Helps to End Gender Discrimination
Right now, too many women pay more for coverage just because of their gender. For instance, a healthy 22-year-old woman can be charged premiums 50 percent higher than a 22-year-old man simply because she is a woman. In addition, in many states, being a victim of domestic violence can be considered a pre-existing condition, and used to either restrict or deny coverage to women and their children. The health care reform law will end this gender discrimination and prevent any insurance company from denying coverage based on medical history.

Promotes Preventive Care
Twenty percent of American women over the age of 50 went without mammograms over the last two years. Younger women are often denied maternity coverage and benefits in the individual insurance market, even though a small investment in prenatal care can make a huge difference. The new health care reform law covers preventive care, including maternity benefits, which will create a system that encourages prevention and promotes better overall health.

Extends Coverage to More Young Adults
Starting this year, young Americans will be allowed to remain on their parents’ health insurance coverage until they turn 26. And since young adults often change jobs, move, or hold part-time jobs, the creation of health insurance exchanges in 2014 will help ensure they always have access to high-quality, affordable health insurance choices, no matter their employment status. The exchanges will make it easier to decide which plan is right for them by providing easy-to-understand information so they can easily compare prices, benefits and performance of health plans.

Reforms the Federal Student Loan System
Along with the health care reform law, significant reform of the federal student loan system was also signed into law. The new law now requires all federal student loans to be issued through the existing Direct Loan program later this year. This reform eliminates handouts to banks and lenders, streamlining federal student loans and saving taxpayers nearly $61 billion in the process. These savings will go toward a number of priorities, including paying down the deficit and boosting the Pell Grant program, which gives critical grant assistance to young Americans to pursue higher education.

It is one of the easiest (I’m talking third grade math here) ways to stay on track to reach your financial goals. A solid budget is really the foundation of any financial plan.

Most people think having a budget means you can’t have any fun with your money, which is not true. Having a budget simply means you understand where your money is going. Once you understand where your money is going, you then have a basis for future financial decisions.

A budget is like a roadmap (or if you’re like me, a GPS system you can’t get anywhere without!). You can drive in circles all you want, but if you don’t stop and ask for directions, you’ll go through the woods and over the bridge and end up on the wrong side of the track . . . and without any money.

If you can add and subtract, you can make a budget. With today’s technology there are tools that make this process even faster and simpler.

Letting Excel do the Work:

Using Excel, you can easily keep track of information you’ll need for a basic budget. Begin by labeling your top columns as follows: Expenses and Amount.

From here, begin labeling your vertical columns with typical monthly expenses. My suggestion is to keep it simple. Although a budget should be precise, we don’t want to list every little expense. This would be energy and time deficient and it’s likely one would quit keeping up with it.

Start by listing the basic bills you know you will be paying each month such as rent/mortgage, utilities, car, student loan and credit card payments, gasoline (a growing part of everyone’s budget!), insurance, cable, phone and internet. Don’t forget to include food, clothing, savings, travel expenses, entertainment and miscellaneous. An example of our budget so far might look like this:

It’s important to realize you should customize your own budget. Your budget and your friend’s budget are not going to be the same. For example, if you spend a lot of money at the vet for precious little Spot, that’s something you’d want to include in your budget. Or if you practice Yoga three times a week at $25 a pose, that should be included.

Each month, take the time to fill out the amount you spend in each column. This can be done retroactively, or you can use this same spreadsheet to project monthly budgetary goals. In our case, let’s assume we are doing it retroactively. It might look like this:

Lastly, we want to add all of our expenses together to find the total. If you have entered all the data into Excel this is as easy as clicking some buttons! Click on the box underneath our last entry of $350 for miscellaneous items. From there, click the auto sum button (which looks like a Sigma). Then press enter. Voila! We now have our grand total:

Online Bank Statements: Our Friends!

Another budgeting tool to use is online bank statements to keep track of expenses. If, for example, you use one bank account to pay all of your expenses and bills, your statement itself can be used as, or incorporated with, a budget. This is a great starting point to getting your finances in order. It is also very accurate and detailed which will produce a precise budget.

If you have multiple bank accounts and credit card statements, printing these at the end of each month and reviewing them can also serve as a budgeting tool.

Online bill pay will also allow you to save on postage costs, which means more money left over!

So I have a Budget: Now What?

Remember when I said making a budget is easy? Well it is. The hard part is implementing action steps in result of your budget. Budgeting is an active process. One that needs review and determination. If you’re not willing to execute needed changes in result of preparing a budget, then it’s not worth any more than the paper you printed it on.

Implementing a budget simply means learning from it and using it as a guide. For example, after reviewing a few months worth of budgets you might be surprised to see you’ve spent $150 a month on lattes. Or you might find that while you are spending $400 on entertainment and clothes, you really haven’t been paying as much as you should toward credit card debt or savings.

Preparing a budget can also be a good way to spot excessive costs and ways to cut back. For example, after preparing our budget at home, I discovered we were over paying for our trash pick-up. Since we have a homeowner’s association in our neighborhood, we receive discount service. Had I not looked over our budget, I would never have identified this error.

Your Budget, Your Dreams:

Your budget says a lot about you. What you spend your money on is, in a way, a reflection of your values. When you take an objective look at your budget, do you like what you see? If so, keep up the good work! If not, tailor your lifestyle and budget to reflect what you think is important.

Once your budget is defined, write down realistic financial goals you hope to accomplish in the short and long term. Subtract your monthly income by your monthly expenses (identified through the use of budgeting) to see what is left over. This “leftover” money can serve as a piggy bank for your dreams.

