October 2008 Edition

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eFinPLAN.com Taking the Mystery Out of Financial Planning Newsletter

A letter to Washington

Now that the elections are over, the politicians we have selected can get to work to do what we have hired them to do: to run government efficiently and productively. I am going to write my leaders in Washington the following letter:

Dear (insert name),

The following is my Christmas list — as my appointed representative in government I am asking you for the following:

Reduce Your Pay:

Unlike people in the private sector, you are able to give yourselves raises and determine your retirement and health benefits (which are better than the benefits for anyone in the public and private sector). In the coming year, pass new legislation for reductions to your income and benefits. Looking at your record, you get less than a passing grade for fiscal responsibility, such as endlessly passing bills with pork and running budget deficits; therefore, you should get a pay cut. If you are successful at doing a better job of running the government, I will be all for increasing your income.

Lower Taxes

Americans pay an enormous amount of taxes when you consider: Income (federal, state, local), sales (retail, gasoline, hotel), gift and estate tax, real estate, Social Security and Medicare, not including other forms of taxes such as toll roads and licenses. The corporate tax rate is one of the highest in the world, and corporations just pass it on to the products and services they provide. When you add up all the tax that we pay, it is much higher than the amount we see on our tax returns; taxes should go down or at the very least should not increase.

Bailout Alternatives

You borrow money to fund bailouts and it will cost us interest for decades to come. The only way you are going to pay for this is through taxation which is not fair to the generations that follow us. Also when you borrow, you don’t borrow money that is already available; it comes from the Federal Reserve, and since they don't have it, they simply electronically increase the amount of money in circulation without even touching a printing press. This can’t be good for the economy and will contribute to devaluation of the dollar. The Japanese did a similar bailout in the 90's and it failed. Consider and evaluate alternatives that may work better, such as bankruptcy reorganization, and creative solutions mentioned by Warren Buffet and others.

Create more incentives for Small Business

Increase incentives and funding, and lower taxes for small businesses. This will set the stage for a strong recovery, restore our trade competitiveness, and create more jobs. This would be much more beneficial than bailing out large corporations when you consider…

“Small firms (employing less than 500 employees): Represent 99.7 percent of all employer firms, employ about half of all private sector employees, pay nearly 45 percent of total U.S. private payroll, have generated 60 to 80 percent of net new jobs annually over the last decade, create more than half of nonfarm private gross domestic product (GDP), hire 40 percent of high tech workers (such as scientists, engineers, and computer workers), are 52 percent home-based and 2 percent franchises, made up 97.3 percent of all identified exporters and produced 28.9 percent of the known export value in FY 2006, produce 13 times more patents per employee than large patenting firms; these patents are twice as likely as large firm patents to be among the one percent most cited.

Source: U.S. Dept. of Commerce, Bureau of the Census and International Trade Administration; Advocacy-funded research by Kathryn Kobe, 2007 (sba.gov/advo/research/rs299tot.pdf) and CHI Research, 2003 (sba.gov/advo/research/rs225tot.pdf); Federal Procurement Data System; U.S. Dept. of Labor, Bureau of Labor Statistics”

Fix Health Care

The health care system is broken; it costs too much and too many people don’t have it, and it’s not just the poor anymore. It’s people who have lost employment or those starting new businesses. Many people today are only one large health bill away from bankruptcy. Total health care spending represents 16 percent of the GDP; health insurance expenses are the fastest growing cost component for employers, and people spend over 10% of their income on all health-care-related expenses. These expenses are increasing every year and faster than inflation. I am not in favor of federally run health care because the government has never been able to run enterprises efficiently. Start by studying what works and doesn’t work in all countries that have a form of national health care. Next, assemble a team of leaders representing consumers, small and large business, and the medical and insurance industries. Charge them with creating a real, non-political, cost effective, efficient health care delivery system that provides high quality.

In conclusion, it is my belief that if you run government more efficiently, reduce taxes, curtail bail outs, invest in small businesses and fix health care, our country will be restored to the position of international leadership and raise the standard of living for all citizens.

To locate and contact your state and federal representatives go to link.

