The beginning of the year is a good time to check your withholding allowances. Are you perpetually behind, or need more money in your paycheck? Remember that you can claim any filing status and number of exemptions on the W-4 for your regular withholding during the year. Read my article.

Don’t rely on 1099’s to tabulate your income, free-lancers. You are responsible for reporting your income accurately, whether or not you receive a 1099. Business owners, make sure your contractors fill out IRS Form W-9 before you hire them, so you can issue them a 1099 if needed. (Doing someone a “favor” by not issuing them a 1099 means that we’re all paying their taxes.)

Reprinted with permission of AppZen

Insurance: Businesses, do you have a “fidelity bond” or employee dishonesty insurance”?  On my first non-profit audit we discovered embezzlement. One of my first business engagements was investigating fraud at a large medical practice. Appropriate controls are important to reduce the threat of fraud; appropriate insurance is necessary to help you recover in case it does happen.

Elder care planning:  Another relaxing subject! Nevertheless, a necessity for kids and parents to start discussing. Contact me to discuss further and to be directed to appropriate resources.

IRS Letters! Don’t panic if you get them, but don’t sit on them either. Because of the IRS’ woeful budget, errors are plentiful and corrections are slow —  you may be getting bills for $12,000 when I sent in the correction making it a refund months ago, but they have not processed it yet.  But don’t be like the non-profit that passed the envelope around like a hot potato for a year without opening it; as a result they missed deadlines and had to appeal to have several thousands of dollars in penalties waived.

UPCOMING EVENTS

I will be back at the fabulous Artisan’s Asylum makerspace in Somerville, MA on Thursday night January 21, 2016 to discuss Tax and Incorporation issues. Join me at 7pm for a short talk, gathering, and refreshments. Free, register here.

NEW BUSINESS CHECKLIST!

Thinking about establishing a small business in Rhode Island? Check please read this article for a list of essential steps, from deciding on your legal structure to staying in good standing on an annual basis.

While Obamacare has expanded healthcare coverage dramatically, it has also created some new difficulties.

Consider:  “June Cleaver” is a single parent of two boys- Wally and Theodore (“Beaver”).  She just became a real estate broker and made $25,000 in 2015.

JUNE’S HEALTHCARE OPTIONS FOR 2016

Medicaid.  The family’s projected income  for 2016 (based on 2015)  is below $27,724* and thus eligible for premium-free healthcare through Rhode Island.* However, Beaver is a behavioral nightmare and his singularly awesome therapist does not accept Medicaid payments; Dr Bigmun Loyd’s direct billing rate is $125/hour.  So June concludes she will need to purchase private health insurance to get these doctor bills covered.

Private Health Insurance:  June can purchase private health insurance on the Exchange; however, if she goes this route, because she’s otherwise Medicaid eligible, she won’t get a subsidy to bring down the cost of the premiums.** The full cost of the monthly premium is beyond the Cleavers’ reach. So at this point June’s only options are to go on Medicaid and take a chance on a new doctor, or sign up for premiums that are beyond her financial means.

Projecting Higher Income: June is self-employed in succeeding years and her income is hard to predict. She hopes 2016 will be more lucrative and, instead of using her 2015 earnings of $25,000, instead projects $55,000 in net earnings on her application. All family members will now be ineligible for Medicaid*. But June is eligible forsome upfront “premium assistance” in 2016; perhaps she can now afford the premiums and continue with the same doctor for Beaver.

What happens if June’s actual income in 2016  turns out to be closer to $25,000? When her 2016 tax return is prepared, the final premium subsidies will be based on this $25,000 ultimate income and she will recoup the subsidies lost when June was paying for health insurance based on her projected income of $55,000 (The tax system has not been designed to  screen for eligibility when computing the finalsubsidy — it’s solely income-based. However, some state exchanges require substantial changes of income to be reported during the year, and there is no guarantee they won’t take action if there is a continuing pattern of disparity between projected and actual income.)

Confused and overwhelmed? You are not alone; even health insurance brokers and workers at the exchanges have trouble sorting all this out.

*The Affordable Care Act dramatically expanded Medicaid eligibility and raised the income limits (which are based on Federal Poverty Guidelines for different family sizes). Rhode Island participates in the Medicaid expansion; the program is voluntary and some states have declined.  In Rhode Island, the upper limit for Medicaid coverage forminors in 2015 was $53,439 for a family of one adult and two children)

** The same would be true if June were eligible for  health care benefits through other government programs like Medicare or Tricare (for military).