Dedicate your piggybank money to your goals, whatever they might be: paying down debt, saving for retirement, buying a home or vacation home, or taking a family trip. Continue to find ways to make your budget work for you . . . not the other way around.

As with anything in life, perfecting your budget will take practice. There is no better starting point to financial success than a sound and basic budget.

“Saving” is setting money aside in a secure location for a certain need or desire.

“Investing” entails putting money to work towards achieving a financial goal with the possibility of generating return.

As an investor, it is of utmost importance to be able to answer certain fundamental questions: Will your current investment portfolio be able to meet both short- and long-term investment objectives? Is your current portfolio correctly geared to your individual level of tolerance for risk?

One sound way to answer these questions is by utilizing asset allocation—a disciplined, objective investment game plan that will help you meet your financial goals. Many financial professionals believe the asset allocation decision is the most important step in the investment process. To be most effective, a personal asset allocation model should be tailored to your particular goals and needs.

A simple asset allocation model for an individual investor generally requires a portfolio of assets divided into three categories—stocks, bonds and cash. Each is assigned a fixed percentage. Based on this strategy, a conservative portfolio would generally contain more bonds and cash than stocks. A more aggressive portfolio might contain a higher percentage of stocks. Since diversification of assets is generally recognized as a way to potentially reduce and manage risk in a portfolio, the mix of assets in your allocation model should reflect your preferred level of risk. Considerations such as current spending requirements, tax implications and inflation-adjusted return may also be addressed through the asset allocation process.

Asset allocation is flexible and revolves around personal needs.
However, professional financial advisors have generally found that investors at various age levels tend to be best served by adopting allocation models that address the needs of their “life-cycle phase”. In most cases, the longer your investment time horizon, the more aggressive your investment strategy might be.

For example, investors in their 30’s and 40’s tend to have several needs and concerns in common (e.g., children, new home, college education, retirement planning). To address these concerns, an asset allocation plan that emphasizes stocks is often recommended because they historically have provided superior returns over time, even though past performance may not be indicative of future results. At the other end of the spectrum are investors who are close to or who have entered into retirement. Their goal might include providing enough income to maintain a lifestyle, or growth of their capital to ensure that they do not outlive their assets. For these investors an above-average holding in bonds may be recommended.

Obviously, these are guidelines. When implementing as asset allocation strategy, the various percentages allocated to stocks, bonds and cash should be assessed on a personal basis and reassessed annually. Be sure to check with your financial advisor regularly on your asset allocation strategy.

Asset allocation and diversification do not guarantee a profit or protect against a loss.

Kenneth J. Wolfe, CRPS®
Financial Advisor
Raymond James Financial Services, Inc
500 Elm Grove Rd. Suite 108
Elm Grove, WI 53122
Ph: (262) 782-5900 ext 102 Fax: (262) 782-5950
Website: KJWOLFE.COM
Member FINRA/SIPC

This material was prepared by Raymond James for use by Kenneth J. Wolfe, CRPS of Raymond James Financial, Member New York Stock Exchange/SIPC Member FINRA/SIPC).

Some Basic Decisions
Your employer-sponsored retirement plan is likely to be a key component of your retirement strategy. Because it represents a key source of future retirement income, it is important to carefully consider your alternatives for administering these assets. During a job transition, you will usually have three options: take a lump sum distribution, leave your assets in the employer-sponsored plan or move your assets into a Rollover IRA.

Taking a direct, lump sum distribution—With this option, the assets in your plan are distributed directly to you in a lump sum, which provides you with immediate access to your funds. Depending on your short-term needs, that may appear to be an attractive alternative. However, a distribution will likely result in substantial federal and state income taxes and a 10% IRS penalty tax, which can significantly reduce the amount of the distribution. Because you will be receiving the distribution directly, the plan administrator must withhold up to 20% of the value of the distribution for federal income tax purposes. Moreover, you will lose the benefit of the tax-deferred status of these assets, which could reduce the amount ultimately available to you at retirement.

The status quo option—You can decide to do nothing, leaving your assets in your former employer’s plan. That will protect the tax-deferred status of your assets and allow you to transfer the account assets at a later time to a new employer’s retirement plan that accepts rollovers. But you may be limiting your investment choices and control because employer plans typically have a restricted investment menu and require the consent of your spouse before you can name someone else as a beneficiary.

Establishing a Rollover IRA—A Rollover IRA simultaneously addresses the issues of taxation, flexibility and control, and may hold significant benefits for you as a result:
• If your distribution is transferred directly to a custodian, rather than to you, the Rollover IRA eliminates the withholding requirement and penalties that may result from a lump sum distribution.
• The entire rollover amount can be invested immediately, according to the strategy you specify.
• Your assets and any earnings continue to have the potential to grow tax-deferred until you retire and begin taking withdrawals.
• You may gain access to a wider range of investment options and more retirement planning and distribution flexibility.
• You can name any beneficiary, including a trust, without needing the consent of your spouse (although special rules may apply in community property states).

For example, investment products in an employer plan are usually limited to mutual funds and company stock. With a self-directed Rollover IRA, you can work with your financial professional to structure a portfolio using stocks, bonds, annuities and other investments utilizing an asset allocation* that is customized to help you meet your retirement investment objectives. And your retirement strategy can be further tailored with a wider range of beneficiary selection and distribution choices.