Grocery Savings Recap for 2008

By Laura Irwin

We have been using TheGroceryGame.com and other savings tactics for more than a year now and have been making an effort to slash the grocery budget. I started keeping track of the savings on each receipt for 2008 just out of curiosity (and a little bit of competition with myself) to see how much I really could save. Knowing that I would be writing this in the December Newsletter also helped keep me motivated. My top savings amount was on a gross receipt of $248; coupons and in-store specials reduced that amount to about $125. Be glad you weren’t in line behind me that day since my newspaper and internet coupons were about an inch thick. There was a lot of eye rolling going on behind me.  Also, be glad you didn’t witness the ‘happy dance’ in the parking lot. 

In 2007 we spent $7,900 for groceries. In 2008 we spent $4,500; however,we got $6850 worth of groceries (includes household supplies, personal supplies, the occasional pair of socks, etc.), which works out to about $375/month for our family of four. For years I have been trying to get below the $400/month budgeted amount and I finally have met that goal.  Next year we will have two children in college, so I will need to drop that budgeted amount, but let me enjoy the feeling of accomplishment for a moment. 

I am willing to admit that there were many weeks in which I went to the store completely unprepared, or worse, I had left my coupons and my list at home. Imagine the savings I could have achieved if my life were perfect! I spend about half an hour clipping and sorting coupons every week, which is about 26 hours for 2008. If my math is correct, that works out to ‘earning’ about $90 for every hour of coupon clipping. Not bad ‘earnings’ for sitting in front of the TV.

For my friends and family who are reading this, I have proven my point now, and I promise to quit asking the annoying weekly question “Guess how much I saved?”

We are not affiliated with TheGroceryGame.com. We discovered it through our affiliate Mary Hunt at DebtProofliving.com.  Mary’s books are packed with savings ideas and I hope you visit her Web site and tell her we sent you.

Maximum 401k and profit sharing allocations

The limits on contributions to 401(k) and profit sharing plans increase next year. This is important to those who are self employed and are contributing the maximum. Talk to your plan provider to increase your contributions.

                                                                           2008                           2009

401(k) contributions                                               15,500                       16,500

Employer contributions                                           30,500                       32,500

-Assuming the above maximum 401(k) contributions

Total annual allocations                                          46,000                        49,000

-Maximum for a participant under age 50 during the year

Catch-up contributions                                            5,000                          5,500

-Which are additional 401k payroll deduction contributions for a participant age 50 or over during the year

Total annual allocations                                          51,000                        54,500

-Including catch up contributions, this is the  maximum for a participant age 50 or over during the year

Courtesy of Elbert R. Nester, JD, Advisors Pension Services, advisorspension.com,

1840 Mackenzie Drive, Suite 201 Columbus, OH  43220-2980, (614) 442-2500

Taxes

In a coming issue we will discuss tax planning. I recommend that you download a copy of Deloitte's “The essential tax and wealth planning guide for 2009,” link an excellent resource. It is quite a read at 60 pages, but reading it will prepare you for the coming tax season. Taxes are a large percentage of your budget, so it pays to become more knowledgeable about tax matters.

Professional Assistance

If you need the assistance of professional advisors, perhaps to help you implement your financial plan, please contact us. We may be able to provide you with a referral. Please contact us if you are an advisor.

Optimism

With so much depressing financial news these days, consider being a contrarian - an optimist. Your outlook or attitude sets the stage for success or failure. Earl Nightingale's wonderful book Greatest Discovery put it this way "...an attitude that expects success, has an uncanny way of shaping future events and bringing together the most astonishing coincidences." To read an interesting column on optimism click "What happened to optimism."

Ideas from other Web sites - From the Blog World

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

• 9 Year End Money Movers from Moolanomy.com
• 5 Insurance Traps from FreeMoneyFinance.com
• House Votes to Suspend Required Minimum Distribution (RMD) for 2009 from FiveCentNickel.com
• Year-to-date Total Sector Returns from AllFinancialMatters.com
• The Entrepreneurial Spirit and the Economic Crunch from WiseBread.com
• Estimate Your Life Expectancy with the Longevity Game from MyMoneyBlog.com
• Why Charitable Giving is Even More Important During an Economic Downturn from Get Rich Slowly
• Taking the Consumer out of Consumerism from MyTwoDollars.com
• Only buy New Things When Replacing Something Old from IWillTeachYouToBeRich.com
• Get What You Pay For from MoneyRulesDebtStinks.com
• Becoming a Millionaire God’s way - Book Review from ChristianPF.com

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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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