It's Your Money

If you keep up with the news you have no doubt heard that we are in a recession. This by itself is not our problem; The problem lies in our inability to keep our money out of the hands of our government. Our government, despite their good intentions, has led us into our current situation through out-of-control spending.

Regardless of which side of the isle you come from, or even if you consider yourself an independent, hopefully you can understand that YOU can take better care of yourself than Uncle Sam. If you can not, then you are destined to a life of financial slavery. That may sound a little harsh, but it's tough love.

We have to get our arms around the fact that our current tax system and the IRS confiscate our money regularly and by doing so, deny us the right to think and act on our own. Don't hear me wrong here, because I believe in paying taxes to support our government, so it can function and protect us from foreign interests. But, they are doing just the opposite.

It's easy to follow the crowd and do what our government recommends. However, by doing so you are increasing your risks and giving up your rights.

If you take a look at history, our country was actually founded because of a dispute of having to pay taxes and the Boston Tea Party. After which we actually had a 100+ year period of prosperity. Then came 1913 and the Federal Income Tax.

Our beloved Abe Lincoln and Franklin D. Roosevelt were the culprits that contributed the most to this ever increasing problem of the IRS. As taxes have increased over time we have lost control. Read for yourself on the IRS website: http://www.irs.gov/individuals/students/article/0,,id=177655,00.html

And here's a chart on the history of income taxes:
http://legacyinsuranceagency.com/taxhistory.html

Okay, so you say what does all of that have to do with me and MY Money? Let's take a look at the average American family, Mom and Dad with 3 kids. Dad earns $72,000 a year after 4 years of college and considerable work experience. He has the typical 401k and saves towards his employer sponsored retirement plan. If this isn't you, just stay with me, you'll get the picture.

Mom drives a 5 year old minivan that's paid for, and carries the kids all around to numerous games, parties and events. Dad drives a newer pickup and has a $500/mo truck payment. They live in a normal neighborhood and have 12 years left on a 15 year mortgage with a 6% rate.

Do you think they sound rich? Well according to IRS tax rate schedules that puts them in a 28% income tax bracket. See for yourself, here's the link:
http://www.irs.gov/formspubs/article/0,,id=164272,00.html

Now you may be saying, "Yeah but I made that and I didn't pay taxes." Some people actually believe that because they get a refund check, or because they don't have to pay money in at the first of the year, that they didn't have to pay taxes. What about that withholding that came out of each and every check all year. Uncle Sam loves payroll deduction. And, let's not forget Social Security, Medicare and your 401k. "What? I thought that my 401k actually saved taxes?"

Let's look at each one of these "deductions" one at a time.

1. Fed Income Tax - This comes right out of your check before you have a chance to spend it. You do have an option here, but most don't exercise their rights to hold on to their money until the end of the year. Uncle Sam feels safer knowing you pay him first, and in many cases most individuals do as well. In this example it would be about $250 every 2 weeks.
2. State Income Tax - Don't forget your friendly state government, in this example we'll assume there share would be about $130.
3. Social Security Tax (OASDI) - Again, before you have a chance to count your money, it's gone. We'll talk about the failure of Social Security later, but in this example about $180
4. Medicare Tax - You can count on not seeing this either, but hey maybe it will be around when you really need it at retirement. In this example, it's about $40.
5. 401k - Conveniently, we'll let our All American Dad contribute 5% or $150 to this "plan"so he can fund his pre-tax investment. You can pay him now or you can pay him later.

Maybe this family has some health benefits and they'll contribute another $250 to these coverages.

After all is said and done this family brings home about $2,250 from the $3,000 he earned.

As if you don't already know this, here are 2 different examples to prove the above calculations.

Your Friendly Social Security Administration: http://www.ssa.gov/OACT/COLA/cbb.html

If you would like to calculate your payroll deductions, check out this cool site with lots of calculators: http://www.dinkytown.net/java/Payroll.html

To keep his mortgage company happy, they are also letting them hold in escrow the property taxes and insurance as well, so in reality they'll never see this money either. After this family pays their mortgage, $2,000 PITI, car payment, credit card debt, and normal living expenses, they feel lucky if they have $50 left over to take the family out to eat.

