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Four Rules Of Thumb That Are Thumbs Down

For many years I have seen articles galore in the major magazines giving consumers “rules of thumb” about making financial decisions.   In a society today where we want to get all of our information in sixty seconds or less, many of these magazines can talk one week about five dollar meals to make and then the next week discuss major financial decisions to make in your household.   I’ve never really been a big fan of “rules of thumb”, so here are four major financial “rules of thumb” that I am simply thumbs down on when it comes to making smart money moves.  Rule Of Thumb #1- 2% Difference In Interest Rate To Refinance –   Many popular magazine and newspaper articles will suggest that you generally shouldn’t consider refinancing unless the difference between the new interest rate and your old interest rate is 2%.    This “rule” makes very little sense to me. What you want to be considering are a handful ...

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Should You Sell Your Business Now?

If you have owned a business for a long period of time and were considering selling, 2012 may be year for you find a buyer to take over your shop.   The Presidential election and many open tax patches/increases loom on the horizon in 2013 which could alter tax rates substantially.   2012 could actually prove to be a much more a favorable year to play let’s make a deal for your business.  Here are four reasons to consider selling your business now. 1.) Historically low capital gain rates –   Currently, we have long term capital gain rate of 15% on most items.    It has been very uncertain where this rate will head in 2012, but 20% at a minimum has been the number thrown about over the past year.    If that occurs in 2013, it will represent a 33.33% increase in your capital gains tax.   The Government will spin it as if it is only a 5% increase, but in really ...

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Student Loans: Use Your Cash Or Take The Loan?

At Your Smart Money Moves, we get questions that we get from clients, through the website, or others that I see on the internet.   Here is a great one I recently came across around student loans. Q: I have about $40,000 saved up with an additional $6,000 in liquid assets that I am using as my emergency fund.  I’m attending graduate school, which will cost me about $50,000 by the time it’s over.  I will be working full time for the years of graduate school, so I believe that I will be able to save the extra $10,000 by the time I need to pay for it.    Should I pay the tuition out of pocket, or take out a low interest student loan at 5%?   I may be wanting to put a down payment on a house in the next five years, but I don’t want to begin accruing interest on student loans that I don’t necessarily have to incur. ...

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5 Questions To Ask Before Refinancing?

With interest rates being incredibly low, I have been asked the question over and over the past several months about whether or not it is a good idea to refinance a home. Here are 5 questions I would consider before taking the plunge to refinance. 1)  How long do I plan to live in the home? Since most people don’t live a home for 30 years, you generally don’t see mortgages taken out on a home actually complete their full 30 year (or 15 year) cycles.  Since there are so many variations of mortgages today, (i.e.- ARM’s, 5/1, 15 year, 30 year), it is important to make a determination first on how long you think you will live in your current home. 2) What are the costs to refinance my home? There is no so thing as a free lunch. If you choose to refinance your home, there will be costs associated with making that transaction. You will have a ...

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What a GRAT trust to fund before 2010 ends!

Who knows where the estate tax limits will fall in 2011.  It might be 1 million or 3.5 million or higher depending on how the legislators settle on this issue. Meanwhile, back at the ranch, Congress is trying to put limits on a popular trust families have used for years to avoid the estate tax. Since this type of trust works best at times when interest rates are low and asset values are depressed, we are urging high net worth clients to look at setting one of these up before Congress decides to make these trusts look like a rainy day in the tax world. This type of trust is known as a GRAT or grantor-retained annuity trust, which allows people to give a portion of an asset’s future profits to heirs tax-free. The trusts we have found can be very popular for clients who have a family business that is expected to increase in value or may have stock ...

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