Tag Archives: budgeting

Budgeting

Should You Refinance Your Home Loan?

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Some of our clients get a letter weekly from the banks that hold their mortgage with pretty great offers to refinance those mortgages to a lower rate. The question isn’t whether you’re getting a good deal but should you do it. Let’s take a better look at all of this.

If you’re relatively early into owning your home, within the first five years,and you started out with a percentage rate higher than 8%, it could work well for you to take a look at it. In some cases you could lower your monthly payments by as much as $900 a month depending on how high your starting rate was while getting a little bit of extra money to spend on a few other things. Of course, the smart thing would be to take that money and put it back towards the principle of your home to help you pay it off sooner but you’d have a lot of options to think about.

If you’re in the last 5 years or so towards paying off your mortgage, the deal might not be as smart a move depending on your long term goals for the house. If you’re looking to stay in the house for the rest of your life, don’t want to have any payments and want to will it to family members, then it’s best not to refinance and have to start all over.

If you’re looking to stay in the house and can continue making payments well into your old age and don’t have anyone you want to will your home to, refinancing this late not only reduces your monthly payments but could give you a nice windfall to use towards renovations. Also, if something happened to you and you had to go into a nursing home, your house might sell quicker, helping you spend down your out of pocket expenses so you can get on Medicaid quicker. That sounds a bit morbid but it’s a consideration to think of.

The decision is tougher when you’re in the intermediate range of 10 to 20 years into your payments. If you’re relatively young it’s not a bad way to go if you can save a lot on monthly payments, possibly making some double payments along the way if you have some extra money here and there. If you have some high outstanding bills and are ready to budget your payments but need a cash boost, then refinancing could help you get out of a jam and give you a shot to start over without having to think about bankruptcy.

Your accountant is a good place to start to ask questions regarding the possibility of refinancing. They could help you with the budgeting process to see if refinancing is a viable way for you to lower payments, pay off bills or make home improvements. It’s better to start with them because they don’t have a vested interest in what you do like the bank’s mortgage professionals will.
 

Finances

It’s Always Better To Know Your Financial Status

As we come to the close of another year, we first want to wish everyone a very successful 2016. We also want to wish that everyone’s finances are in order, that money is plentiful, and that all goes well for now and forever.

Roll, break me off some...
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Unfortunately, we also know it won’t be this way for everyone. As accountants, one of the things we deal with are those clients who come in at the last minute with their papers and receipts for us to do their taxes, or those who want to request an extension without knowing whether they actually need it or not.

Anxiety is a hard thing to overcome in life. It’s very strong when it comes to looking at one’s finances. There’s an inherent response to fear and anxiety; we try to run away from it, avoid it, and hope it goes away. It might for a short period of time… but eventually if it’s bad or perceived to be bad it catches up with all of us.

We always stand on the side that it’s better to know what one’s financial position is than not know. If it’s good, it alleviates a lot of stress. If it’s bad, knowing as far in advance as possible gives you the opportunity to do something about it.

For instance, something we talked about earlier this year involved a friend’s corporate taxes and how, if they’d been addressed way earlier than they were, he would have actually come out way ahead of the game instead of owing money to the government. Sometimes running away from trouble causes more trouble.

We talk about budgeting a lot here because if you budget, you know how much money you have, where it’s going, and whether you have enough or need to find ways to generate more. Budgets help a lot of people get out of trouble and also alleviates a lot of stress when people realize just how much money they have.

A couple of years ago we had a post that talked about the IRS’ willingness to work with people who owe money on their federal taxes and how accommodating they can be. In actuality, the same applies to most large creditors. All you need to do is pick up the phone and talk to someone and almost always, the person on the other end is willing to help you out somehow. There’s a great fear of calling customer service over things like this but the reality is that not only are they regular people like us, but they know that things happen and they’re going to do what they can to keep a customer who’s possibly going through a rough patch.

Of course, nothing is ever guaranteed. You could call someone who’s not as accommodating. In that case, you do what you can, learn who you shouldn’t be a consumer with, and move on with life. Things are always better when you feel you have a bit of control over your life and finances rather than being afraid to pick up the phone because it might be a bill collector.

For 2016, we urge everyone to decide to be a more confident person as it relates to their financial status. We’d love to work with anyone who needs or wants our help in figuring things out, and of course when it comes to your taxes. Be strong, be courageous, and be knowledgeable; those are great things to aim for. Happy New Year!
 

Budgeting

4 Business Financial Considerations

As we head into the last quarter of the year, most business owners will start pulling together some of their receipts for the year and other items to give to their accountants (while some will wait until the last minute next March; which one are you? lol). That’s pretty important, but it’s more reactionary than progressive thinking when it comes to working on the financial stability of one’s business.

We like to talk about the process of budgeting when it comes to managing money. Most of the time it’s all about paying bills. For businesses, it’s a much different thing. It comes down to 4 specific financial considerations businesses should be looking at so they can plan their future.

1. Receivables

What we’re calling receivables you might just be calling “pay”. It all depends on whether you collect your money up front or if you bill people and they pay you later. You need to budget this for three reasons. One, it tells you how much money you’ve made. Two, it helps you figure out how much money you want to make the next year. Three, if you haven’t been paid by some of your clients it lets you know who they are, who to follow up with, and who you might not want to work with in the future.