Don't worry about the capital gain taxes, sales taxes and other miscellaneous taxes, we all pay them, right?

They feel fortunate because they are "getting by" and they feel "comfortable", but inside they strive for more. Our media feeds them advertisements of new cars, plasma televisions, wireless phones and movie star lifestyles, and, they eat it up. We can't help but want those things because "everybody" has them and we have to keep up with the Jones's. Sound familiar?

Okay, so back to the point about who's in control of your money. And, how can you keep more of your money? It's pretty simple really, take control.

Watch every penny. I'm serious, if you want control of your money, you need to document every expenditure. When you do, you will take notice. Once this is accomplished you can move forward, because you have to recognize that there is a problem. If you don't recognize the problem, you will not have the discipline to make a change.

Here's 3 steps to Take Control of Your Money:

1. Let's take a look at the paycheck first. Most of your payroll deductions don't have to be deductions at all. By changing your exemptions you can control who holds onto your pay. By doing so, you will have the use of this money. DO NOT change this unless you have the discipline to set this money aside in an interest bearing account with the sole intent of using it at the end of the year to pay your taxes.

The next deduction on your paycheck is your beloved 401k. Now I know Uncle Sam and all of the so called financial gurus tell you to max out this contribution, but you need to understand what is really happening. Your 401k only defers taxes, it does not save you taxes. While the argument is that you will be in a lower tax bracket at retirement, this is a myth. The reality is that you could be in a higher tax bracket at retirement. That's a whole other topic which we will examine another time.

2. In this example the family is paying about $500 per month for medical coverage because the employer is pitching in some of the premium. While that may sound good, it could actually be better. But, because we are so convinced that our employer needs to fund this, and that we need co-payments and low-deductibles, we let even more money slip out the door. Every situation is different and in many circumstances this example may very well be the best option.

If you want control, you should keep 6 months of income liquid in an emergency fund. Now this may seem impossible to some, but you have to start somewhere. If you do, you can raise all of your insurance deductibles and therefore control your money until you actually need it. Doing so will save you hundreds, if not thousands of dollars every year.

By the way, if you think socialized medicine will work, take a look at Social Security and Medicare. Here's the scenario. Social Security was created in 1935 by FDR. It was never intended to support people into their 70's, 80's and 90's. The debt for SS is $10 TRILLION. Medicare was created in 1965 by Lyndon B. Johnson. The debt for Medicare is over $60 TRILLION. Some quick math will tell you that's $70 TRILLION. And, don't worry about what the retiring baby-boomers will do to that.

3. The next way that many lose control of their money is with a 15 year mortgage. We've all been told that we save interest by paying off our mortgage sooner. While it is true that you can save interest, in reality this may cost the average family hundreds of thousands of dollars over their lifetimes. Again, don't hear me wrong. Each situation is different and if your goal is to pay your home off early, you can still do that in 15 years and have MORE CONTROL of your money along the way.

To grasp how a 15 year mortgage gives away control of your money, you'll have to understand some basics:

• Your home will appreciate or depreciate regardless of the mortgage.
• Because of the interest tax deduction, your net payment may actually be reduced.
• Any payment going towards principle may actually increase your risk and decrease the mortgage lenders risk.

For more follow this link for a mortgage comparison using the LEAP financial calculator:
http://legacyinsuranceagency.com/mortgage-comparison.html

To summarize, with FINANCIAL EDUCATION and DISCIPLINE, you can take CONTROL of YOUR MONEY. When you are in control of your money, you can make informed decisions versus having someone else make decisions for you.

Until next time,
TAKE CONTROL OF YOUR MONEY!
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Get Out of DEBT and SAVE More Money in 2008

It's that time of year when we set our goals and try to improve over the past year. Hopefully, saving more money is on your priority list. Since the rate of spending in America is at an all time high and savings is at an all time low (negative for 2006), this is a good topic to help you get off to a good start.

In today’s world it takes work and discipline to get ahead and save. And, with the ease of using a credit card it’s even harder to stay out of debt. While many of the financial gurus will tell you to cut up your credit cards, I’d like to share some information with you that will help you get out of credit card debt and allow you to keep your credit cards.