Consider Consolidation
This may also be an excellent time to deal with multiple IRAs you may have opened over the years, and with account balances you may have left in the plans of former employers. Together, these assets may represent a significant sum. There are good reasons to consider consolidating them all in a Rollover IRA:

• Comprehensive investment strategy—It can be difficult to maintain an effective investment strategy—one that accurately reflects your goals, timing and risk tolerance—when assets are spread among multiple financial institutions. When you consolidate, your financial professional can help you ensure that these assets are part of your overall asset allocation strategy that is reflective of your current financial situation and long-term retirement goals.
• Greater investment flexibility—A self-directed IRA generally offers you the ability to choose from a wide range of investment products, including stocks, bonds, mutual funds, annuities and more.
• Simplified tracking—It is easier to monitor your progress and investment results when all your retirement savings are in one place, because you will receive one statement instead of several. That simplifies your life while protecting the environment.
• Lower costs—Reducing the number of accounts may also reduce your account fees and other investment-related charges.

Dealing with one account rather than several also simplifies the distribution process—including complying with complex minimum distribution rules when you reach age 70½.** And you avoid the risk of losing track of your retirement accounts or access to the account assets should your former employer merge with another company or go out of business. Your financial professional can help you assess your alternatives so you can make decisions based on what’s best for you. You may find that this time of transition holds benefits for your retirement assets.

Debra Melvin is a Financial Advisor at Morgan Stanley Smith Barney located in Milwaukee, WI and may be reached at 414-226-3128 or http://fa.smithbarney.com/debramelvin.

* Asset Allocation does not assure a profit or protect against loss in declining financial markets.

** The 50% tax penalty for not withdrawing a required minimum distribution for the 2009 tax year has been suspended. However, individuals who attained age 70½ in 2008 must take their initial required minimum distribution not later than April 1, 2009.

Morgan Stanley Smith Barney LLC and its affiliates do not provide tax or legal advice. To the extent that this material or any attachment concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.

© 2009 Morgan Stanley Smith Barney LLC. Member SIPC.

The current state of the real estate market is a confusing one so you are definitely not alone. REAL ESTATE IS VERY LOCATION DEPENDENT. I can’t say that enough. When you read the USA Today article that states real estate prices have dropped dramatically, please take it with a grain of salt. It is always important to consider national trends but real estate prices/sales can drop 40% in a certain city and increase 10% in another. The best way to find out what your city’s current conditions would be to contact your local realtor for location specific trends and price changes.

POSITIVE TRENDS:
• Existing-home sales surged 10.1 percent in October from September and are 23.5 percent above the level in October 2008. Sales activity is at the highest pace since February 2007. So things are looking up.
• Another good sign is that inventory fell 3.7 percent in October from September. Low inventory means that there are fewer homes for sale on the market, which in turn causes more competition and higher sales prices.
• 30-year fixed-rate mortgages are near record breaking low levels. This is great for buyers because you can afford a much higher priced home on the same budget.
• The first-time homeowner government credit of $8000 was extended. The IRS defines a first-time homebuyer as someone who has not owned a principal residence during the three-year period prior to the purchase. It also was extended to owners who have lived in their previous home for five consecutive years out of the last eight ($6500). It applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. The credit is not taxed and is basically an additional $8000 add-on to your income tax returns. There are income restrictions on the credit so please check with your mortgage broker to make sure you qualify.

NEGATIVE TRENDS:
• The Mortgage Bankers Association reported that a record number of loans—1 in 7 are delinquent. Up from 1 in 10 a year ago. Our economy over the past 2 years has weighed heavily on homeowners who have lost income or jobs so many homeowners have not been able to keep up with loans.
• The national median existing-home price for all housing types was down 7.1 percent from October 2008. Distressed properties, which accounted for 30 percent of sales in October continue to downwardly distort the median price because they usually sell at a discount relative to traditional homes in the same area.

Again, take the national statistics that I stated above as general trends. Each city/state will have very different statistics. But the general national trends all point toward a leveling off if not upward trend in total number of sales. Once the foreclosures start to level off, decreased levels of distressed homes are sold, and inventories continue to hover at low levels, the prices of homes will start to increase again. The next 6-12 months will be a great time to buy. Especially as interest rates are continuing to stay at historically low levels. These conditions will not last forever and many mortgage brokers that I speak with warn that home interest rates will start to get much higher in the near future.

FORECLOSURE VS. SHORT SALE

Foreclosure is the legal proceeding in which a homeowner obtains a court ordered termination of their right to possess the home. A short sale is the sale of real estate in which the sale proceeds fall short of the balance owed on the property’s loan.

If you a seller, you will want to do everything you can to sell your home through a short-sale process rather than through a foreclosure. Here are a few benefits for doing a short sale.
• You are in charge of the sale, not the bank. But you do need approval from the bank to proceed.
• You can be current on your payments and still sell through a short sale
• Your home sale will be handled like any other home sale
• After foreclosure, it can take 5-7 years before you can purchase another home. In some situations, you are able to purchase a home immediately after a short sale.
• Effects on your credit score after a short sale can be 50 to 130 points. Effects after a foreclosure can be 200-400 points.

If you are a buyer, there are also many differences between the two. Working with a short sale is very similar to working with any ordinary for-sale home. You might get a better “deal” because the owner has the ability to sell the home for less than they owe the bank, but that does not mean the bank will give it away. The short sale process is more straightforward than working with foreclosed properties.

Buying foreclosed properties can be a very complicated process. You are negotiating with a bank so it can sometimes take up to 3-4 months to even get an answer to your first offer. Closing timeframes can take many, many months. Cash is king. A cash buyer, or buyer paying mostly cash, will be a lot more attractive to the bank even if the offer is lower. Nothing is guaranteed in a foreclosure. So if the bank verbally accepts your offer and they receive a higher offer within the next few months, they can and will back out given they have legal rights to do so.

