September 2008 Edition

eFinPLAN.com Taking the Mystery Out of Financial Planning Newsletter

Our goal is to demystify financial planning by providing common sense usable information and easy-to-use financial planning software 

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This Issue…

Home Budgeting Economics      Financial Planning                                  Ideas from other sites

Avoiding Obvious Trips              HSA, MSA, HRA and FSA Accounts       How to Freeze Your Credit

                                                        Preparing for the Great Election          Blog Highlights

Home Budgeting Economics - AVOID GETTING TRIPPED BY THE OBVIOUS

Laura D. Irwin

My husband, Kent has been in the financial services industry for about 25 years. We were having a conversation the other day about how we wish we had had access to a financial plan when we were newlyweds about 24 years ago. We started the conversation by verbally kicking ourselves for any mistakes we have made over the years and how good advice and planning could have helped us avoid them. The more we thought about it, we realized that a financial plan and advice was hard to come by for middle class couples even back then (even for those in the financial services industry) and consumer software didn’t exist to offer alternative help.

After that conversation we came back to why we started eFinPLAN in the first place. There is a vast need for planning tools for people who cannot yet afford the services of a financial planner. Our dream is to help clients by providing an affordable educational tool to help people plan so successfully that they would eventually need the services of a financial planner.

Here are some obvious financial bumps in the road that have caused many to trip:

Neglecting to plan ahead financially for annual or quarterly payments, car replacements, taxes, school fees and clothes, college tuition and books, holidays, computer replacements, household maintenance and upkeep or any other major purchase or financial outlay. In essence, if you have a car it will need to be replaced at some point – figure out when that might be and begin saving toward it. If you have a school-age child, you will encounter fees and probably eventually college tuition. If you own furniture, it will wear out. If you own a house, everything will break eventually (at least it seems that way sometimes).

We have a college-age child and another who will begin college in one year. Because of the stage we are in, I want to give an obvious warning to those of you with younger children that college years come quickly and tuition is expensive! If you have an eFinPLAN, you can use the tool in the college planning section to help you make an educated guess as to how much college expenses will be in the future for your child. There are about 1500 colleges programmed into the software.

Our dear affiliate Mary Hunt at debtproofliving.com has several books, including Debt-Proof Living, that can teach you to avoid common mistakes and help you keep your feet safely from tripping. Her books describe a ‘Freedom Account.' Mary writes “To treat my own case of selective amnesia, I developed something I call a Freedom Account. It is a simple, personal money-management tool that makes unexpected, irregular, and intermittent expenses as ordinary, predictable, and necessary as your rent and grocery bill. A Freedom Account eliminates financial surprises.” Pg. 118, Debt-Proof Living.

Since it is time to start preparing for your holiday expenses, you may also want to read Mary’s book Debt-Proof The Holidays. If holiday expenses have ever made you stumble, this book is a must read. To order Mary’s books, go to debtproofliving.com and click on the bookstore tab at the top. If you are an online subscriber to her monthly e-mail, you can buy the books at a discounted rate. A great gift idea for any newlyweds you may know would be Debt-Proof Your Marriage. We recommend all of Mary’s books to help people avoid getting tripped up by the obvious and to empower readers to take control of their finances.

Financial Planning – HSA, MSA, HRA and FSA Medical Accounts

Health Savings Accounts, Medical Savings Accounts, Health Reimbursement Arrangement, and Flexible Savings Accounts are all special accounts that may be offered or provided to you by your employer. They offer the ability for you and your employer to pay for some benefits with ‘tax-advantaged’ dollars. This means that your contributions or your employer contributions into these accounts may be deductible, before taxes, or may be tax neutral to you.

Sometimes these plans work in conjunction with higher deductible and co-payment plans to help you plan for expected expenses, offset unexpected expenses, or gain tax advantages, thereby further offsetting expenses. People today are paying more out of pocket for health care and health insurance, so these plans provide significant benefits if you have them.

If you have a Health Savings Account, you also have a high deductible health insurance plan (HDHP). The most you can contribute to these is $2,900 if you are single and $5,800 for a family 2008 (it is indexed for inflation). You can receive tax-free distributions from your HSA to pay or be reimbursed for qualified medical expenses you incur after you establish the HSA.

The Internal Revenue Service publishes information about these accounts (Publication 969). This publication has not yet been updated for 2007 but it has very useful information.