While most of have been lured to the stock market for more aggressive returns, the truth is you can’t get ahead until you get out of debt. And, while these returns haven’t been that spectacular anyway, why gamble? There are many more ways to maximize your return without risking your hard earned money. Before we get into making money though, let’s take care of some simple housekeeping.

One of the easiest ways to earn a guaranteed return, is to get rid of your bad debt. If you are uncertain of the difference between bad debt and good debt, good debt would be a secured loan on an insured asset, like your mortgage. On the other hand, a high interest credit card that is unsecured or uninsured would be bad debt.

If you are one of the typical American families who carries a balance on a credit card, you can enjoy a huge return, as high as 22% by paying off your credit card balances. The interest rate you are paying now will be the “gain” you receive by paying off the balance. So, if your rate is 18% your return will be 18%. If your balance is 6%, your return will be 6%, nothing huge but nothing to sneeze about either. Primarily though, it is risk free and guaranteed. And, after fees and you’ll be way ahead of most stock purchases or other investments.

The average family today has credit card debt approaching $8,000. And the typical interest rate is about 18%, with many paying even more. If you do the math, an 18% interest rate on an $8,000 balance is $1,440 a year. Can you afford to pay $1,440 a year in interest?

Another way to look at it is, if instead of paying $1,440 a year, you had $1,440 to invest every year for the next 20 years and you earned an average return of only 6% percent a year. Over the 20 years you would have invested a total of $28,880 and your money would have grown to $56,150. More good news is that at that point compound interest is really starting to work for you, and in just 10 more years (30 total), you would have saved a whopping $120,674. There is really no reason not to pay off your credit card debt and let your money start working for you.

So, what are you waiting on? The fact is, if you have high interest, unsecured debt and you don’t act now, you are going to dig yourself a hole that will be hard to ever get out of. It’s easy to get in debt and it can be easy to get out of debt. Here’s a few simple steps you can take to clear up your debt and start saving.

Analyze your budget and see if you are spending money needlessly. Determine exactly where your debt is and take charge of paying it off asap. Don’t be tricked into thinking your saving money in the market or in your low interest savings account until you have cleared up your revolving debt. Use your savings if you have to, but pay off your credit cards. You may be able to consolidate credit cards into one low interest payment, still pay it off. Once you do, you will have cash-flow and you can then truly start to save.

Another option may be to refinance your mortgage, but make sure you are getting an attractive rate and that you are NOT using your mortgage to build more debt. This can be a trap, so if you use this method use caution and discipline.

You should keep your credit card accounts open if they don’t have a yearly fee, this will help you maintain a favorable credit score.Pay your credit card balance off monthly without hesitation. This will help you discipline yourself not to overspend. And, it will keep you out of debt.

Once you have paid off your balances, if you have decided to keep your credit card accounts open, you are now in a position to negotiate the interest rate. There are many ways to do this, but the first is to simply ask. Pick up the phone, call the company and ask for a better rate. If you pay your bill on time, they will probably oblige your request. If not, you may have to threaten to close the account or transfer the balance. It is in your best interest to not close the account, but you only want to keep it open if there is no annual fee.

Traps of Credit Cards

• Late Payments - If you have fallen into the trap of paying your bill late, you probably have a high interest rate. Timeliness in paying your bill is the single most important factor in determining your credit score. So, if you haven’t learned this lesson already, pay your bills on time. Banks will sometimes forgive you once or twice, but ultimately there is no excuse for being late.
  
• Exceeding Your Limit - If you overextend your credit limit, you are asking for a higher rate. Generally, you will be stuck with a fee that can be as high as $50, and your company will most likely raise your interest rate.
  
• Paying Too High of an Interest Rate - Some banks will try and charge you a higher rate regardless. And, many have hidden fees and a yearly fee. There is no reason to pay a yearly fee or a non-competitive interest rate when so many banks offer credit cards. If your credit score is above 620, then you are in a position to negotiate.
  
