Breaking the Small Business Code

New Stimulus Bill 's Housing Related Benefits & College

     We don't know all the details yet but the recently passed Stimulus Package looks to have three potential benefits for families thinking about buying or refinancing a home. I wanted to share how these items can have possible benefits for college planning:

• In 2008, the conforming loan limits were increased to $729,750.  The American Recovery and Reinvestment Act of 2009 (ARRA 09) reinstates the $729,750 conforming loan limits until December 31, 2009.  This means lower interest rates for loans up to this amount. Higher rates come with "jumbo loans" that exceed this amount.  If your home still has equity, this could be a good thing to take advantage of lower interest rates for college planning!

• The 2009 bill will offer first-time home buyers a tax credit in the amount of $8,000 providing you purchase a home between January 1, 2009 to December 31, 2009.  The credit does NOT have to be paid back to the government unless the buyers sell their home within 3 years after the date of close of escrow on the home.  If you have the means, this could be a great time to help your student(s) buy their first home in lieu of a dorm. 

• The American Recovery and Reinvestment Act of 2009 offers incentives to existing home owners for going Green.  A tax credit of up to $1500 is given to home owners who make some “Green” home improvements.  These Green home improvements include, but not limited to, energy efficient windows, doors, and furnaces.  So doing something to save energy costs could help reduce taxes both of which can improve tax flow for college.

     As I learn more about ARRA 09, my team and I will look for ways to help college-bound families use the benefits to help pay for college!

Pork Barrel Bill and Transparency by Blog

     You may or may NOT have heard about some of the shennanigans burried in the new "Relief" aka BAILOUT bill passed last night by "our" Senate from the "mainstream" media.  But no one else said anything including NPR other than "this was an important bipartisan bill" or showed the self-congratulating senators pushing to get to the microphone.  I saw just ONE outside expert commentator on Fox plop down a telephone book-sized bill that had evolved from Paulson's 3 page outline but he gave no details!  And the eMail alert I got from US News today also only summarized the high points that related to the crisis. 

       I was clueless about the bill's REAL details and contents until I started reading my morning blogs like "Don't Mess with Taxes".

     Thank you blogosphere!  Thank you "Don't Mess With Taxes!" and the 20 or so other blogs I subscribe to each day.  Yes, I know there are kooks and way-out-there blogs but there seems to be no where else to learn what is REALLY going on in our congress.  Blogs by citizens like me who share what they have learned seems to be the best place to learn what is really going on out there!

     Here's what got me so angry:  Did you hear about the arrow tax break provision? This little add-in waives the tax on child's practice arrows and costs taxpayers about $200,000 a year (enough to send 8 kids to UCLA free every year).  Granted, this is a very teeny tiny part of the NEW ADDITIONAL $108 billion (!) in businesses and individual taxpayer "sweeteners" that were added to make the bill pass.  BUT IT SHOWS how our politicians can't help but pork out everything -- something even as critical as this bailout bill!

    Politico lists some of the various "sweeteners" and their costs. While an kid's arrow tax may soon become great fodder for Saturday Night Live or Jay Leno, it is the poster child for PORK BARREL POLITICS.  The Senate sounding so serious about how critical their efforts were was nauseating this morning on the AM news.  They were all patting themselves on the back for a bi-partisan effort.  Yeah, bi-partisan means they both were equally adding pork!

    My client families and the members of the College Leadership Foundation's College eCoaching Club have been flooding us with questions on how to afford college with their savings and home equity cut or gone.  They want to know what they can do to pay for college while waiting on the "financial rescue" AKA "bailout" bill. Most think it will someone help them personally.

     My recommendation to these families is to call the House of Representatives and tell them to scrub out every ounce of pork.  Focus only on what Congress SAID was important to stabilize the financial industry if that is STILL as important as they make it sound.

    In my opinion, if this was soooo critical, they wouldn't have taken the time to stuff it like a goose full of special favors and little unknown tax breaks! 

     SO what are your feeling on this mess?  Mine can't be printed because it would scorch the screen I am so angry.  Pass this blog along so Google will pick up all your comments and maybe we can get the idiots  we elected to come to their financial senses!  STOP THE PORK BARREL POLITICS disguised as crisis!

 

Response to the Market Meltdown - A Person POV

    

         In the last 4 hours I have received so many calls and eMails on the meltdown and cries for help from college-bound families that  I have lost count!  So I wanted to put up my two cents worth from my personal point of view as a college funding expert, a grandmother of two, and as a business owner.