CLASSIFIEDS DEPARTMENT!

My wonderful firm needs an experienced tax preparer 5-10 hours a week for the busy season. Must be comfortable with professional tax software.  Will work closely with yours truly. E-mail me.

BECAUSE YOU ASKED

Thank you for the well-wishes for my “frozen shoulder” surgery, to remove “adhesive capsulitis”.  All was smooth and I should be returning to championship weightlifting in no time. As you can see, they successfully unstrapped me from the medieval torture rack they used to manipulate my shoulder after surgically removing the scar tissue.

Because you asked.  And by all means, keep asking,

You know the story. Student loan debt, well over 1 trillion dollars, exceeds credit card debt and is crippling graduates — and in turn, the whole economy.

I had a pediatrician in my office who was making well over six figures, owes $300,000 on her student debt and yet Sarah cannot deduct a dime of her payments.

George is in sales, he owes far less — but is barely able to make the payments and stay out of default, which would subject his tax refunds and even his eventual social security benefits to “offset” (reduction).

Are there any viable options, Horace Mann?

There are a variety of “income-driven plans” that peg your student loan payment to your income, while extending the payback period to 20 or 25 years. Income-contingent repayment, income-based repayment and  Pay As You Earn plans peg your monthly payments to a percentage of  your net income — 20%, 15% or 10%, respectively.

Balances owed at the end of the period are forgiven!, but the cancelled debt would be taxable (at least under current tax law.) Each program has slightly different criteria and formulas, although none of  them apply to privately-issued loans. The most generous — PAYE — is only available to recent grads.

While the idea of a two-decade plus repayment plan is intimidating, remember that you can always accelerate payments if things get better.  Click here or here! to learn more. Your tax filing status might also come into play, and yes, I can help you “run the numbers.”  E-mail me.

(The SLBA — Student Loan Borrower Assistance — has an excellent “step by step guide to solving your student loan problem.”)

Now, why was Sarah unable to deduct her student loan interest?

Once your income tops  $65,000  (if you file singly), your ability to deduct student loan interest is “phased out.” Once you hit $80,000 it’s gone. You borrowed money to put you on a sustainable career path — and once you are on that path you can barely, if at all, take advantage of this (already minimal, capped at $2,500, even for joint filers) tax deduction. Don’t get me started on the  inequities in the tax code that get little attention.

What else to consider? If you own a home and have sufficient equity you could borrow against it and take advantage of the mortgage interest deduction. However, if the interest rates are not comparative this may not be an attractive option.

This is an issue that is not going away, Elizabeth Warren. Watch for more policy proposals at the federal and state levels,

BECAUSE YOU ASKED

Are there any other mensches in your family?

Berkowitz, Brooklyn

 

My late cousin, Murray Cohn, was principal of Louis D. Brandeis High School in New York City, an inner city school, for decades. He presided there during some tough times — urban riots, union strife, teacher strikes — but his firm, compassionate leadership helped Brandeis weather those storms. He would sometimes butt heads with the unions, but his door was always open.  When he died in 2004, a surprising number of former “adversaries” came to pay tribute.

 In his seventies, Murray was finally forced to retire — I think he was the longest serving city principal at the time,damn near fifty years in the system.

After he was widowed, Murray hooked up with my Mom (not blood cousins, Pat Robertson). 

They shared a love of opera and books. Never lived together, and Mom moved closer to me, Murray near his daughter in Mass. But it didn’t surprise me that they died within months of each other in 2004.

Because you asked.  And by all means, keep asking.

Q: I landed a new job in sales and upgraded my wardrobe. Can I deduct the expenses?
–Taylor Slow

A: Nope — the tax code can be magnanimous but these are purely personal expenses. You also cannot deduct perfume, lipstick, lip balm, an electronic toothbrush or your coconut-lime shaving cream. (Okay, lipstick if it is needed for your actress gig; lip balm if you work for Mary Kay and buy samples. Or if you have a specially embroidered uniform that is specifically for your job or a costume designed for the stage only.)

Q: I’m aqua-phobic and I pay all my taxes on April 15, unless it’s raining. A month later and I ALWAYS receive a penalty notice from the IRS. Why is my CPA screwing up and why haven’t I switched?
–Captain Nemo

A: Your tax return is due April 15, but taxes must be paid throughout the year, whether you are paid as an employee or are self-employed. Otherwise you may be subject to underpayment penalties or public ridicule, whichever is the most uncomfortable. CPA’s are blessed with divine wisdom and hefty insurance policies.