• Closing Your Credit Card Account - When you close your account you are throwing away your history. Your “history” in making payments is a huge factor in determining your credit score. If you close the account, this could negatively effect your score, even if the balance was paid off. So, pay off your balance but keep the account open if there is no yearly fee. If they have a yearly fee, ask them to waive the fee.
  
• Transferring Balances - If you are savvy you can save yourself a ton of money by utilizing balance transfers. On the other hand, if you are not careful you can cost yourself a ton of money as well. The trap is most low interest balance transfer offers are only for the transfer itself. All new purchases are charged a higher rate, usually more than 6%. Understand the rules before making the transfer and do not make new charges on the account.
  
• Using Credit Cards for Cash Advances - Using your credit card at an ATM for cash is a bad idea. Cash advances on credit cards can cost you 20% or more. And, the bank will probably make you pay off your regular balance before allowing you to pay off the advance. This is a trick banks use to charge higher rates, so again understand the rules. Debit cards are free with many checking accounts now, so if you need fast cash just withdraw from your checking account using your debit card.

Okay, now that you understand how to keep your credit cards under control it’s now time to start saving some money. If you’re already saving money that’s great, keep saving. While there are many ways to save money, from sticking it under your mattress to buying into a mutual fund, we will focus on safe, secure and guaranteed returns.

If you have a retirement plan at work consider yourself fortunate. However, you want to make sure you understand how it works. If you have nothing, or if you are not getting the return you want, now is the time to start saving. Regardless of where you are in your life, you can start to save now and live your retirement with dignity.

When considering a savings plan or any investment vehicle, here are some questions to consider:

1. Are the returns Guaranteed?
2. Is there a competitive Return On Investment?
3. Is the gain or growth Tax Deferred?
4. Is the gain or growth Tax Free?
5. Are the distributions upon your death Estate Tax Free?
6. Are you allowed Unlimited Contributions?
7. Is it Creditor Proof?
8. Do you have Investment Options?
9. Can the savings be use as Collateral?
10. Is it liquid, and do you have Use and Control?
11. What would happen to the contributions if you became Disabled?

If you do your research (this does not mean reading the opinions of so called experts on the radio and in the magazines), you will find that few savings plans can promise you all of this. Fortunately, one does, it’s called Whole-Life Insurance. And, nothing else offers you the tax advantages, the guarantees, and the ability to control your money, even after your death. You owe it to yourself and your family to explore the uses of life insurance.

Key Points

• Use the money you were paying on your credit cards to start to save money.
• Discipline yourself to save monthly or at every pay interval.
• Watch your money grow by utilizing tax and investment strategies.

Learn more about the uses and advantages of Life Insurance with a free financial analysis from Legacy Insurance Agency. We’ll help you to understand the facts about saving for retirement with no pressure and no obligation.

Until next time,
Get out of Credit Card Debt and Start Saving!
Barry Page
http://www.legacyinsuranceagency.com

Legacy Planning

Making a Difference, After You Are Gone
Author: Barry Page
© copyright 2007 www.legacyinsuranceagency.com

How do you want to be remembered? Do you want to impact the lives of others for years to come? Your legacy can live on forever with proper planning today.

The obituary in the local paper or the epitaph on a burial marker is sadly all we will have to remember many when they pass. But, this does not have to happen to you. Even if you feel you don’t have any assets or that it is too late, there are steps you can take to ensure that you leave a legacy for others.

Most people think that leaving a will, or designating a beneficiary on their retirement account, is all they need to do to safely pass on their assets to their loved ones. While this may be a strategy, it does not maximize the transfer of wealth and there are tax and legal ramifications that should be considered.

If your estate is already worth a substantial amount, then there are precautions you may want to seriously consider while you are still in control. How would you feel if the assets that you spent your entire life building were subject to probate or excessive taxes? Or the house you left your children became a subject for controversy and split the family apart? And, if the taxes levied on your estate consumed the bulk of the assets, would that be prudent?

The first step in planning your legacy involves properly structuring a strategy today. You should first seek legal counsel and determine what it is you would like to achieve. A good CPA should be able to provide tax advice and be utilized as well. However, it is imperative that you choose the advice of licensed professionals that have experience in the areas of estate planning. Ironically, many of today’s so called “financial planners” may actually be the ones you may want to leave off of your legacy planning advisor list.