                       This is an OPEN LETTER TO ALL POLITICIANS & THE MEDIA

    You work for me.  I vote, I pay taxes, and I love my country.  I want you all to stop and listen to me - the voter - for a change.  I didn't rip off anyone, I don't have a golden parachute and I didn't dump bad home loans on Wall Street.  Yet I and my grandsons are the one who will ultimately pay for your programs, cushy pensions (which are not in the market) and for your blame game politics.

    First, stop all the finger pointing.  I DON'T CARE who created the mess.  Stop bickering, grab a mop and clean it up.

     Geewhiz, I feel like I am listening to a bunch of 5 year olds who think it's more important to blame the other person for playing with matches than stop and fight the fire.  I want to grab both sides by the collar and give them a time out.  WHERE ARE THE GROWN-UPs in all this? Talk to me like I have a brain.  Stop trying to do 10-second platitude filled soundbites.

    And oh by the way Ms Pelosi, don't insult the other guy when you need him to help solve the problem.  Excoriating the current administration and the Republicans as being to blame  (true or not) from the floor of the House and then expecting them to support your bill is NOT good leadership. We need people working together and blame (coming from both sides) is not good team building tactics. 

    Second, EVERYONE stop saying it was the "other guys" and explain exactly WHAT HAPPENED.  Today's captain of the ship may NOT be responsible for the ship sinking if it was badly built and maintained by the previous captains!! Let's have a REAL examination of why it sunk so it DOESN'T HAPPEN AGAIN!!!!   I'm an engineer and politics have no place in examining a failure if you want to learn from it and keep it from happening again. So . . . 

Shut up about who's to blame and start bailing together  or we all go down together!

    Lastly, vague generalities and blame makes me think my elected officials on both sides don't KNOW what happened or why.   As a responsible citizen, I have done my homework.  I did the research, looked at the graphs and even I can see what happened when.  WHY CAN'T YOU?!!!

How can  I trust whatever plan you have to fix things IF you apparently don't know what you are fixing!!

      I don't want platitudes and slogans -- I want facts and concrete answers that lead to reasonable and clear fixes. I don't want pages and pages of special deals and carve-outs and attached amendments.  I want to be able to CLEARLY see what you are doing, what is supposed to happen and see accountability ON YOUR SHOULDERS TOO!

     And oh by the way, all you "reporters", start REPORTING!!  I don't want you to be a commentator who is parsing it for me into little bite-sized pieces like I was a child.   Don't disguise the news wyhen it is clearly editorial opinion.  WHERE is the neutral research about WHAT happened, the WHY and the mudraking for players on BOTH sides of the aisle?  You are sooooooo transparently biased I can't trust you any more.  I want facts not thinly disguised and sneering interviews.

      I want someone to step up and say we had a good idea in making housing more affordable but it had unforeseen consequences because we measured success wrong.  We had a good idea but making lenders lend when they shouldn't for political reasons backfired.  Our programs encouraged people to cook books and dump risky debt.  I want to hear you say it is not good policy to do the same old junk bills filled with special pork and singling out those who only took advantage of what you created.

   Stop looking for whipping boys ("the rich"), stop pointing fingers ("them"), and start giving me answers.  THEN I MIGHT want to elect/re-elect you to fix the problem no matter what party you're from.  I want leadership NOT politics.  I want answers, not slogans.  I want accountability, not blank checks. I am not allowed to spend more than I make, not allowed to dump my bad debts and not allowed to stay in business by blaming the other guys for my mistakes!

   So get together, stop name calling and get to work on something that I can understand and trust in. Let me know what you did, why you did it and TAKE RESPONSIBILITY if the fix doesn't work.

   That's my two cents . . .   

I APOLOGIZE!

ORIGINAL DATE: 04/27/2008 10:52:38 PM

It’s All My Fault And I’m Apologizing!

Here is a recent conversation I had with a mom I met at a birthday party for a mutual friend this past weekend in Orange County, CA.  After I introduced myself, she wanted to know more about what I did for a living.  Being passionate about my work, I spent about 5 minutes telling her how I help college-bound families with cash flow planning, tax capacity and minimizing debt – things she said she had never heard applied to college planning. I then asked her about her family. She told me that their daughter was graduating from UC Davis this summer after 5 years. She told me that her husband had had to postpone retiring because they had accumulated nearly $100,000 in PLUS Loans for the direct college costs as well about $18,000 they had borrowed from their home equity line of credit for the “incidentals” that kept popping up.  She had over $1,500 per month payments that were not tax-deductible. She was quiet for a minute and then asked me where I had been for the last 5 years! She was actually angry that she had never heard of people like me. I told her that fee-based college consulting is a very specialized occupation and sadly, very few “players” in the system really know how to help families in the right way.