My suggestion when working with foreclosed properties is to always, always perform a very thorough inspection. Foreclosed properties are sold “As-Is” so the bank will not put any money into repairing or fixing them up. Many times these homes are left damaged by the owner or tenant who previously lived there. Also, many homes have been neglected for many months or years on end. I also highly recommend working closely with a real estate attorney who has experience with foreclosed properties so they can ensure that the bank is following through on their agreements.

When buying foreclosed properties, make sure you have the time and patience to go through the entire process. You should also expect that you will need to do some work to get the home back into living condition. There are many “deals” to be had in the foreclosure process but you must have patience and time.

TAX INCENTIVE FOR HOMEOWNERS
There are many tax incentives for homeowners and that is one of the big reasons you should consider purchasing a home if you have the resources. Please talk to a qualified tax attorney to find out the individual benefits that apply to you but here is an outline of what you can expect.

• Mortgage Interest—This is your biggest tax break. All the interest you pay throughout your loan is deductible. In the first years of owning a home, the majority of your loan payment will be paying off interest.
• Points—To lower your interest rate, some homeowners will pay money up front. The amount of points you pay is deductible. This is a little less common these days because interest rates are dramatically low.
• Taxes—Most homeowners will pay property taxes (included in the monthly loan payment) into an escrow account. This escrow account will be used to pay your property taxes for the year. These taxes will be an annual deduction as long as you own your home.
• When you sell—When you decide to move up to a bigger home, you will be able to avoid some taxes on the profit you make.

There are also many tax incentives that are offered on a city/local basis that you can apply for that will help once your taxes are due. One recent tax incentive that was put into place revolves around Eco-Friendly construction. If your home was built with a certain number and standard of ENERGY-STAR windows, doors, etc. you can apply for a tax break.

That wraps up my three-part series of explaining the entire home buying process. Although this can look like a long, complicated process from a distance, it can be greatly simplified by using the resources of qualified professionals within the real estate world. I hope this has helped provide an example of the process from beginning to end and gave you some good tips to follow along the way.

If you have any real estate questions and/or are interested in starting a search, please contact me through my website at www.CondoMeNow.com or by email James Weber at jweb@heliosrealty.com

HAPPY HOUSE HUNTING!

The Walk-through ~ Is it the perfect place for you?

Depending on where you are searching and how close the properties are to each other, I recommend scheduling your viewings in two hour increments.

Obviously this will vary per situation but when you start seeing numerous properties in one session, they will all start blending together by the end of your day. Bring a pen and paper if your realtor doesn’t provide you listing sheets. Take notes on each property relating to the condition of the property, size of bedrooms, condition of flooring, and if anything stood out so you can remember the condo/home. By the end of your showings you will be glad that you took these notes. Take a few minutes to go over your notes when you get done and if possible, transfer these notes to the website you and your realtor are sharing so he/she can view them down the line.

I always tell my clients that this is the “weeding out” phase. It will be very unlikely that you will make a final decision after only seeing the property once, so the initial phase of looking at properties is to eliminate the ones that will definitely not work for you. This process is going to be a very emotional process so every good realtor will point out certain things that you might over-look. I am always looking at characteristics from a re-sale standpoint because your first home purchase will likely not be your last. How much light does the condo get? Are the room sizes too small? What type of condition is the building in (if it is a condo)?

Every situation is different but one of the things you will want to ask yourself when starting your search is whether you will want to do any repairs down the line. Some people want to move into a “fixer-upper” and others will want a move-in ready home. If you are looking to make repairs try to evaluate how much time and money you will need to invest to make the home livable.

The amount of homes that you end up looking at will vary from market to market but the average client I work with will view around 20-30 homes before we start setting up second showings.

Second Showings ~ Checking out your maybe’s

Once you weed out the “No’s” I start scheduling second showings. This is where you will want to start paying attention to the small things. I would suggest viewing it at a different time during the day than you originally did. Especially if you saw the home/condo during the evening because you will want to see what type of lighting you will receive during the daytime.

Condo Considerations

A more important issue you will encounter when purchasing a condo in a mid/high rise is the health of the condo building itself. Most realtors will do this research for you but you will want to know how much money the condo association has in its reserve fund. It will be important to find out when the major structural elements have last been replaced. Major structural elements include the roof, tuck pointing, windows, and mechanicals. When buildings take on these major projects, the tenants of the building will pay for them if the building doesn’t have sufficient reserve funds to pay upfront. I have seen these projects cost owners thousands of dollars down the line.

After you narrow down your search to one property, you and your realtor will sit down to discuss the market value of the home. The most important thing when determining market value is the price of the most recent sale(s). In a perfect world, the best comparable property would be a condo in the same tier (same layout and dimensions), with the same exact finishes, one floor higher or lower that sold yesterday. Because this will be uncommon, your realtor will do their best to find the most similar properties in the same location, which have closed within the past few months. Although current, active listings can help, they are not a true representation of market value because they could be priced incorrectly (high or low). Your realtor will sit you down and will explain the differences between each property and the one you are interested in. After noting the differences and assigning a value to each difference, your realtor will suggest a market value for you to consider when negotiating.

Bidding and Negotiating on your first home

The next step will be submitting your first offer and negotiating the important points within the contract. Everything is negotiable so if you can’t get the exact price you were aiming for, maybe you can get a closing date that works best for you or a possible seller credit that will help you pay for closing costs. It is a give and take process from both sides so some things more important to you might not be for the seller. Before calling it a day and giving up on the negotiations, make sure you discuss each point to see if something can be mutually beneficial.