Self-employed individuals, investors and others with substantial non-salary income are the most at-risk; this is why your CPA urges you to pay estimated taxes or increase your withholdings. For more on tax deadlines, read here.

Q: Should I contribute to my retirement plan or a college savings plan first?
–T Broody, Foxboro

A: The old adage is to take care of yourself first (no retirement equivalent to college loans), but your kids generally get to college before you retire (!) and you may want to have something to offer besides getting on the hook for more debt (“PLUS loans”). You may want to consider the flexibility of a Roth IRA for this very reason: while Roths are “retirement vehicles” you can always withdraw your original investment for any purpose tax and penalty free (the earnings you withdraw are taxable under certain circumstances). This may be an attractive option if you are not sure which basket to put your funds into, or if you are an older parent like the author — my parenting started late so my retirement age hits before my children will be going to college (not a great financial strategy!) As always there are details galore so educate yourself and consider seeking professional advice — especially if you have aging parents you are trying to help as well — the trifecta! (yes, we can help, and read more here.)

Because You Asked Dept

Q: Did your mother really threaten to take you out of her will when you moved into the Providence Zen Center in 1984?
–Harry Krishna, Berkeley

A: You have to understand — my sister has lived on a kibbutz since 1973, and the thought of this widow’s other child going communal scared her, briefly. My uncle talked her out of it and when she spoke at my wedding in 1993 (her finest moment!) she was effusive in her praise of what that environment had done for me. My mother was a very kind if self-tortured soul — as a prominent doctor eulogized at her service, she wasn’t the easiest patient, but much of her anxiety was rooted in her deep concern for others.

Because you asked… (and please, keep asking).

When thinking about financial planning, it’s important to consider the long-term.  What plans should be put in place in order to prepare for the future?  For financial advisor Larson Gunness a central question is this: are we optimistic or fearful of the future?  In typical original fashion, his article looks at the urgent global issues of our time and discusses how these relate to our personal financial planning.

Is There Room For Good News?

The Coming Disaster 

There are a lot of people these days making the case for extreme pessimism. The past few years have seen a great deal of attention paid to the catastrophes that may befall our society: global warming, economic collapse, terrorism, and Ebola. And with reports about gridlock in Washington and apathy in the general populace, it can sometimes seem that modern society is on a steady decline toward our own ruin. “Things are bad and getting worse” is the message I’m seeing from all quarters. And that’s a pretty grim message. But this has never struck me as completely accurate. I keep seeing evidence of good news. Also, there have been many times in our global history when people have had it much worse than we have it now. So I have begun to collect information about the good news I find. Am I just looking at rare examples of positive news in the midst of our downward spiral? Or am I looking at evidence of a lesser told story? One that might actually be a story about optimism?

 We Love Us a Good Catastrophe

We humans have always been very good at envisioning the unravelling of our world as we know it. Religions have been founded to prepare us for the end of days. Literature has long featured this topic. Think of the Bible’s Revelations, A Modest Proposal, The Crucible, The Lord of the Flies, All Quiet on the Western Front, and The Road. In popular media it’s been War of the Worlds, Planet of the Apes, Mad Max, the Andromeda Strain, Silkwood, and more recently it’s Walking Dead, World War Z, Hunger Games, and Maze Runner.

Stories of collapse are not always fiction. Many societies have been caught unaware, thus stumbling in ignorance into their own destruction. The Mayans didn’t expect Spaniards on horseback. The residents of Pompeii didn’t understand geology.  All of Europe underestimated Hitler’s Nazis. And there’s the oft-cited comparison between the modern United States and the Roman Empire. I’ve come across scores, even hundreds, of articles, documentaries, blog posts, and talking heads predicting with great certainty our society’s imminent demise. They may be right, and that is a fearful thought. Our society could collapse. Someday.

 How Likely is our Demise?

But as I think and worry about the case for pessimism, I keep coming up with questions. Is the cynical view correct? Are we in fact in the last days of the era of American prosperity? Or worse, is the entire society soon going to collapse? Will we find ourselves outside the gates of survivalist compounds, wishing we’d stockpiled as much food, water, and ammo as possible instead of glibly pecking away at our computers and diligently paying off our mortgages?

