July 31, 2010 A Home Run for George Steinbrenner probably his greatest financial grand slam was to die in 2010 avoiding a 55% Federal Estate Tax and a 16% New York State tax (being a Florida Resident). Financial Talk For Newlyweds Often, I am consulted by newlyweds and young couples as to how to handle their money. It is usually an unsatisfying conversation for the couple since they would like me to pull a rabbit out of the hat and all will be all right in order to solve the distress that brought them to me. Unfortunately, the answer is one of basics, which are ground out day after day. In football, the analogy is that the ground game (which is two yards and a cloud of dust) wins games although the fans want to see the spectacular passing game. According to a survey conducted by the Consumer Credit Counseling Service two out of three married couples consider money a major source of potential conflict in their marriages. The first thing a couple should do is to create a list of short, medium and long-term goals and compare notes (buying a house or car, having children, moving to a new city or starting a business). For each goal, figure out how much money you need to get there and how long you think it should take. Will the two of you maintain separate accounts and divide household expenses or will you maintain separate discretionary accounts with a combined household account? Are you willing to merge all finances? What is your money personality? Create a budget together by checking your past spending history and calculate your past debts. Create a budget, which will let you maximize your income and track your actual cash flow to make sure you are staying within the boundaries you have set for yourselves. Usually, it is a month to month projection of the amounts allocated to each expense item based upon your income. When you make a purchase or pay a bill write it down and subtract it from the total you planned for that expense. Sticking to a budget can be difficult and at times frustrating and there is no guarantee you will see huge savings in the short term, but it still is what you must do. Preferably, go digital and obtain a software package to perform basic budgeting task as well as sophisticated transactions. Keep the budget simple and practical and, above all, be realistic. If you love going to the movies, don’t cut them out entirely; instead cut back on the number of times you go or start a new tradition of movie nights at home. If you are planning to have children, look into some specific tax savings accounts called 529 plans or Coverdell IRAs. If you have the option of saving for retirement through an employer sponsored plan, such as a 401(k), open an account immediately. You can defer a certain amount of your pretax salary into the account. In some cases, your employer will match a portion of your savings. In this way, you have the double advantage of saving money on taxes now and building your retirement account for the future. Be prepared for unexpected events such as a job loss or major household repairs with an emergency account equal to three to six months of expenses. To build up this account, have between 2 and 10% of your paycheck automatically deposited into savings. No Credit For Small Businesses The reason small businesses cannot get bank loans is because there is a federal policy telling banks not to lend to small businesses. Well, they don’t come out and say it like that, what happens is the federal regulator of banks states if you lend to “risky enterprises” and the loans go bad, the bank examiner will recommend the government to take the bank over and liquidate the bank. The government’s definition of a “risky enterprise” is a small business. So, because the bank does not want to be dissolved, it either lends to larger businesses or borrows from the Federal Reserve at 1% and buys Long Term Treasuries at 4%. So when Obama complained that the banks were only lending to large businesses, he was correct. But he was deceitful in not explaining why. What would you do, faced with these facts? As always, if you have any questions about these or any other matters, do not hesitate to call me. Remember, We’re Here For You!!