle down economics is that more money in the hands of the very wealthy will lead to increased investment in domestic production. However, the approach is different.
Trickle down depends on tax cuts and subsidies targeted toward businesses and the very wealthy. To the extent low to middle income families enjoy tax cuts and more discretionary income, we’re back in the same boat as trickle up economics so far as creating jobs on foreign soil unless the goods they purchase are manufactured on domestic soil.
The difference is that trickle down primarily offers benefits to business operations on domestic soil. The plan encourages growth here at home. Expansion of businesses means more production and more jobs of many kinds in various phases of production. More jobs mean higher income among low to middle income families, resulting in – you guessed it – a jump in tax revenue.
In the end, both trickle up and trickle down depend on large businesses and the very wealthy to reinvest stimulus money back into the economy, but they approach it differently. Trickle up puts money in local hands first which eventually works its way to the top, where it is reinvested. Trickle down starts at the top where it is invested and works its way down to the local level.
All things being equal, trickle down encourages more money to stay on domestic soil. For example, a government stimulus package may award millions of dollars for road construction on domestic soil. This guarantees jobs are created here at home, leading to higher incomes (and more tax revenue) and increased spending (and more tax revenue). The key risk with either approach is whether the businesses receiving the stimulus will actually invest in increased production on domestic soil. Policy can be established to restrict those who will receive stimulus under the trickle down approach to target businesses and very wealthy who will invest in domestic production. This is not possible with trickle up because government cannot control where the money ultimately ends up.
But given all this, the only reason any economic stimulus packages are used in the first place is when either businesses or local people become crippled. These situations represent an economic imbalance, and government decides to intervene to bring things back to the middle. It doesn’t always work and is definitely not fool proof. The better approach is for government not to intervene at all or to exercise restraint when deciding to get involved.