It’s perfectly understandable why people believe in the case for extreme pessimism. There is a lot of bad news out there. In the discussion over global warming, earlier signs of environmental collapse get very little attention nowadays. Remember acid rain, the collapse of bee colonies, the thinning ozone layer, and the masses of endangered species? Also, the great mountain of economic hardship we all have witnessed since the 2008-2009 Great Recession seems more than ample evidence to support cynicism. The US media has eagerly embraced this sentiment of impending catastrophe, delivering up to us a constant flow of misery and dysfunction.

I was at lunch with some clients the other day, and just behind them on the wall was a TV tuned into one of the mainstream cable news stations. So while we ate and talked, the TV behind them blared a constant gushing of urgent and vital news about Ebola, ISIS, and the plunging stock market… throw in some ads for Walking Dead and it was a veritable orgy of the apocalypse. It seemed absurd, a blatant appeal to the emotions of fear and paranoia. This particular station seems to care very little about providing a balanced review of what’s what… they want to hold our attention long enough that they can deliver us to their advertisers.

The Case for Optimism

So is there a case for optimism? Or would only a fool harbor any sense of hope for the future? I’ve been doing some research. I took some of the big topics: global population, world poverty, environmental degradation, and looked for good news. And I found some. In fact, I found a lot.

Our World in Data (www.ourworldindata.org) was one of my primary sources. Max Roser is an economist working at the University of Oxford. He gathered long-term data on several topics, including population growth, world poverty, violence, public health statistics, and so on. I also read articles about the Endangered Species Act (from the Center for Biological Diversity), bee populations and the ozone layer (from The Good News Network). These studies found evidence that seems to me to be damn good news. As I came across these studies, I felt my biased inner optimist shout There!  See? I knew it! 

Two conclusions I draw from this research. One, from Max Roser, is that when you look at data trends over many millennia, it appears that we are living in the safest, healthiest, most prosperous period in all of human history. And two, when we humans intervene to impact the problems we’ve caused, sometimes our interventions actually work. Though the monetarist in me hates to say it, it looks like our cumbersome and clumsy regulatory framework can, in fact, achieve success.

Population Growth: In contrast to the famous Malthusian catastrophe model where we will outpace our resources and face subsistence level survival, what the data show is that the rate of population growth is in decline. Since the early 1960s, the rate of population growth has declined to the extent that in the not-too-distant future, I believe that we are likely to see global population stabilize. The determinants of population growth are fertility rates and life expectancy. While life expectancy has been in a long-term increasing trend, fertility rates have declined as poverty declines. The factors that impact life expectancy and fertility are similar: expanded healthcare, education, freedom, safety, and prosperity of people (especially women). They can lead to smaller, more sustainable family sizes and communities.

World Poverty: If you look at global poverty over the course of centuries, you see that the amount of people living in poverty (especially when adjusted for local standards of living) has been in decline. Nations are getting richer and middle classes are growing. Globally, the picture has been getting much better. Most of the improvement is coming in the poorest regions. There’s still a long way to go, but the trend is good¹.

Environmental: I heard a GOP leader on the radio say that he’s not a scientist so cannot be expected to understand climate change (of course, he’s also not an economist, or a gynecologist, or a priest..). I don’t want to sound like him. I am worried about global warming. But I am confused about impact. Earlier, I mentioned endangered species, ozone, and bees. I found articles that suggest we should have optimism about each of these. For example the article that looked at the endangered species list challenged the viewpoint that there is no progress there. When the list was put together, each affected species was given a period of time, usually decades, that it would to recover to healthy status. The authors of the article compared the actual recovery rate of species with the projected rate of recovery in their federal recovery plans. Their study looked at species from “all the 50 states, include all major taxonomic groups, and have a diversity of listing lengths.” They found that 90 percent of species are recovering at the rate in their federal recovery plan. This is good news.

Other: Take a long-term view of world health, literacy, violence, and democracy. There are many good news stories. These many trends are interrelated and reinforce each other. Together, they strike me as cause for optimism.

But Wait, You Say, Not So Fast…

Even if what I say above is true, what about global warming, or growing income disparity in the US? What about all of the cities that are in perhaps irreversible decline? How could anyone look at Haiti or the Congo or Eritrea and make any claim about long-term global improvement?

I am not arguing that we can relax our vigilance about global problems. There are tremendous problems in the world that we cannot ignore simply because we were blessed to be born into a stable and prosperous society. I am arguing here that there is a case to be made, a strong case I believe, for optimism. Overall, perhaps the storyline we constantly hear lacks context. Perhaps the system isn’t as near to exhaustion as we’ve been led to believe. And we should keep up our attempts to fix the system because our efforts seem to be working. Slowly, with negative unintended consequences, but working nonetheless.