If you have one of these accounts, I encourage you to gather the benefits booklet from your employer and study it along with Publication 969, so that you are ready to make an informed decision when Benefit Election Time occurs with your employer. To help you plan, know what is paid by these accounts (see Pub 969), previous year’s tax returns, and expected health related expenses. I realize that medical expenses are hard to predict, but you may be able to predict some medical expenses. For instance, after continual problems with my tonsils, it wasn’t difficult to predict that they would need to be yanked out.

Having a properly planned medical account works like and in conjunction with a “Freedom Account” (see previous article above), only it is turbo-charged with tax advantages and the ease of payroll deduction.

Financial Planning – Prepare for The Great Election – Benefits not Presidential! 

This fall you have two elections, employee benefits and the Presidential. Your benefits elections may affect your personal finances just as much or maybe more than the next President will. The fall is the time of year in which most employers offer you the ability to choose parts of your benefit package. Especially if you work for a large company you may be able to choose from the following:

• Medical Plans, such as PPOs, HMOs, Low-deductible and high-deductible plans
• Optional Group Life Insurance (low cost term – payroll deducted)
• Optional Long-Term Disability Insurance
• Funding of Health Savings types of Accounts (see previous article)
• Group Long-Term Care Insurance
• Vision and Dental
• Retirement Plan (contributions and enrollment may be offered during the year) 

If you have an eFinPLAN financial plan, you may refer to it to help you determine how much insurance or retirement savings you may need. Then when you get the benefit election form or electronic enrollment emailed to you, you will be ready to make informed decisions. Remember it is always wise to seek the counsel of respected professional advisors before making these types of decisions.

Making wise benefit elections can protect you and your family with the correct amount of insurance, save you money (e.g., health savings accounts), and plan for retirement. Your employer invests heavily in these benefits, sometimes 30% – 45% of payroll, and these provide the bulk of many people’s savings and insurance – so the time you invest in understanding your plan is well spent. Begin planning now, before the chaos of the Holiday seasons approaches. 

Ideas from other Web sites – Credit Freeze 

There is a lot of talk today about the advantages and disadvantages of freezing your credit to prevent identity theft. Follow the link  to read an article from USA Today by Sandra Block that describes current laws, pending legislation, fees and possible hassles associated with freezing your credit report. 

Ideas from other Web sites – From the Blog World

At eFinPLAN.com you will see on the right side of the screen “News Feeds”. These are interesting financial articles and blogs from around the Web that I think are useful. Some I have written, but most are written by others. Go to eFinPLAN Blogroll to see the following and more:

• “Why you should become a part-time entrepreneur” from Moolanomy
• “Finding good even in tough times” from Money Rules, Debt Stinks
• “What’s the Absolute Minimum High School Kids Should Know About Personal Finance” from All Financial Matters
• “Down with down payment assistance” from Money Musings
• “Stay thin and save” from Wise Bread"
• Credit card perks you didn’t know about” from I Will Teach You To Be Rich
• “10 ways to save money on the golf course” from No Credit Needed
• “My tithing experience” from Christian Personal Finance
• “The hidden costs of college” from Free Money Finance
• “Combining Maslow’s Hierarchy of Needs & Personal Finance” from My Money Blog

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About the Authors Kent E. Irwin is CEO and co-founder of eFinplan, LLC. He is also a Chartered Financial Consultant (ChFC), a Chartered Advisor in Philanthropy (CAP) and a Chartered Life Underwriter (CLU). He can be reached at kirwin@efinplan.com. Laura D. Irwin is CFO and co-founder of eFinPLAN, LLC. She can be reached at lirwin@efinplan.com.

eFinPLAN reports, newsletters and Web site are designed to increase your knowledge of financial matters and permit you to take greater control of your financial future. The resources provided are to assist you as you advance up the financial learning curve. No single company or person has all the financial knowledge you need or can address everyone’s individual situation and show all possible solutions. Therefore, we encourage you to utilize other resources, and when appropriate, rely upon trusted professional advisors. This is not intended to, and does not, provide specific legal, tax, accounting, and insurance, and investment, financial or other professional advice. eFinPLAN is not your financial planner or investment advisor. For specific advice on these aspects of your overall financial plan we encourage utilizing trusted professional advisors. This is not an advertisement or solicitation for any specific investment or investment strategy. Information contained herein is not a substitute for consultation with a competent legal professional or tax advisor and should only be used in conjunction with professional advice.

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