What Is The Affordable Care Act (ACA)?

Unless you have been away from all types of communication over the past six months you have heard the term the Affordable Care Act.  If not, don’t panic, you may identify this act by its better known name “Obama-Care.”

The bottom line for this act for individuals is simple – if you can afford health coverage then you must be covered or else pay a fee at the end of the year.

Here are some highlights of the Affordable Care Act or “Obama-Care”:

·         March 31, 2014 is a key day.  All those eligible to obtain coverage must obtain coverage by then.

·         Penalties for not being covered in 2014 will be the higher of 1%of the yearly household income or $95.00 per person ($47.50 per child under 18).  Penalties for 2014 will max out at $285.00 per family.

·         Penalties in future years will increase sharply: 2015 – 2% of income or $325.00 per person. 2016 – 2.5% of income or $695.00 per person.  After 2016 the penalty will adjust for inflation.

·         If you are uninsured for less than three months you will not be penalized.

·         Penalties will be pro-rated for those who are insured for part of the year.

·         You must have what is considered minimum essential coverage in order to avoid these penalties.

·         There are several exemptions based on income and certain circumstances.

·         Self-employed individuals who aren't considered employers must also be covered.  In fact, you may even have more options being self-employed.

·         You are considered covered if you have any job-based plan, a health insurance plan you bought yourself, COBRA, retiree coverage, Medicare, Medicaid, CHIP, TRICARE, VA health coverage, or some other kind of health coverage.

·         Individuals may qualify for health care tax credits, lower out of pocket costs or Medicare.

These are simply a few highlights of the Affordable Care Act.  Allow The Towles Group Inc to assist you or your business with navigating the complex Affordable Care Act.  

Grow Your Money Tree

It is a fact that most of us will have several hundred thousand dollars pass through our hands in our life time.  You don't believe me do you?  Well lets say you work for the minimum wage ($7.25 per hour), full time (40 hours per week) for the next fifteen years.  If you did that you would have earned $226,200.00.

With that knowledge you and I both most figure out a way to grow our money tree. There are several obstacles that are trying to kill the growth of our tree: bad money choices caused by hereditary and environment, debt, clear understanding, etc.

We can clear up bad money choices with continued exposure to information that will increase your financial literacy. In this post I want to challenge your understanding and debt.

Some people, professional and otherwise, will tell you that you should pay off all of your debt first before you can grow your money.  I believe that this is poor advice for most people.  You should develop a strategy where you are reducing debt, saving and investing for growth simultaneously. Work with someone who can help you develop this strategy

This way your money tree has the best chance of growth.

Also please keep in mind these three principles:

1. The fastest way to increase wealth is to invest.

2. There is a significance in making more money and increasing wealth.

3. When you start to invest don't get discouraged if you are not able to be a part of the "big deal".  A few "small deals" can put you in a position to be part of the "big deals".








Image courtesy of ddpavumba at FreeDigitalPhotos.net

Christmas: Fishing Time

The Christmas season is upon us and you know what that means.

It means that retailers have already figured out where the fish (you) are and they are ready to release the bait (“the deal”) that the fish want.

On Black Friday - the day after Thanksgiving - mall parking lots and department stores will be crowded with people who will be seeking a deal.  On Cyber Monday, the Internet will have quite a bit of traffic to popular retail site by deal seekers.  A deal is a great thing, but this Christmas season, let’s not seek a deal.  Let’s seek what we are in need of.  The retailers want customer to exceed their budgets and they make it very convenient to do so.

Here is a short list of five things that you can consider before you go out seeking a deal during the Christmas season:

1.      Don’t rely on the fact that you will be receiving an income tax return check in January which you will use to pay off your Christmas spending bill.  Yes you may be receiving a check during the tax season but that check could go to invest in your future or assist you in getting out of debt.  Why not consider taking one of those actions with your anticipated income tax refund?

2.      Make a list of items that you need and only seek deals for those items.  (Need here simply means that the item is a necessity for survival.)  Don’t allow the retailers to reel you in.  You have to make wise decisions for your future and that of your family.  Buy what you absolutely need.  You will get a good price on something you need. 