 So how to get a sense of context that is accurate? If the media can’t provide a balanced view, then we need to create one for ourselves. Just how great are these risks we keep hearing about? How should we think about them?

 Local Risk – Some of the crises we hear about pose serious threats, but only in a local context. Take the Ebola epidemic. This is an almost unimaginable challenge… in three countries in West Africa (Guinea, Sierra Leone, and Liberia). But how great is the risk to other parts of Africa? How great is the risk in northern Europe? How about the U.S.? Is this really a risk to us? To put it in perspective, as of this writing, more Americans have married Larry King than have contracted Ebola. Another example might be when a powerful storm devastates one region, the impact to someone in another hemisphere might be negligible. Despite media coverage that makes us feel like all crises are closer to home, when thinking about a particular risk, it’s critical to consider whether the risk is far-reaching or actually quite localized.

 Systemic Risk – Not all risks are local. Some challenges are bigger. Some challenges could impact the whole world. The most prominent example of this is, perhaps, global warming.  The reports seem dire: we’re nearing a tipping point, the sea levels are rising, most scientists agree this is a manmade problem, and so on. Dissent with this case-making is widely shouted down as counterproductive to the cause. When faced with a system-wide risk, weighing the costs of action against the costs of inaction becomes the main task. How bad could it really get? How much would it really cost to cause positive change? How much impact can we actually have? There is a lot of hyperbole out there. In order to cause changes in behavior on a global scale, urgency is necessary. And global destruction sure focuses us on the problem. With global warming, it seems to me that we have to act because the potential negative impacts are so great as to be unacceptable. But no one is sure how the negative (and, yes, positive) impacts of global warming will play out. So with global systemic risk, it seems that the analysis needs to clarify the probability of negative outcomes and the costs/effectiveness of solutions. Given evidence of the past, I think our track record for resolving system-wide issues is actually positive.

 But we might need to have our backs up against the wall before we actually collectively pay enough attention to make the needed changes.

The Economic Ecosystem

The forest pond has become my favorite analogy for the economy. Our economy is an ecosystem, like a forest pool. I got so excited about this analogy that I thought I had come up with a whole new way of thinking about economics: the economy as ecosystem. Wow. A whole new school of economic thought, one that unified and explained the intricacies of cause and effect, all created by me, now that’s really something… until I discovered that there was already an MIT-led school of economics called bionomics which formally presents this viewpoint. Oh well, it’s still a great analogy.

 Think of our little pond in the universal forest. It’s an ecosystem (economy) full of species (businesses, sectors, entities) that coexist and compete. The state of health in our pond is derived from many interrelated factors. Some factors cause species within the pond to thrive, some factors cause damage to species. When some species thrive, others might thrive too, or they might decline. It is a system constantly in search of new equilibrium. And the thing about equilibrium is that it is never quite reached, at least not for long.

 It is possible for the entire system to collapse. It is also possible for the system to self-regulate and to evolve and seek periods of new stasis, different from the previous norm.  We canintervene in that system and try to encourage or discourage various things from taking place. We could aid a certain species that we think is important, or we could try to slow the growth of something that we believe is harmful. But our tools for intervention are crude, and while they may do what we intended to do, they may also have unintended consequences. It can happen that the cost of the unintended consequence outweighs the benefit of our intended action. I imagine archetypal beings looking over this pool, each with its own viewpoint on how to help it thrive. Think of the hippy environmentalist, certain that her loving and careful policies will create the perfect harmony. But beside her crows her hunter/fisherman adversary who wants her to just stay clear of the fray so that she doesn’t mess it all up (when in fact what he really wants is for the hippy to go gaze at lily pads while he strings up his fishing rod and tries to land a big one).

 I’ll explore this forest pond analogy in future writing. For now, consider that maybe the long-term health our economy is evolving, and sustainable. That doesn’t mean that all sectors, jobs, even cities will survive. But taken as a whole, I think the evidence is actually cause for optimism.

 What does this Mean for Investors?

In making this case for optimism, I’m not also making the case that investors should ignore risk. The markets may continue to have booms and busts. Bubbles may inflate and burst. These cycles can be painful and can last for many years. To paraphrase Maynard Keynes, the markets can remain irrational longer than you can remain solvent. So it is important to maintain an asset allocation strategy that is in sync with your risk profile, your time horizon, and so on. My case for optimism is about the long-term. The point is that long-term investors can, I believe, expect stocks to rise. While stock investing involves risk, including loss of capital, the trends I discuss in this paper support the notion that investing in stocks is a prudent long-term strategy.

