More Related Content
What's hot
What's hot (13)
Viewers also liked
Similar to Newsletter May 2009
Similar to Newsletter May 2009 (20)
Recently uploaded
Recently uploaded (20)
Newsletter May 2009
- 1. THE LINK Newsletter Provided by Nexus Financial Management May 2009 Nexus Financial Management LLC A Small Business Plan for Uncertain Times Bryan Dudones 4600 Touchton Road E. It's official: these are hard financial times. cash reserve to cover times when your ac- Building 100, Suite 150 Many small business owners are feeling the counts receivable may be slow. Jacksonville, FL 32246 Phone: 904-334-1376 pinch, and you may be one of them. Here are Finally, meet with your banker. Try to keep a bryan@nexusfm.com some tips to help you swim against the tide www.nexusfm.com line of credit available to hedge against poten- and help you keep your head above water. tially declining revenues. Perhaps you're thinking you should defer making the capital Review your business plan improvements you were planning. However, Hello Everyone, Your business plan represents the roadmap while interest rates are low, consider if this your company is following. Consider reviewing The stock market once again would be a good time to lock in financing for moved decidedly higher. During it as if through the eyes of someone new to the month of April, the Dow them. the area. Is it still the best possible route to rose 7.3%, while the S&P 500 and Nasdaq recorded their best where you want to go, or should you consider Work with me here monthly gains in many years, some change in direction? It may be valuable rising 9.4% and 12.3% Your existing customer base may be your best respectively. to create an advisory team from your circle of prospects for new business, so remain in business contacts to help you with The market has taken bad news close contact with them. Determine in stride, which is a positive this task. sign. Chrysler filed for their needs and seek to help them bankruptcy protection and the meet those needs. Consider offering Keep current and vigilant same could happen to GM soon. The final results of the them discounts in exchange for ad- government's stress tests on When the times are changing, you vance payment or long-term contracts our banking system will be need current and accurate financial released on May 4th. I still with you. And always provide them information on which to base your believe the economy will with excellent customer service. In improve toward year-end, decisions. Keep a close eye on all however I think the market has return, they may refer other potential your expenses. If you must cut your gotten ahead of itself just a bit. customers or clients to you. A well diversified portfolio is expenses, consider reducing ex- crucial, especially during times penditures only on goods or ser- By the same token, work closely with of considerable uncertainty. vices that are no longer profitable. your own suppliers. Agree to long- And try not to slash all of your ad- term contracts in exchange for a fixed Bryan vertising budget. If people don't know you're price, if doing so would be beneficial to you. there, before long you may not be. Consider seeking discounts if you pay in cash, or asking for longer payment terms if you are In this issue: Be careful about the urge to cut your prices willing to pay full price. Be willing to contract without exploring alternatives or without ade- A Small Business Plan for for supplies at the regular price if they will give Uncertain Times quate justification. Doing so might lead to a you great discounts on any of their own over- temporary swell in your sales volume, but it stock that you might need. If you are open Investing in a Low Interest will also undercut your margins, and may di- Rate Environment about your needs with each other, you might lute your brand name. You might also want to be able to create win-win situations for you Charitably Inclined? The continue spending money on development. both. Income Tax Benefits of Giving The hard times will eventually pass, and when they do you'll want to have new items or Value your employees Can I open a 529 account in anticipation of my future services for your customers or clients to buy. You no doubt have good people working for grandchild? Examine your revenue stream, and think you, and they are a valuable part of what has about ways to pursue any delinquent ac- made your business thrive. They have a stake counts receivable. Be careful of the credit in your business, too. Try to find ways (even if terms you extend to your customers, espe- only simple gestures) to thank them for jobs cially new ones; if they can't meet their obliga- well done. Look for ways to boost productivity, tions, you might fall behind on your own. Try and reward those employees who meet the to maintain a healthy cash flow, and create a challenge of becoming even more productive.