Most cities/towns/states will have a standard contract that most offers are submitted on. A few important sections within most real estate contracts are earnest money, mortgage contingency, closing date, attorney approval period and inspection period. Your realtor will explain these in more detail but here is a quick explanation of each.

The Vocab you need to know!

• Earnest money can be described as a good faith deposit. It is offered to the seller as a monetary promise that you are doing everything in your ability to close on their home. Earnest money can vary from $1000-10% of the purchase price. If you do not uphold the contractual end of your agreement, you are liable to lose this earnest money.
• The mortgage contingency is a provision that says that if the prospective buyer can’t get a mortgage within a fixed period of time, he/she can call the deal off. A lot of the time the mortgage contingency will have a provision that the seller can find the buyer a mortgage on their own (within certain mortgage interest rates and terms) if the buyer says they cannot find one.
• The closing date will be the perfect world scenario for you. I suggest picking a date at least 30-45 days after you submit the initial offer. This will give your mortgage broker the necessary time to secure the loan for you. The closing date can vary greatly depending on your situation and that of the seller. There are monetary penalties for both the seller and buyer if this closing date is not met.
• The attorney approval period is usually 7-10 business days from when the offer is accepted. This will give both attorneys time to discuss legal matters. It also allows the attorney to cancel the contract or request it be altered. During this period, either party may void the contract without penalty in most cases. You will want to conduct your home inspection during this timeframe as well. If a large/expensive issue comes up during the inspection, you will want the ability to get out of this contract penalty free if you cannot agree on a monetary solution. It is very IMPORTANT to choose a “real estate” attorney in most states. The real estate laws are very complicated and you do not want to leave it in the hands of an attorney who is not familiar with real estate law. If you do not know a real estate attorney, have your realtor refer one.
• The inspection period is also a very important one and is usually 7-10 business days. I recommend that all my clients hire a licensed home inspector. This is more important in older buildings but I recommend it even if the property is brand new. There are so many things that can go unnoticed without hiring a licensed inspector. They will inspect the appliances, electrical outlets, mechanicals (HVAC and water heaters), roof, common elements, etc. A good inspector will also teach you how and when to perform routine maintenance and give you a bunch of useful hints/tips on how to keep your home running efficiently. I suggest taking notes during the inspection.

After the inspection has been performed to both party’s likings and both attorneys’ sign off on the attorney approval period, your work is almost done. It will now be in the hands of the mortgage broker to gather the necessary documents, set up the home appraisal and secure the mortgage before the closing date. In today’s mortgage environment, be prepared to supply any and all documents to your mortgage broker. It may seem annoying and time consuming but in lieu of the high amount of mortgage fraud over the past few years, banks want to do everything they can to ensure they are loaning money to someone who can make payments on this home/condo. The quicker you can provide these documents, the smoother and quicker your loan commitment will come.

Assuming your mortgage broker is on top of everything and the loan commitment has come in before your closing date, all you will need to do is show up at the closing location and be ready to give your signature hand a good workout. In most states, your attorney will walk you through each document and tell you the importance, or lack of importance, of each one. This is another reason you will want to hire a good real estate attorney.

Once you have signed the necessary documents and the funds have been transferred to the respective banking accounts, you will be handed the keys to your home. This might seem overwhelming and a lot of work, but good realtors will make this entire process painless for you. If you surround yourself with the best professionals available (realtor, mortgage broker and attorney), the process will be an enjoyable one you will remember forever. Good luck with the move in!

In the final part of the series I will discuss the current state of the market, foreclosures, short-sales, and tax incentives to owning a home. If you have any real estate questions and/or are interested in starting a search, please contact me through my website at www.CondoMeNow.com or by email at jweb@heliosrealty.com.

These are a few of the questions that will be spinning around in your head as you begin taking your first few steps. I always look at these matters and explain to my clients its all about balance. What is important is finding a way of saving that gives you flexibility, while being relatively simple to get started. Before we can discuss diversification we will need to determine what and how we will be funding. You will first want to take a long hard look at the benefits your employer is providing. This typically will be a great beginning to exploring your options.

Benefits Puzzle–What’s a 401(k)?
When you started your new job, the human resources person gave you a packet of information that contained everything from health insurance, tax withholding, life insurance coverage . . . all of the benefits you can take advantage of through your employer. Somewhere in the packet was information on the Company Retirement Plan called a 401(k), if your employer is offering one (most medium to large size companies will have one). As you begin by thinking . . . ’what the heck is this 401(k) business and why do I care?’ A 401(k) plan is an employer sponsored retirement plan that allows you to save money for retirement and depending on the type of 401(k) the money you save is PRE-TAX (for our purposes I will assume your employer is offering a traditional 401(k)). This means you are not taxed on the money as you are putting it away for the future. Of course in the future when you withdraw those dollars you will have to pay taxes. This then depends on your employer, but you may have to wait for a period of time before you can enroll, others allow you to start saving money right away. Regardless, the money you defer from your checks is always yours for the future.

Now that you have done your budget (see article on Stash Your Cash) and determined you can save 10% of your income (for 2009 the maximum for individuals under age 50 is $16,500 of income deferral into the 401(k)) so what is the best place for doing this? Again, this is where a little bit of balance helps. If your employer is matching your contributions $0.50 on every dollar up to 5% it is an absolute no brainer to contribute a minimum of 5% to the 401(k) plan. So you are getting the equivalent of 7.5% savings by deferring only 5%. Many employers will have a period of time you have to work there before these ‘matching’ dollars are yours; this is referred to as the vesting period and varies. Never . . . ever . . . leave free money on the table.