She informed me that all she ever saw was all about either selling her something (529s, books, insurance, even the colleges) or telling her to borrow (students, parents, home, private loans).   She looked for the "free ride", did the FAFSA, read a "free report" on the "9 Secrets" from an insurance salesman, and attended every college night and seminar she could!  They spent lots of time searching for scholarships and found about $3,200 all 4 years. I then made a MAJOR mistake. I did some quick mental calculations based on what she had told me and gave her a couple of ideas that would have cut her costs in half. But before I could share some things she could do now, she told me it was MY FAULT she had all that debt and walked away, clearly upset. I was stunned but after thinking about what she had told me, she was absolutely right to be mad!  She had never been given the information I had shared!  She had told me about all the places she had gone for information – the colleges, the high school, her financial planner, her tax professional, the internet – and got nothing that helped her!  I was just a handy target for her anger. Good news is she came back later in the evening and she will be meeting with me to see if there is anything we can do now. Her husband works in law enforcement and he can retire anytime but he is still working because of all their college debt. Good news is there are ideas we can use. Then I got an eMail from Chuck Moore – one of the masters of college financial planning!  He had had an almost identical situation with the head of Human Resources at a company where he had been referred! The person he was talking to had massive debt for two children who were out of college and was angry at him for failing to let people like her know they had options! Chuck said it had really made him stop short! He felt it was partially ALL our faults in the college planning field.  We were not getting our information out to enough people!  No one knew they had options! I hate to keep repeating myself, this confirms that the College Leadership Foundation and their revolutionary College eCoaching Club is the right thing for families NOW.  Families who join the Club will have choices and options based on KNOWLEDGE that is unbiased and immediately useful.  Visit www.CollegeLeadershipFoundation.org.

Using Retirement to Pay for College - Should You Do It?!

ORIGINAL DATE: 04/16/2008 08:59:08 AM

Congratulations, your student got into a great college.  Hopefully they qualified for a great aid package based on need and/or merit.  But there is always something left for you to pay for.  How do you do it? The first place most people look is student and parent loans.  But that means a new monthly payment that grows every year of college.  Rule of thumb is your monthly payment on a 10-year Parent Loan for Undergraduate Students (PLUS) is the amount you borrow divided by 80.   So if you borrow $24,000 for 1 year at a state university, you would pay $300 per month.  At the end of 4 years you have a payment of $1,200 -- $1,500 if your student goes 5 years.  Borrow $50,000 per year for an elite ivy and your monthly payment is $2,500 or $30,000 a year!  And you add it for each loan for each student you have. If loans aren't your thing, it is VERY tempting to turn to your retirement accounts for help pay some of the costs.  IRAs require you to withdraw the money – no loans.  Some 401(k) and 403(b) accounts allow loans as well as withdrawals.  But let’s talk about withdrawals – retirement money you take it with no plan to pay it back. When you take no more than the total cost of attendance (COA) for the college year in a calendar year, you will only pay income tax on the total amount.  Good news is there is no 10% penalty for being under age 59½ as long as you don’t take more than the COA.  But you need to consider that you are losing money from your retirement.  Rule of thumb is if what you withdraw would have gotten a 7% return, what you withdrew would have doubled every 10 years.  So if you are 45 years old, taking $100,000 means you could be losing $400,000 in retirement assets!!  NOTE - If you have ROTH IRA, there is no tax or penalty as long as you only withdraw the COA.  But you still lose the growth potential. Borrowing from your 401k/403b may seem a better idea if loans are allowed. BUT there is a bigggggg catch.  If you leave the company for ANY reason, you have to pay all the money back in 60 to 90 days.  If you don't put it back, the loan becomes a withdrawal and you face taxes AND penalties on whatever exceeds that year's COA.  And borrowers rarely put money into their account at the same rate as before when making loan payments!  So you could have a double-whammy problem. BEFORE YOUR TOUCH a 401(k), have a financial advisor DO THE MATH to calculate how much money you have lost in growth for borrowing and/or not putting money into the account from now through retirement.   I think you’ll be shocked at how much you could potentially lose. Borrowing just $8,000 ($2,000 per year) for 5 years and not deferring the same $2,000 each year means a loss of $63,000 in 30 years.  Take more and for longer and you take a bigger hit! So before you touch your retirement, make sure you look at ALL the ways to pay for college – loans, work study, home equity, lifestyle, start a home business, tax planning, scholarships, college choices, get out in 3 years, use summer school, etc., etc.  the best way to pay for college is to do PLANNING for college at any age and any time in the process!   I strongly urge you to get coaching from a college planning professional if you are thinking about spending retirement money for college. Or you may want to consider joining the nonprofit College Leadership Foundation's "College eCoaching Club"  at www.CollegeLeadershipFoundation.org.