- 2. Page 2 Investing in a Low Interest Rate Environment prefer individual stocks, keep an eye on Low interest rates create a dilemma. Do you trading costs. accept a low return because you feel you must protect your principal? Or do you take on Think about your real return greater investment risk in order to try for a Low interest rates may not be quite as prob- higher return? In balancing those two con- lematic as they seem. Even if you're earning a cerns, here are some factors to think about. low interest rate, your real return might not Consider laddering your CDs suffer too much if inflation is also low. Real return represents what your money earns When yields on Treasury bonds began drop- once the impact of inflation is taken into ac- ping last year, many investors were attracted count. With an annual inflation rate of 0.1%-- to certificates of deposit (CDs) offered by the December 2008 Consumer Price Index banks that needed to attract capital. However, (CPI) figure--a bond that pays 3% would pro- interest rates won't stay low forever, and at duce the same real return as a bond that pays some point you may want access to your 5% when annual inflation is running at 2.1%. money before a CD matures. One way to achieve higher rates while retaining flexibility Compare interest rate and yield spreads to adjust your strategy over time is to ladder When market instability CDs. Laddering involves investing in CDs with drove many investors to the varying maturity dates. As the shorter-term safety of Treasury bonds, CDs mature, you can reinvest in one with a their prices rose and yields longer term and higher rate. Over time, lad- fell. As a result, the spreads dering can give you both the higher rates typi- between Treasury yields cally offered by longer-term CDs and the abil- and those of corporates and ity to adjust as interest rates change. municipals have been rela- Example: Susan wants to invest $60,000 in tively high over the last year Don't stop at yield CDs. She puts $20,000 in a six-month CD that because non-Treasury If you're tempted to pays 2.6%, another $20,000 in a three-year bonds have to offer higher yields to compen- seek a higher return, CD that pays 3%, and the final $20,000 in a sate for investors' anxiety about the safety of don't forget that yield five-year CD that pays 3.5%. When the six- their principal and possibility of default. alone shouldn't be your month CD matures, she reinvests that money only criterion. In Consider small changes in another five-year CD. When her two-year reaching for additional CD matures, she reinvests it in still another You may not need to remake your portfolio yield, you may be five-year CD. At that point, funds from a ma- completely to seek a higher return. For exam- taking on additional turing CD will be available roughly every other ple, if you're in Treasuries, you could move risk. Also, if and when year, but will earn the higher five-year rate. If part of that money to municipal bonds, which interest rates rise, the rates are lower when a CD matures, she has may involve greater risk of default but whose change may affect a the option of investing elsewhere. (This is a net returns are boosted by their exemption bond's market value hypothetical example and doesn't represent from federal income tax. Or you could shift a unless held to maturity. the results of any specific investment.) portion of your stock allocation to dividend- Don't hesitate to get Pay attention to expenses oriented stocks and ETFs, or preferred stock. expert help to assess whether you can Look for buying or selling opportunities Low returns magnify the impact of high invest- increase your return ing expenses. Let's say a mutual fund has an Interest rates also can be used to help evalu- without taking on more expense ratio of 1.00, meaning that 1% of its ate equities. Some analysts like to determine risk than you can net asset value each year is used to pay oper- the relative value of the stock market using afford. ating expenses such as management and the so-called Fed market valuation model. marketing fees. That 1% represents a bigger (Though not officially endorsed by the Federal relative bite out of your return when the fund Reserve Board, the method evolved based on is earning 3% than it does if it's earning 10%. a 1997 Fed report.) The model compares the At the higher number, you're losing only about earnings yield on the S&P 500 to the 10-year 10% of your return; at 3%, almost a third of Treasury bond's yield. If the S&P's yield is your return goes to expenses. Before invest- higher than the T-bond's, the model considers ing in a mutual fund, carefully consider its fees the market undervalued relative to bonds. If and expenses as well as its investment objec- the Treasury yield is higher, the market is tive and risks, which can be found in the pro- overvalued. However, this is only one of many spectus available from the fund. Read the valuation models and shouldn't be the sole prospectus carefully before investing. If you factor in your decision.
- 3. THE LINK Newsletter Page 3 Charitably Inclined? The Income Tax Benefits of Giving the full amount of your payment. (Special Do you give regularly to a religious organiza- rules apply to payments made to colleges and tion? Perhaps you make an occasional gift to universities for the right to buy tickets to a charity like the Salvation Army, United Way, athletic events.) or Red Cross? It's said that a good deed is its own reward, but when it comes to your federal Limits based on income income tax return, there's a little more to it Your deduction for charitable contributions than that--Uncle Sam rewards your generosity generally can't be more than 50% of your ad- by allowing a deduction for qualified charitable justed gross income (AGI) for the year. A contributions. The rules, however, can be lower percentage AGI limitation may apply to: confusing. โข Contributions made to certain organiza- Itemizing deductions tions (e.g., veterans' organizations, First, in order to deduct a charitable contribu- fraternal societies) tion, you've got to file IRS Form 1040 and โข itemize your deductions on Schedule A. So, if Contributions made quot;for the use ofquot; any your allowable charitable deduction plus all organization (contributions held in trust your other itemized deductions doesn't add up for the qualifying organization) to more than your standard deduction (for โข Gifts of capital gain property example, married couples filing a joint return are entitled to an $11,400 standard deduction If these limits prevent you from deducting your in 2009), you generally won't realize a tax contributions in the current year, you're able to benefit from the charitable contributions carry forward your excess contribution for up Special rules apply in you've made. And because total itemized de- to five years. many situations, ductions are currently reduced for higher in- including What if you volunteer your time? comes (this won't be the case in 2010, but it is contributions of: for 2009), your charitable deduction may con- If you volunteer your services to a qualified โข sequently be limited as well. Clothing or organization, you are allowed to deduct unre- household items imbursed amounts that are directly connected Qualified organizations โข A car, boat, or with the services you provide. You can deduct You can only deduct contributions that are airplane out-of-pocket expenses that are directly re- made to qualified organizations. Churches, lated to the use of the vehicle in providing โข Appreciated synagogues, temples, and mosques automati- services. You can use actual expenses, or property cally qualify. Almost all other organizations base your auto deduction on the standard โข Taxidermy property have to apply to the IRS. An organization mileage rate (currently 14 cents per mile). You should generally be able to tell you if it is a โข can also deduct parking and tolls. You can't, Property subject to qualified organization. You can also check though, deduct the value of your time. a debt IRS Publication 78, Cumulative List of Organi- โข A partial interest in Recordkeeping zations Described in Section 170(c) of the property Internal Revenue Code of 1986, which is Make sure that you keep records that docu- โข A fractional interest available online at www.irs.gov. ment the contributions that you make during in tangible personal the year. Did you receive a benefit? property For cash contributions, you'll need a bank Generally, if you make a contribution and re- โข A qualified record (e.g., a canceled check or a credit card ceive a benefit as a result, you can only de- conservation statement), or a receipt from the organization duct the amount that's more than the value of contribution that includes the name of the organization as the benefit you receive (for contributions over โข A future interest in well as the date and amount of the contribu- $75, the charity must give you a statement tangible personal tion. If you make an individual contribution of describing the value of the goods and ser- property $250 or more, you'll need a written acknowl- vices provided to you). So, if you pay $200 at edgement from the organization that meets โข Inventory from your a charity auction for a weekend getaway that specific requirements. business has a fair market value of $150, your deducti- ble charitable contribution is $50. โข A patent or other If you made noncash contributions, the spe- intellectual property cific documentation that's required depends You can, though, deduct your entire payment upon the amount of the deduction. to a qualifying organization if you receive only a token item or benefit in return, and the or- For additional information, see IRS Publication ganization determines that the value is not 526, Charitable Contributions, and discuss substantial and tells you that you can deduct your situation with a tax professional.
- 4. Ask the Experts Can I open a 529 account in anticipation of my future grandchild? No, not if you intend to descendant of any of them, (3) sibling or step- name your future grandchild sibling, (4) parent or ancestor of either, (5) as beneficiary. A valid 529 step-parent, (6) niece or nephew, (7) aunt or beneficiary has to have a uncle, (8) daughter-in-law, son-in-law, mother- Social Security number, so it's not possible to in-law, father-in-law, sister-in-law, or brother- name a child who hasn't been born. But there in-law, (9) the spouse of any person listed, Nexus Financial is a way to open a 529 account that eventually and (10) first cousin. Changing the beneficiary Management LLC can be turned over to a future grandchild. could have gift tax consequences, though. Bryan Dudones 4600 Touchton Road E. However, carefully check the details of any Your first step is to open a 529 account and Building 100, Suite 150 529 plan you're considering before you name name a beneficiary who is a quot;family memberquot; Jacksonville, FL 32246 the initial beneficiary. Some plans impose age of your future grandchild. Then, when your Phone: 904-334-1376 restrictions on the beneficiary, such as requir- grandchild is born, you, as account owner, bryan@nexusfm.com ing that the beneficiary be under age 21. Such www.nexusfm.com can change the beneficiary to your grandchild. a restriction could pose a problem if you in- All 529 plans have mechanisms in place for tend to name your adult son or daughter as changing the beneficiary. Nothing in this document should the initial beneficiary. be construed as specific According to IRS Publication 970, Tax Bene- investment advice. For Other plans may have rules that indirectly investment and tax concerns fits for Education, there are no income tax specific to your needs, please impact who you can choose as your initial consequences if the beneficiary of a 529 plan request a personal consultation. beneficiary, such as a requirement that the account is changed to a quot;family memberquot; of funds in the account be spent within 10 years the original beneficiary. This includes the of when the initial beneficiary would be ex- beneficiary's (1) spouse, (2) son, daughter, pected to enter college. You don't want to be stepchild, foster child, adopted child or surprised by a technicality. Can more than one 529 plan account be opened for the same beneficiary? However, some states consider the accounts Yes. You (or anyone in other states to determine whether the limit else) can open multiple has been reached. For these states, the total 529 accounts for the balance of all plans (in all states) can't exceed same beneficiary, pro- the current year's maximum contribution vided you do so under amount. different 529 plans. Also, keep in mind that each 529 plan will For example, you could open three 529 col- have its own investment options and flexibility, lege savings plan accounts for your daughter: contribution rules, ownership and beneficiary one in State A, one in State B, and one in designation rules, costs and fees, and ability State C. Similarly, you could open accounts in to perform account management tasks online. States A and B for your daughter, and another relative could open an account for her in State Note: Investors should consider the invest- C. Or, you could open a 529 college savings ment objectives, risks, charges, and expenses plan account and a 529 prepaid tuition plan associated with 529 plans before investing. account for your daughter in State A. But you More information about 529 plans is available can't open two college savings plan accounts in each issuer's official statement, which (or two prepaid tuition plan accounts) in State should be read carefully before investing. A for the same beneficiary. Also, before investing, consider whether your state offers a 529 plan that provides residents If you do open multiple 529 accounts for the Prepared by Forefield Inc, with favorable state tax benefits. same beneficiary, keep in mind that each plan Copyright 2009 has its own contribution limit, and contribu- tions can't be made after the limit is reached.