Roth IRA
So where do I put the other 5% of my earned income? Now, your approach to this becomes a little more subjective, but if you follow my example the next applies nicely. If you are tax savvy, or have a friend who is a CPA and you realize that by adding another 1% into the 401(k) it drops you down a tax bracket, then by all means do so. However, if this either doesn’t matter or is not the case I would typically recommend setting up a Roth IRA. IRA stands for Individual Retirement Account. Look at it from this perspective; 401(k)’s, IRA’s, Roth IRA’s and many of the other types of accounts you can fund are SIMPLY CONTAINERS . . . I view them like martini glasses, if you choose to put a cosmo in them that is fine, if you choose to put Grey Goose in them that is fine as well, so just remember when I refer to the TYPE of account remember it’s the container . . . let’s not get into which type of drink your palate prefers.

Tax-free Savings for Your Future
When we discuss asset allocation we can address that matter in more depth in my next article. Ok, so maybe it’s time to start investing additional monies into your Roth IRA so you have a nice balanced approach. What are the rules and why do I want to do this? Here is how this works; you can ONLY contribute up to $5,000 per year as long as you are under age 50 , and the money grows and compounds tax deferred. At qualified retirement age (currently 59 1/2) and as long as you have held the monies in the account for 5 years your withdrawals are INCOME TAX FREE! So let’s say over 20 years you put $5,000 per year into an account and it’s now worth $200,000 and you are now at an age where you can take withdrawals, you don’t have to PAY ANY TAXES. This is clearly a big deal and should be given great consideration.

There are a few catches that go along with this. The biggest concern is if you are doing well financially. If you earn over $110,000 per year as a single tax filer you are EXEMPT from making contributions to a Roth IRA. However there are other rules that apply here that go beyond the scope of our discussion (I am available via appointment for consultations on these matters). If you are in this arena, there are special considerations that apply and I am more than glad to do an individual consultation to explain some tactics on reducing your income so you can potentially drop to the income range which qualifies for a Roth IRA. By combining these two retirement savings account; The 401(k) Plan and the Roth IRA you can have a great balance in your savings and be well on your way to creating a foundation and planning for your financial future.

In my next series we will take a look at portfolio diversification, which will address the question of what to put in each of these accounts now that you are funding them. We will look to answer your questions on risk tolerance, time frame for certain investments, and asset allocation tactics that will put you in the driver’s seat as you are building your future savings.

The total amount that can be contributed varies depending on income, age, and contributions to other accounts
Special ‘catch-up’ provisions apply to individuals age 50 and older. Amounts could be more or less depending on age and income

This is purely for illustration only and is not indication of any performance, nor a performance guarantee. Investments can and do lose value and previous performance does not guarantee future results.

There are many alternative options and considerations for high income households. This is an area which requires analysis and careful planning to make sure guidelines are followed. Please contact me for a personal consultation.

Kenneth J. Wolfe, CRPS®
Financial Advisor
Raymond James Financial Services, Inc
Member FINRA/SIPC
500 Elm Grove Rd. Suite 108
Elm Grove, WI 53122
262-782-5900 X012

As the nation recovers from the largest credit binge in history, there could hardly be a more apt time for Isla’s chick lit heroine to leap from the paperback pages of Sophie Kinsella’s famous series of novels and onto the silver screen. After all, in 2009 frugal is fashionable, saving is sexy and staying out of the red is the new black.

Whether you’re stressed about mounting bills, or drowning in a sea of debt, you’re not alone. According to the Federal Reserve, consumer debt totaled $2.57 trillion in November 2008. (Source www.federalreserve.gov)

Find out how you can kick-start a credit management plan as Braun Mincher, financial expert and author of The Secrets of Money: Practical Financial Literacy, and Maria Thompson, debt counselor with the California-based non-profit organization, Springboard, offer advice for debt dieters and credit addicts alike.

1. Get Savvy
Braun Mincher: Don’t let credit card marketers control what you know. Take charge, understand which credit cards you have and educate yourself. Websites like www.cardratings.com make it easy to compare credit card interest rates, terms, conditions and benefits like cash back or rewards.
Maria Thompson: Always read your credit card’s terms and conditions. Even if you’re “pre-approved’” for a low interest rate that doesn’t mean you’ll receive it after you have applied.

2. Know the Score
Braun Mincher: Your three-digit credit score is one of the most important numbers you’ll ever be allotted. It doesn’t just determine whether you’ll be approved for a credit card, it will also determine the interest rate and terms of your card. A bad score could cost you thousands of dollars in interest payments. Many states determine car insurance premiums from your credit score, and, recent research has even shown that companies are even using credit scores to make hiring decisions—and not just in careers that involve the handling of money. Although the exact formula for how credit scores are calculated is a guarded secret, about a third of your score comes down to paying bills on time.
Maria Thompson:
Keep your fico (credit) score healthy. No matter how many cards you have, keep the balance at about 50 percent of the credit limit and of course, if you can, pay off your card every month.

3. Ditch Store Cards
Braun Mincher: Store cards offer limited use and higher interest rates which can quickly eclipse whatever introductory savings deal you may have been offered You’ll get better terms and conditions by using a regular credit card.
Maria Thompson: Retail cards are often easy to acquire, but if you’re young or trying to rebuild your credit, a much safer way to get a card is to have a family member co-sign for a credit card with you. Otherwise, if you’re credit-challenged, ask your bank about a secured credit card. You’ll have to pay a deposit on the card before you start spending, but after six months of keeping up with payments and not incurring any late charges, you may be able to negotiate different terms and conditions.

