Client Newsletter

I often get the question, how much life insurance does one need? And what type should it be. The answer usually depends on the person or couple, but I usually recommend 20 year term insurance with a face value amount that is 10 times annual income. Another way to calculate how much life insurance you should carry is to add up all of your debts plus future expenses that you would like to pay for like your childs educations and have an amount that will at a minimum pay off your house and all other debts plus leave your survivors some money to make it through a transition period. For a typical 30 year old in good health, 20 year term for 250k in coverage is usually around $20/month or less. Be sure to leave your loved ones financially secure if an unforeseen accident happens.

Term insurance is relatively cheap and if you would like a quote, please give me a call as I am a representative for The Hartford.

Tax shelters aren't just for the rich and famous. Rental real estate propery such as houses and commercial property are great tax shelters. Traditional tax shelters have included investments in real estate, oil and gas, equipment leasing, and cattle feeding and breeding programs. Today I'll talk about real estate as it is the most popular amongst my clients.

Indeed, it's such a good tax shelter that U.S. Rep. Pete Stark, D-Calif., once said, “It’d take a genius to invest in real estate and pay taxes.” Real estate provides leverage, an inflation hedge, cash flow and equity buildup.

As your property appreciates, you are allowed a paper (tax) deduction for depreciation. If structured correctly, you buy the property with your down payment and hopefully, your rents cover your mortgage interest, taxes and operating expenses.

But it’s possible to come out ahead, even if the property loses money. Remember, in the 28% tax bracket in 2004 or 2005, a $5,000 paper deduction for depreciation creates a real cash tax savings of $1,400. This tax-generated cash can be used for any operating expense deficit.

Moreover, as you pay your mortgage, you’re building equity as you pay the loan principal down. It’s a win-win situation. Once your mortgage is paid off, you have an annuity in perpetuity (rents) while your investment appreciates in value. The downside is that you must buy property that will appreciate in value, and, if you want to deduct your losses, you must be actively involved in its management.

One way to increase cash flow, or get paid faster can be to take credit cards for payments. Quickbooks has a built in credit card service that is easy to sign up for and will take Mastercard, Visa, Discover and American Express. There is no additonal equipment to buy and the fees are comparable to other vendors. Fees amount to about 2.2% of the transaction amount and the funds are deposited directly into your designated bank account about 2 to 3 days after you process the payment. If you would like more infomation on getting credit cards setup within quickbooks, give me a call or email.

The report of the month is Budget vs. Actual. This can be found under reports and then budgets and forecasts. First off, you have to have loaded a budget into quickbooks. Usually your budget numbers are loaded at the first of the year based on a projection of your income and expenses for the year. Often if you plan or budget items, you force yourself to stay within those numbers and make the profit you desire. So the Budget v. Actual report will let you know how you are tracking vs. what you thought you'd do at the first of the year.