The most important advisor you can have may have the initials CLU after their name, but most certainly they will merit the representation of one America’s fine mutual life insurance companies. The term mutual is very important because it relates to your mutual ownership in the company. This advisor will also have a fluent understanding of this company’s products and services.

Quite simply, the most prudent financial decision you could ever make today also ensures you can leave a legacy for others. And, it also avoids many of the tax and legal issues that usually follow the passing of a loved one.

Life insurance that is properly structured for a holistic approach to legacy planning ensures your control over your assets today and in history. The dollars you use to purchase whole life insurance from a mutual company today may very well be reused by your family and ancestors to achieve financial success in years to come.

Using this approach, your other assets will be relieved of pressure and be used to enjoy today. Reverse mortgages can be utilized and real estate can be sold. Assets can be used when you want or sold with timing at a premium. Risks are minimized and health care issues no longer demand fear.

You can determine your legacy today. Take care in making your decisions and make them now while you have time.

Barry Page

How to Create Wealth

Although many may not admit it, most of us desire to be rich. We want to create wealth and not have to depend on ourselves or anyone else to live comfortably. How to create wealth is the stumbling block that holds us back.

That being said, our perception of "comfortably" is what seperates the wealthy from the middle class. If you want to increase your financial intelligence and create true wealth for your family, you must organize, plan and take action.

MUST HAVES:

A Burning Desire - It's one thing to say you desire to be wealthy, but it's another to be driven by your desire.

Specialized Knowledge - organizing and using your knowledge with a definite plan of action.

Call to Action - Once you are organized , you must put your plan in action with a consistent effort.

WHAT IT TAKES:

Conditioning of your mind – You are where you are today without accident. Your mental conditioning is inherent. In order to prepare yourself for the future you must prepare your mind with mental conditioning.

Change of habits – You have habits now, good and bad. If you want to change your life, you have to change your habits.

A solid foundation – to create true wealth you must create a solid foundation. A solid foundation means protection, savings and growth.

Consistent effort and attention to detail – A consistent effort to improve and attention to detail are essential for long-term growth.

ACTION STEPS:

Organize Your Financial Filing Cabinet
What does it look like now? Do you have a financial junk drawer?
Create a Filing System (Organize by date and kind)

• Insurance Statements
• Bank Statements
• Investment Account Statements
• Credit Card Statements
• Expenses
• Phone, Utilities
• Business Entity Documents
• Real Estate Documents
• Wills and Trusts
  

Open Your Wealth Accumulation Account

• Money Market or similar with EFT options
• Deposit at least 10% EVERY time you get paid
  

Create Your Income Statement

• Balance Sheet
• Income and Expenses
• Cash-Flow
  

TIPS:

Have an emergency fund - Have at least 6 months' income in a money market account that can be accessed easily.

Pay yourself first - Start a systematic savings plan. Discipline yourself to save 10-20% of your pre-tax income into a wealth accumulation account.

Spend less than you earn – This may seem obvious, but discipline is key here.

Pay your bills on time - Avoid needless late fees.

Avoid debt to the extent possible - Student loans and mortgages can be "good debt", Use “tax advantaged” liabilities whenever possible. But, make paying them off a priority.

Set a budget - live by it, use a software program or just a paper and pencil.

A consistent effort is needed to preserve wealth once it is created. "Easy come, easy go" is relevent here. A continuous curriculum of financial education will create confidence, success and happiness.

Start your journey of creating wealth today by subscribing to Financial Intelligence

Until next time,
Barry Page

Give the Gift of Financial Education to Graduates

It’s an exciting time for seniors everywhere as they graduate from High School and College. And, as we celebrate their accomplishments, gifts are an important way for us to contribute. It can be a good time to offer a gift to graduates who are about to take a big step into the real world.

Many graduates will enter the work world and others will continue on with their education, but chances are whatever they do they are not financially prepared. As important as their academic education is, their financial education is questionably the most important in securing their future.