4. Shift your Financial Focus
Braun Mincher: Make credit cards work for you. That means considering credit cards as an emergency resource to purchase unforeseen essentials, not as a way to go out and get a Chanel purse. In this economy it’s time to forget buy now, pay later. Start saving. Put a minimum of 10 percent of your gross pay directly into a 401K or an IRA. In addition, aim to set aside a six-month fund in savings.
Maria Thompson: Always remember that if you’re overspending now, you’re hurting your chances of getting good credit later.

5. Stop the Snowball Effect
Braun Mincher: The first step to paying off multiple credit cards is to assess your situation and commit to living within your means. This may sound harsh, but getting on top of debt really just comes down to cutting your expenses or increasing your income.
Maria Thompson: Look at where you’re overspending so you can budget more for paying off cards. It makes sense that the more you apply to your card’s balance the sooner you can get your debts paid off. By paying the minimum on your card, you could be paying off little more than the interest on your debt for decades and decades.

6. Take Action
Braun Mincher: There are many different strategies for paying off multiple maxed-out credit cards. The most popular tactic is to pay off the card with the highest interest rate first. However, everybody’s situation is different, what is essential is that you come up with a plan you can stick to and change your lifestyle. If you are tempted to pull money from a 401K to pay off credit cards, know that you’ll pay a fee for early withdrawal and taxes. Plus, 401K’s are exempt from bankruptcy.
Maria Thompson: Never try to consolidate a large amount of debt on your own with introductory rate cards. Introductory rates can expire quickly, potentially leaving you with difficult-to-make payments. If you do consolidate debt, create a plan and make sure your debt is small enough for you to manage. Look for the APR (Annual Percentage Rate) to find what you’ll really be paying.

7. Negotiate
Braun Mincher: You have the power to bring down your payments, so start by contacting your credit card company. Call the toll-free number on the card and ask to speak to a supervisor. A great way to start the conversation is to tell them you can get a better rate elsewhere. Remember, your chances of success are greatly increased when you prove you can make your payments on time. Keep up a dialogue and let them know what’s going on.
Maria Thompson: Remember, you can negotiate with collection agencies too. After 120 days of non-payment many card companies sell your debt to a collection agency. It’s very important not to ignore the situation. Instead, set up a payment schedule. You’ll want to do anything you can to keep collection agencies’ actions at phone calls and letters.

8. Know who can help
Braun Mincher: Seek debt counsel. You can pay for a debt acceleration program which creates a payment plan for you by factoring in your individual card rates, income etc . . . but that can be costly. And remember, if it comes to it the only person properly qualified to help you with bankruptcy is a specialized attorney.
Maria Thompson:
Find a debt counselor and be sure they’re associated with a non-profit organization. There are many resources available, The National Foundation for Credit Counseling is the best place to look. To get advice, visit www.NFCC.org, or call 1-800-388-2227.

This is the first part in a three-part series walking you through the entire home/condo buying process. Along the way, I will provide some tips and suggestions that you can follow to ensure a successful transaction and a very happy home purchase. Buying a home is the most important and most expensive purchase most people will make in their lives so going into the process blind is a mistake you will not want to make.

one:

The absolute first thing I recommend 100% of my clients to do is speak with a trusted mortgage broker. If you don’t know of one, ask your friends, family, and colleagues. Anyone you know that has purchased a house in the past few years should be able to recommend one for you. Because of the recent mortgage fraud running through the U.S., make sure that your contact had a positive experience with them. My clients usually speak with at least two mortgage professionals. The mortgage interest rate that is quoted is always important but it will most likely change by the time you find your condo. You should definitely consider the quoted interest rate but choose the broker you feel most comfortable with because interest rates will not fluctuate greatly from broker to broker.

The mortgage broker will ask you questions about your current job, run your credit history, and ask you how much money you are willing to put down as a down payment at closing. All of these things will have a significant impact on the mortgage rate you qualify for. It is very important to speak with a broker early on in the home buying process because if your credit score can be improved or if you know you need to save a little more money before buying, it can positively affect your interest rate and the purchase price of the home/condo you can afford.

two:

Once you have narrowed down a purchase price with your mortgage broker the next step will be finding a location. If you have been living in the city for years and know where you want to buy, choosing a safe location is easy. But if you are new to a city or exploring neighborhoods in your current city there are a few things I suggest to my young professional females to make sure the neighborhood is safe.

• Drive or walk around your neighborhood at different times throughout the morning, day, and evening.
• Test out the public transportation, if it exists. See what the best and fastest routes are to work, grocery stores, and your favorite restaurants.
• Spend a weekend day in that neighborhood so you can test out some local food, entertainment, etc.

three:

When you have narrowed down your price range and location preference, your next step will be to choose a respected realtor to help you find your dream home. I highly recommend asking friends and family for referrals. If someone had a bad experience with an agent, they will never recommend them. Your realtor will most likely set up a time to meet and discuss your complete situation, likes/dislikes, needs, and wants. Along with price range and location, be prepared to answer questions about how long you plan on owning the condo, if you have any preferences of construction (new, vintage, fixer-upper), number of bedrooms/bathrooms, and if you need parking.

Refrain from narrowing down your search too much unless you absolutely need a particular trait in a home. If you can’t go without a washer/dryer in your unit or hardwood floors, tell your realtor. If you think you can either add them at a later date or go without, I would suggest not limiting your search. You would hate to miss a great home because the washer/dryer hasn’t been installed or hardwood floors haven’t been added. You can do all of these improvements at a later date. I would rather have a client see a home without that trait and then rule it out, than never see it at all. All of these questions will help your realtor narrow down your options so that they can find the right home for you.