3.      Consider donating some or all of the money set aside for Christmas shopping to those less fortunate than you.  There are many who are less fortunate than we are.  Let’s remember them during the Christmas holiday.  There will also still be people who are displaced from the storms in the northeastern part of the US.  Help someone out, the nature of Christmas is birthed in giving to those who are less fortunate and in need of assistance.  Lend a helping hand; let’s not forget about those who are in need.

4.      Consider giving your children, nieces, nephews or godchildren gifts that will assist them in the future.  One thing that you might want to do is by a share or a few shares of stock and offer this as a gift to your children or relatives who are in the earlier stages of life.  They may look at you funny but over time if the money is invested properly these young people will thank you greatly when they get older. Think investment. 

5.      Create a budget for your Christmas spending and stick to it. This should have been the first, second and third option.  Above everything on the list, establish a budget – parameters on what you are able to spend on Christmas shopping while still maintaining your monthly, weekly and/or daily expenses.  If you do not have a plan with regard to a budget, you are most certain to spend money that you cannot afford to spend.   

Don't Forget About The Kids!

I recently read an article that stated only three out of ten US parents talk to there kids about money and money related matters.  This is a major issue as we need to produce more financially responsible people.

Financial literacy is a must for our children in today's society. A few decades ago financial literacy for children meant opening a bank account, showing them how to write a check, balance a checkbook and saving. Today true financial literacy for children must be more robust as the financial health of our nation depends on it.  Remember our children will be the next leaders of our nation, which has been in financial turmoil for the past sixty years. If we dont do something soon there might not be a land of opportunity to lead.

The talk about finances with our children is just as important as the "sex talk" although many parents do not see it like that.  How do I suggest to handle talking to your children about money? I am glad you asked.

Well we need to start with the basics - teach them how to save, how to give back to help others, how to write a check and balance the checkbook.  But let's add topics to our discussions - there can't just be one discussion because the topic of money or finance is just too broad - like retirement (including the benefits and drawbacks of 401Ks and IRAs), credit, creating a budget, insurance, investing, entrepreneurship, taxes and home ownership.

If you need some help to understand how these discussions should go, don't hesitate to contact us.

2012 Money Play

As a new year approaches, it is a great time to starting talking and thinking about your finances for 2012.  There are some things that you and I want to consider now for 2012:

Develop a budget

It is going to be important to develop a budget for 2012 and to stick to that budget as best as you possibly can.  Here are some things you can do right now to construct your budget. 

1.      Log onto your bank account.

2.      List all of the things you have spent money on from January 1, 2011 until now (include all the transactions in your accounts – checks, withdrawals, debit card usage, bank fees, etc.)

3.      Categorize all of your expenses into the following categories for each month: Housing (mortgage, insurance, real estate taxes, rent, utilities, repairs to home, etc). Transportation (automobile expenses including insurance, taxi/cabs, bus or train fare, etc). Meals (meals purchases at work, groceries, etc.). Entertainment (meals outside of work and home, movies, subscriptions – magazines, NetFlix, etc). Travel (vacations). Personal care – haircut, salon, spa, etc. Investments – any amount you spend on investments outside of job sponsored retirement plans, this includes savings and life insurance. Miscellaneous – anything else which does not fit in any of the above categories.

4.      List your monthly take home income.

5.      Subtract your total expenses from your total income.

6.      Are there any negative months?  What happened in those months? Was there some level of emergency? Were there any months that were profitable? Did you break even in some months? What happened in those months?

7.      Take another sheet of paper and a calculator and figure out how much of your annual take home salary is being spent in each of the eight expense categories. 

8.      Compare your results to what I call a typical budget: Housing should consume no more than 30% - 37% of your take home or net pay. Transportation – about 20%. Meals – between 15% and 20%. Entertainment – 3% to 5%. Travel – 5% to 10%. Personal care – 3% to 7%. Investment – 5% to 10%. Miscellaneous – 3% to 5%.

9.      If your percentages don’t match up with those in item 8, you should consider adjusting your expenses accordingly.

10.  Stick to the budget you created in 2012. Don’t go astray from the path.

Get out of debt

Debt grows faster than your income so it is a mandate to get out of debt as soon as you can.  With the rate that the world’s economy is going make it a priority to retire your debt as soon as you possibly can.  This includes student loans as well.  I would suggest opening a separate bank account where you pay your debt from and call it your DSA - Debt Shrinking Account.  Make extra payment if you can to shrink your debt faster.  Email me for more advice on this.

