European Debt Crisis

November 30th, 2011

Recently, European debt has been a focus in the news, especially the debt crisis in Greece. According to the Bank for International Settlements, Greece has more than 340 billion euros of debt – for a country of 11 million people, that’s about 31,000 euros per person (or roughly $44,000). There is speculation now that Greece will be forced to default on their loans, and possibly leave the European Union.

How did Greece’s finances get to be in such a predicament? In 2002, Greece changed their currency from the drachma to the euro, enabling borrowing to be done with greater ease. Along with that, the Greek government continued paying for high-profile projects, like the 2004 Athens Olympics. To make matters worse, public spending in Greece soared and public sector wages almost doubled in the past decade alone. Between their unwillingness to adjust their spending and with tax evasion being such a frequent occurrence, Greece is simply spending more than it is able to bring in.

In Greece, the retirement age may be 65, but average age of retirement is much lower due to the many questionable opportunities for early retirement. With the level of debt they hold and their citizens’ average lifespan being one of the highest in Europe, Greece cannot afford to be so generous in their retirement age. While it may seem unfair to U.S. citizens for our retirement age to rise from 65 to 67, hopefully this situation in Greece can help put this in perspective. Without a country adjusting their system to remain functional, the system will crumble. If the American age of retirement stays where it is, the U.S. may follow suit with Greece and cause not only our Social Security system to cease to exist, but potentially damage our economy along with it.

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Emergency Planning Part II: How Should You Save Your Funds?

October 31st, 2011

The fundamental aspects of emergency planning were addressed in last month’s blog, Emergency Planning Part I: How Much Should You Save?. After determining the amount that will need to be saved, it is important to decide the best methods for saving up this amount and how to invest it. While these choices are a personal option, there are a few things that should be kept in mind when deciding.

To begin, don’t worry- this does not need to be saved all at once. The best strategy is to set aside small amounts until you reach your goal, by either saving a percentage out of each paycheck or a set amount per month. Treat this as you would any other bill, and try to avoid missing making any payments.

When deciding the best way to save for emergencies, it is important to keep your funds liquid. That way, if an emergency situation does arise, you will be able to access your assets in time, and with as little fees if possible. Some options to keep your funds liquid are savings accounts, short term CDs, or even small cash reserves. While keeping your emergency savings liquid is vital, by no means do all of your savings or investments need to be this liquid.

Come by and see Scott today to start planning for your emergency fund.

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Emergency Planning Part I: How Much Should You Save?

September 30th, 2011

When it comes to saving, the idea of saving for emergencies tends to not cross our minds- until it is too late. According to researchers at Ohio State University, seven out of every ten households do not even have enough money saved to cover three month’s worth of expenses. Don’t be another statistic- let the experts at Cline Financial Concepts help you be prepared for when the time comes, instead of letting emergencies hold you back.

Why exactly is having an emergency fund important? An emergency fund becomes a necessity in a wide array of situations. Imagine facing unexpected medical bills, major auto repairs or unemployment. Nowadays, many employers do not feel responsible for their employees’ wellbeing after a layoff. After being laid off, most people instead find themselves receiving less than enough to support themselves and their families, or entirely on their own.

Determining your monthly expenses is the first step in planning your emergency fund. Experts, like Scott Cline, recommend you have 3 to 6 months of your monthly fixed expenses saved in your fund. Scott recommends erring on the side of caution and keeping your funds closer to the 6 month amount. It cannot hurt to save a bit extra, if you have the resources to do so. When the time comes to make use of your funds, you will be glad you were prepared.

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Retirement Planning

August 9th, 2011

The average American enjoys 20 years of the retirement lifestyle; have you began planning for yours?

To create the most secure retirement plan, it’s best to have a diverse range of investments. A great way to begin this process is to first see what retirement savings program (ex. 401 (k) plan) your employer offers and find out all its details. These plans can be a great way to save; not only will your taxes be lower, but some employers will even match contributions to a certain percentage or amount. Stop in and see Scott to learn more about other saving options available.

When should you start planning for your retirement? Actually, the sooner you do the better off you’ll be. According to the U.S. Department of Labor, if you were to save $5,000 each year in a Roth IRA for only five years (and it earned 7% annually), you would accumulate $28,754. However, if you were to save that same $5,000 each year for 35 years, you would accumulate $691,184. An early start can really make a difference. A well-planned retirement can lead to a more comfortable lifestyle when the time comes.

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What is estate planning?

July 12th, 2011

Do you current have arrangements for the distribution of your assets? It’s never too early to begin the estate planning process. At Cline Financial, in the Champaign, Bloomington area, our trusted financial advisers can help you plan the future distribution of all the elements of your estate. We can help you maximize your legacy, whether you wish it to be to your family, friends, something that’s important to you, like a charity, or a combination of all of the above.
While the will is an important component of estate planning, there are are other elements that can play a role as well. You may wish to set up a trust for your children, spouse or another. Perhaps you may wish to have gifts distributed. On top of these options, there is also life insurance to be considered. Don’t wait until it is too late to begin the estate planning process.