After the realtor feels they have a good idea of what you are looking for, they will set you up an automated MLS (Multiple Listing Service) home search. All of your parameters (price range, bedroom, bathroom, unit features that are a must, location preference) are entered into a database that runs a few times a week. You will be able to view pictures of the homes, read the description of the properties, make notes, mark your interest level and ask questions from within that database. The realtor will be able to read your comments and answer all your questions from the back end of the system. This search will run from this time until you move into your home. Any new properties to hit the market or any properties that fall into your parameters will be sent to you by email.

This is a great way for you to keep track of all the properties on the market, make notes on the ones you have seen, and eliminate ones you do not like once you have seen them. It is the best way to keep you and your realtor on the same track regarding the condos that might work for you.

I hope that gets you started and in the next part of the series I will discuss finally hitting the pavement with your realtor, negotiating the offer, inspection, attorney approval period and closing. In the final part of the series I will discuss the current state of the market, foreclosures, short-sales, and tax incentives to owning a home.

How much to save:
If you are wondering exactly how much a person should keep in a ‘liquid emergency’ reserve fund a good rule of thumb is to take your monthly take home and multiply that number by 3 to 6 times. I would say that having 6 times is excessive, but for some people this is most appropriate. So after analyzing your monthly expenses you realize that this is going to take quite a bit of time to build up, but if you continue to exercise financial restraint and steer clear of the newest line of Louis Vuitton handbags (or at least initially) it will become second nature to you. Don’t worry about how much is needed as long as you are making a substantial effort on a monthly basis to build up your reserves, it will happen soon enough.

Of course, you don’t want to stop paying on your other obligations so this is where the balance comes in. A well rounded financial plan functions just like a balanced diet. A few of each grouping will go a long way over time to your continued overall financial health.

Student Loan Payments
If you are saddled with a decent amount of student loans I find people asking, ‘which of the student loan repayment plans should I take out?’ I often explain that there are only a few ‘good’ types of debt and having student loans is one of them, and depending on your income the interest may be deductible. (Please consult your tax advisor as the deductibility depends on your current tax scenario) Now, I am not saying you should opt for the 30 year loan repayment plan, but lock in the repayment plan that gives you flexibility and a good set repayment schedule especially if the rate is FIXED and LOW. If you have a variable rate you are going to want to ATTACK these hardest, but don’t lock in a high required payment. It’s got to work with your monthly budget, and we will build a discipline of savings and debt reduction at the same time by using my monthly Income/Outflow Analysis, which I am linking for your use.

Categorizing your expenses
Here is how this works; add up your monthly take home pay and put that on the top left line, then work down the right hand side looking at your TRUE monthly expenses, so for example . . . say I go out with the guys on Thursday or Friday Nights (or sometimes both) and we do dinner and drinks, which we all know gets to be way too expensive to do on a regular basis, but these are TWO SEPARATE categories as if we go to dinner that’s DINING OUT, but then we leave and go to another place to meet up with our lady friends and have a few adult beverages that is another category for GENERAL ENTERTAINMENT. This becomes very confusing and also an accounting nightmare to track UNLESS . . . you keep all of your receipts. Keeping your receipts does two things, it allows you to know what you spent, and reminds you of how much you spent when you blew the budget while having a few tee many martoonies. Even the best of us have done this in one way or another and if we exhibit moderation with whatever it is we spend our monies on we will be able to keep our finances in order and there will be plenty of money.

Savings first!
Remember the idea is to look at savings FIRST, not from what’s left over. So, after we added up all of the expenses we then subtract these from our monthly income and guess what we get our ‘total discretionary monthly income.’ Hopefully this amount is positive and if not . . . THIS IS THE REASON YOU HAVE CREDIT CARD DEBT! If negative, take some time and review the starred areas. These are the areas that you are overdoing it in, and the funny thing is you knew it before you even completed this form. I have heard that thousands of times in working with my clients and this seems to be the common thought here. So here is a bit of advice for those who have these out of control areas . . . figure out an amount each month that you feel allows you to both satisfy your needs in this area, but is not overindulgent and then make one envelope for each of the areas and label it. At the beginning of each month put the amount you have allowed yourself in these areas (again that doesn’t blow the budget) and when it’s gone . . . THAT’S IT! No more spending in this area. Try this technique and in about three months you will find yourself weaned down to a livable pace on spending here.

Now for those of us that have a big positive each month, do the following: go to the bank and open up a savings account. Have the bank take 75%-80% of this amount monthly and put it into this account. For example if my take home is $3,600.00 per month and my total expenses are $2,600.00 my discretionary income is $1,000.00. I will go to the bank, setup a savings account and have them transfer $800.00 per month from my checking over to my savings until I have accumulated roughly $10,800.00 (monthly take home X 3) in savings that I have not touched. Now, if I have credit card debts, or high rate student loans it is completely acceptable to keep going until this amount reaches $21,600.00, but once it hits this amount we are going to hit the ‘purge’ valve and cut a check each 6 months for $10,800.00 to the highest interest card or student loan holder and say goodbye to high interest loans.

I have successfully used this discipline effectively with many clients over the years. By coupling this with a disciplined systematic investment plan you can accumulate FIRST GENERATION wealth. Stay tuned and in my next series we will discuss building a solid financial foundation and how asset allocation works to your advantage.

Kenneth J. Wolfe, CRPS®
Financial Advisor
Raymond James Financial Services, Inc
Member FINRA/SIPC
500 Elm Grove Rd. Suite 108
Elm Grove, WI 53122
262-782-5900 X012