Develop a plan to save and invest

Now that you have your budget and DSA in place you will need to develop a plan to save and invest.  The 5% to 10% that is being set aside for investments should be split in half between investments and savings.  Your savings here would be your “rainy day” fund.  The way the world’s economy looks we are in for quite a few rainy days in 2012.  It is always best to be prepared.

Speak with a financial advisor on what you should use the other half of your funds to actually invest in.

Watch the markets

This doesn’t mean only the stock market.  But watch all the markets.  What are you looking for?  You are looking for opportunity, an opportunity that can catapult you and your family to the next level.  With the other three items, mentioned above, in place you now have the ability to not only watch the markets but also take advantage of some of the opportunities that are presented to. 

Tax cleaning

I am sure you have heard of spring cleaning, but tax cleaning?  Since it is the end of the year, it is time to do some tax cleaning.  You ready? Ok great, let’s start:

Portfolio investments

Begin cycling through your investment portfolio; if you have sustained losses on some of your investments sell them now. Don’t worry if you like the investment buy it back immediately with just a few clicks of the mouse. We want the loss for your tax return.

Donations

Go through your closets, basements, garages and other “storage” areas.  There are hidden deductions, I meant donations there I am sure. Search for useful things that you haven’t used in the last few months or forgot that you had. Donate those items to a tax exempt organization before the end of the year. Be sure to retrieve a receipt from the organization signifying your name, the date the item(s) were donated and a description of the item.  Be sure the organization is a charitable organization with its tax exemption currently in place.

Maybe you have some extra cash lying around, if so make a yearend contribution to your favorite charity.

Withholdings

If you owed money to the IRS or state you reside in over the past year or two, it maybe a good idea to increase your withholdings at work.  Do this by completing Form W-4 and submitting it to your employer immediately.  Be sure to claim one or two less exemptions that you originally did. Note: you want to do this soon as some employers don’t process W4 changes right away. You can change your W4 back to its original number of exemptions at the start of 2012.

Distributions

If you are over 70 ½ years of age you are required to take a distribution from your IRA or employer sponsored plans.  Be sure to do this before December 31^st. If you don’t take the distribution timely you will certainly pay a penalty for it.

Tax payments

If you pay estimated taxes during the year, make your January 2012 payment before Dec 31, 2011.  This will assist you in lower any potential tax burden in 2011.

You have some information to start with, now start cleaning! Speak with your tax advisor about how this information will impact you specifically. Tax planning is unique to the individual, his/her income and their overall financial health. If you don’t have a tax advisor then visit us at www.thetowlesgroup.com. 

The Intrusion of Black Friday

It appears that retailers are dead set on impacting the family structure this year.  Black Friday is actually starting about six hours earlier this year.  Well I guess that is another story for another time in another setting.  Nonetheless, here are three tips on how to protect yourself and your family financially on Black Friday:

Stay home enjoy family and look forward to Cyber Monday.

Enjoy your family on Thanksgiving Day, don’t eat and run so you can get in line at your favorite retail store.  Part of the dynamic of the “savings” the retailers offer on Black Friday is simply a ploy for you to buy something else that you don’t need.  Safe yourself the headache and shop around on the Internet for the item you are looking for on the Monday after Thanksgiving. Here is a tip: with the state of the economy, the later you wait to more you will probably save. No need to rush.

If you must go into the stores on Black Friday, have a spending plan.

Before you get on line outside of the store have a plan. Ask yourself what am I going to buy and what price am I going to pay for it?  When you have a plan and stick to that plan then the retailers can’t offer you their credit card in order to get an additional percentage off the sale.

Walk in with a plan, stick to the plan and walk out of the retailer with what you planned to walk out with at the right price and nothing more.  No need to layaway what you have planned for. There is no need to finance the purchase you have planned for.  There is no need to spend more than you planned.

Remember you’re on a budget

What is your budget for the Christmas shopping season which starts in a little over 24 hours?  If you don’t have a budget then you don’t have a plan and the only thing that can happen is an unwise move.  Most people can’t afford another unwise financial move this year.  Create your budget today before tomorrow comes and you aren’t prepared.

Let me know how this information has impacted you, whether positively or negatively. I’d like to hear from you. Send your responses to info@frederickotowles.com.