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A Few Bits of Important Illinois Tax News

January 17th, 2011

-Last week, Governor Quinn signed into law a steep income tax increase proposed by the state legislature, hoping it’ll help the state with its enormous debt.According to the News-Gazette, Illinois taxpayers should expect to see a 66%  increase on their income taxes while the corporate income tax is increased over the next for years to 7% from 4.8%. Many worry the new legislation may drive businesses and residents to other areas of the country with lower tax rates. Although this increase will be seen negatively by many, it’ll be interesting to see how it’ll effect the state’s debt within the next few years.

-Fox Chicago News reports that a potential online sales tax will hurt Illinois web-based businesses like Groupon and Coupon Cabin. A new piece of legislation waiting to be signed into law calls for “online retailers such as Amazon and Overstock to collect a 6.25% sales tax if they have affiliates in the state.” Although not signed by the governor just yet, the tax proposal may eventually be challenged in court and will certainly see some sort of opposition from businesses and consumers alike.

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Planning Your Child’s College Education: 529 Plans

December 8th, 2010

It’s never too early to start thinking about your child’s future especially when it comes to their education after high school. It’s no secret that the cost of college tuition for both public and private institutions is now more expensive than its ever been. With this in mind, by the time your own child becomes college-bound those costs will be significantly larger and much harder to afford without the right type of planning early on.

One of the most popular ways to save for college is to utilize a 529 plan. A 529 plan is a simple education savings program that is not subjected to federal or state taxes if used directly on college expenses. Along with being tax-advantaged, 529 plans come in two varieties: A 529 savings plan and a prepaid tuition plan. A 529 savings plan involves a money manager or financial advisor investing the contributions you make into options such as mutual funds or age-based portfolios. Prepaid tuition plans allow you to pay for future college expenses at today’s prices. Each plan comes with its own restrictions, level of flexibility, and additional cost so deciding which type is most appropriate for you and your child depends on your specific needs and qualifications.

We at Cline Financial know how important it is to keep your child’s future in mind when making financial decisions. An investment in a college education is one that comes with a lot of thought and planning, but our team of financial professionals are more than happy to help you along the way while working with you to give you the information and assurance you need when planning your child’s educational future. Visit us at our Champaign office to learn more about education planning and the many other financial services we offer.

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Roth IRAs: What Are They And How Can They Help Me?

November 17th, 2010

Roth IRAs are individual retirement accounts that allow your contributions to grow tax-free for many years down the road. Many view these accounts as simple, effective, and beneficial resources in securing money for retirement as an alternative to 401(k)s and other savings plans. Roth IRAs allow individuals to contribute up to $5,000 or 100% of income (whichever one is less) annually and once the account holder reaches the age of 59 1/2 and has held the account for at least 5 tax years, they may withdraw their earnings tax-free. The key feature of a Roth IRA, and one that distinguishes it from a general IRA, is the fact that the account holder receives a tax break on the money they withdraw instead of on the money they initially put in.

Although mostly geared towards planning for retirement, Roth IRAs can be opened on behalf of kids or teens as early investments. Although they must actually earn money equal to the Roth contribution to be eligible to maintain the account, teens may be able to work part-time jobs in stores or restaurants while younger kids can earn money through babysitting, lawn mowing, or even being hired by their self-employed parents, all avenues which are qualified sources of compensation for the Roth IRA account.

Roth IRAs have recently been in the news with a major deadline approaching in December for investors. According to the Wall Street Journal, all taxpayers are able to convert their regular IRA accounts to Roth IRA accounts and if done so by December 31st of this year, taxpayers will be able report the income on their 2010 tax returns or have that income spread equally across their 2011 and 2012 tax returns.

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How to Invest “Extra Funds”

August 12th, 2010

Cline Financial Concepts is committed to providing the most trustworthy financial planning service in the Champaign, Bloomington area. A question that we often find ourselves answering is “what do I do with my extra money?” Well, if you’re dead-set on not taking a cheap plane ticket out to Vegas –– we can give you a few pointers.

Buy Investments:

Using the extra cash to buy investments that supplement your portfolio is always a great option. If you’ve done your research, buying investments with high potential becomes much easier to swallow when you have a few “extra” dollars.

Rebalance Your Current Investments:

Avoid selling appreciated assets and use your extra money to help create a healthy balance of stocks, bonds and cash. Not only does that shore up your portfolio –– it helps you avoid paying capital gain taxes.

Add to Your Retirement Account:

If you’re not taking advantage of your employer’s retirement match policy –– consider using your extra money as a “catch-up” contribution. If you’re new to the professional world, adding as much as you can to your retirement plan will be invaluable down the road. If you’re over the age of 50, consider the contribution a make-up for that stretch when you were a little short years ago.

Add to Your Emergency Fund:

We don’t have to tell you the importance of having an emergency fund set aside. Typically, emergency funds cover 6 months of living expenses. Adding a little extra is always a good idea, and if you’re short –– solidifying an emergency fund is an important investment that everyone should have.

These are just a few of the options that we recommend to our Champaign and Bloomington customers; however, we do stress the importance of having your financial situation analyzed. Adding to your retirement plan, setting up an IRA, or saving for your child’s college are fantastic investment plans –– but they all should be put into perspective with your financial portfolio. We tailor all of our advice to your financial situation. Visit our Champaign office to find out more.

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