So, how can you give a gift to a graduate that shows your love and caring for them while also pleasing the recipient? Sure a nice sports car or some cash would be pleasing, but what does that say to them as they are entering a world where debt and lack of savings runs rampant? It could be that they have earned these special gifts and now is the time to reward, but another gift may be more appropriate.

With that in mind, a gift that promotes financial education may be better suited for a recent graduate entering the cruel world. Here are a few financially intelligent gift ideas for high school or college graduates that will prepare them for a lifetime of financial success.

1. Publication - Many authors offer books, games and audio/video publications that can prepare anyone for today’s fast-paced world. A few of my favorites are George Clason, Napoleon Hill and Zig Ziglar, to name a few. Their publications provide a variety of knowledge from Biblical guidance to modern day wealth creation. Their books also provide a multitude of information and advice for building a solid financial foundation.

2. Training Seminar – A real estate, entrepreneurship, or similar financial seminar taught by a respected speaker such as Robert Kiyosaki, will provide a lasting impression on a young mind that will last a lifetime. At the seminar they will most likely meet others who are ambitious, and this could be encouraging to a budding entrepreneur. Many seminars are primarily sales pitches to sell products, so make sure you choose one that is educational in content.

3. Whole Life Insurance – While on the surface this may sound unimportant to a young person that is healthy, but it will provide a lifetime of financial stability while providing guaranteed security. Permanent, investment grade life insurance can also contribute to the graduate's continuing education in the future, or for the education of their children. It could also be used for many other financial obligations, or as a loan to purchase a car or home. Primarily they will be protected from unexpected loss or illness, and by showing them how life insurance can be used as a financial tool, you can share with them a gift that will keep on giving.

To learn more about financial gifting to graduates read our newsletter Gifting to Young Adults

Give the gift of Financial Education, subscribe graduates to Financial Intelligence

Compare Your Life Insurance Options

Life Insurance Comparison of Term and Whole Life

Discover if whole life insurance is right for you. Are you wondering what to do when it comes to purchasing life insurance? Losing someone you love is always difficult, but emotional struggles don't have to be compounded by financial difficulties.

Life insurance secures your loved ones future. Life insurance provides tax-free cash benefits, in most cases, to your heirs after your death. This cash (known as the death benefit) can help to replace your income and can secure your family's financial needs.

Typically, Whole Life Insurance has premiums that remain fixed for the life of the policy. A part of the premium is used to accumulate a guaranteed cash value thus adding a savings element. Dividends, which are not guaranteed, may also increase policy cash value. The policy remains in force during the insured's entire lifetime, provided premiums are paid as specified in the policy.

Term insurance is, as it suggests, for a given term. Usually 10, 15, 20 and 30 year terms are available. As you get older the companies will only write policies with shorter terms. The death benefit will disappear when your term expires, or if you renew will increase dramatically. While term insurance provides excellent savings benefits for a short period of time, it is not a long-term solution. The lost opportunity costs and potential loss of the death benefit are the main vulnerabilities.

When deciding between whole-life and term you have to ask yourself if you want to rent or own? With term you are renting and with whole-life you own. While many insurance agents only talk about the death benefit, they seldom ever discuss how many death claims are actually paid on term insurance. This is the biggest reason why term insurance is cheap.

Permanent or whole life insurance can also provide a living benefit. Part of your premium goes into a cash reserve and accumulates tax-deferred. You can generally access this cash reserve at any time for many purposes including critical illness or loans. It can also be used for many other needs like education expenses and retirement income.

Bottom line, whole-life insurance will be there for you and your family, as long as premiums are paid, for your entire life. When considering Life Insurance, speak to a professional and make sure you consider things like retirement, taxes, inflation and your estate.

For more information please visit www.legacyinsuranceagency.com
------------------------------------------------------------------------------------------------Written by: Barry Page President, Legacy Insurance Agency, PLLC Ocean Springs, MS 39564 Barry Page is a licensed insurance agent. (c) Copyright 2007 www.legacyinsuranceagency.com

Personal Finance and Insurance

Learn tips, tricks and strategies for success in with your personal finances. Personal insurance is essential in protecting your assets, income and life.

Learn more at www.legacyinsuranceagency.com