2. Liabilities

Liabilities for business are different than just thinking about bills that need to be paid. Liabilities in this case are those things that are pretty much set in stone where, if you don’t pay them you could lose something as far as it concerns your business. If you’re paying for your office space monthly, that’s included here. If you’re paying for insurance for your employees, or a company to handle your payroll, it all goes here.

3. Expenses

Expenses are those things where the value changes from month to month, as well as being something you might be able to control and reduce. Mileage is one of those things that changes monthly. General supply costs such as paper, pens and other things like that are another. When things are tough financially this one could spell the difference between shutting down or monitoring costs for better efficiency.

4. Capital Equipment

Many businesses will try to buy equipment for their business before year end. If it’s budgeted for the previous year, you might be able to buy that equipment whenever your needs hit because you know how much you’ve going to make and how much you’re already paying out. Things like computers, printers, or other equipment that’s costly and that you can write off should be a part of the process, especially if there’s something you need to purchase once a year.
 

Managing Money

Work Towards Now, Plan For The Future

A couple of years ago we posted an article here titled Setting Financial Goals. The, at the end of 2014, we posted another article asking people if they were going to set financial goals for the new year.

Riches
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Like almost everyone else, we like to stress the reality of knowing how much money you’re making, being able to pay your bills, putting money away for a rainy day and still being able to have a fun life. Yet, we’re not sure that there’s enough emphasis put on the “now”, the more immediate needs of life.

Talking about the ability to pay one’s bills is pretty immediate, but maybe not immediate enough. For most bills, you’ll get them and have at least 21 days before there’s an expectation of payment. If you don’t have enough money and you know the bill is coming, that’s an extreme amount of pressure to deal with. If it’s multiple bills… way more pressure.

An article we wrote 3 years ago talked about whether it was better to pay off bills or save for retirement. Our conclusion was that paying off bills with higher interest rates is the wisest move, which is something one has to address while still working, because carrying debt into retirement will drain your limited income faster. Thus, you should be working towards a “now” mindset instead of thinking only of long term goals.

There was also an article on another blog on financial issues that gave a plan where, if you started young enough, you could have significant savings when you retire by learning how to put money away monthly, increasing it by $10 every year from age 20 to 40, then continuing that same investment amount for the final 25 years.

It’s a good plan but it still means that one has to think more of “now” than later. As a general question, how many of you are ready to start investing $100 a month into a long term savings plan and still pay all your bills and have a regular life? Actually, hopefully most of you do, but it’s something you might not think you’re ready for, which means a mindset change is needed into understanding the “now”.

What if you really don’t have that $100? Scary to think about isn’t it? This is why we talked about finding ways to increase income a couple of years ago, as well as talk about budgeting all the time. It’s also why we often mention working with an accountant if you need help in figuring things out; it never hurts to work with professionals on your financial goals.

Working towards “now” involves these things:

* having a significant enough income now
* paying down your most significant debt now
* budgeting what you have now
* being comfortable now

Think about it, and if you have anything more to add, let us know.
 

Budgeting

Why The Greece Story Is An Important Lesson For All Of Us

By now you have probably heard about the problems with the country of Greece (stated for our New York readers since there’s a Greece about 90 minutes away from Syracuse). In essence, they’re close to defaulting on debt they can’t pay because of years of spending money they didn’t have and never adopting any austerity principles to help the country take care of itself.

Greece might end up lucky in some way. It’s looking like, after a lot of chest thumping, they’re about to accept a deal they were actually offered months ago. This will include having to set up ways to generate more money (increase taxes) and reduce spending (budget) drastically.

Does this sound familiar? Every day, people spend more money than they make. They don’t know it because they ignore it, the “I’d rather not know” syndrome. That’s understandable because it’s scary. Unfortunately, one can’t hide from the eventual realization that all isn’t rosy.

Accountants can’t help anyone who doesn’t ask for it. Sometimes, if things are critical enough, even an accountant might not be able to get you out of trouble. In those cases you might have to do some things you don’t want to do.

Maybe it’s Consumer Credit Counseling, which many communities around the country have. They’re wonderful at what they do, but they’re not the answer for everyone.

Maybe you can get a consolidation loan of some kind, pulling all your bills together and getting them paid off so you only have to pay the bank. That might work… unless you don’t start controlling your spending, putting together a budget so you can pay down your debt and still live your life comfortably.

Then again, you might not qualify for that either, in which case you might have to do the ultimate sacrifice – bankruptcy. The problems with that are many, including having a negative action on your credit report for 7 years. However, what’s even worse is that there are debts that aren’t excluded just because you filed bankruptcy. If you owe on a college loan or back taxes… you still have to figure out how to deal with those things.

Our position has always been that it’s better to know where you stand so you can address it. If you’re not in deep trouble, we can help. If you’re in minor trouble we might be able to help. If you’re in major trouble, we can offer you guidance.

Addressing potential financial issues might be scary, but the truth is that the sooner you know, the sooner you’ll gain peace and perspective and can be on the road to serenity.