Larson Gunness is the owner and managing director of Gunness Financial Services, a financial planning and investment management firm based in Barrington, RI. A musician and writer, he is also the author Peace, Love and Financial Planning: An Illustrated Guide to Money. Larson can be reached at www.gunnessfinancial.com or e-mail him at: larson@gunnessfinancial.com.

Any views, opinions, and statements are those of Larson Gunness exclusively and may not represent the views, opinions, and/or statement of Aaronson Lavoie Streitfeld Diaz & Co, PC or its officers or owners. Nor has Aaronson Lavoie Streitfeld Diaz & Co reviewed or authorized the information Larson Gunness has presented and it expresses no warranty on them.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results.

The economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

This issue brings together recent developments and strategies about paying for health care and disability. It’s a complicated — but important — subject. I hope there is something useful for everyone. (And if not, there is a little family anecdote.)

Q: Is there anything GOOD that came out of the last budget bill?
–M. McConnell, Louisville

A: Actually, yes. There is now a special, tax advantaged vehicle for disabled individuals. Modeled after the 529 college plans, eligible ABLE plan participants must have been diagnosed with a disability by age 26. Investments are not tax deductible but grow tax-free and withdrawals must be used for qualifying services or be subject to tax and penalty on the earnings.

Importantly, creation of such accounts would not jeopardize one’s eligibility for social security disability benefits or Medicaid. Nevertheless, an ABLE account will not be accessible to everyone, and is only a small step in addressing the enormous financial challenges of families with special needs. I recently participated in a webinar on this vital subject. E-mail me for information about future webinars.

Q: I am told my company has to buy insurance through the “exchange” to continue receiving business tax credits. Can I hate Obamacare and still love the tax credits?.
–HealthCareForNone.org

A: Yes. Effective January 1, 2014 the tax credits offered to businesses offering health insurance to their employees is increased from 35% to 50% of eligible premiums (from 25% to 35% for non-profits). However, such premiums must be now paid through Obamacare’s state “SHOP” exchanges in order to be eligible for the credit.

ALSD can help you navigate your health insurance options, and we will soon be eligible to be a Rhode Island company’s “broker of record” for the SHOP program through Healthsource R.I.,the state’s exchange. E-mail me for details.

Q: Health insurance is still expensive, and now I must ask employees to contribute a portion. What else can I do? My employer benefits are already meager.
–Google, Palo Alto, CA

A: There is a rare win-win available to employers, called a “Section 125 cafeteria plan”. It allows the employees’ health insurance contributions to be deducted from their pay pre-tax. It therefore reduces the employer’s payroll taxes as well. Your payroll service company should be able to administer this for a small fee.

BECAUSE YOU ASKED DEPT

Q: What does “Streitfeld” really mean?
–Distant relative

A: Family lore has it that my ancestors were traversing Europe around the turn of the century and wanted a militaristic surname because of anti-Semitic activity in Germany. “Streitfeld” may have derived from “Schlachtfeld”, or “battlefield”.

The thread continues with my eldest son, whom we named “Yonah” — in part because of it’s proximity to “Jonasz”, a Polish name his (Polish-born) Mom liked. Yonah is Jonah, Hebrew for “dove”and the symbol of peace. Thus “Yonah Streitfeld” means “peace on the battlefield”!

It gets better. Yonah’s younger brother is Malcolm — we just liked the name. We found out later that Malcolm means “follower of Saint Columba.” And how has Columba been translated? “Dove.”

Because you asked… (and please, keep asking).

The Holidays are coming (Oh No!) so this seemed a good time to discuss the hangover
— debt. This guest article is reprinted by permission from Larson Gunness’ groundbreaking book, Peace, Love and Financial Planning; an illustrated guide to money
Larson is a local financial advisor and creative entrepreneur — click here to see what I mean!

“Unless you come into a big chunk of money (inheritance, lottery, manna from heaven), there is no easy way to get out of debt. Debt works that way; it’s really easy
to get into debt, and hard as heck to pay your way back out. So if you have a
situation where you have many different debts spread out on various accounts and
cards, here’s a good way to pay them off. This approach takes time (as in years),
but if you’re diligent, it will work.

1. First, get current on all your payments and stay current
2. Pay the minimum balance on all of your debts, except for the smallest debt (lowest principal balance)
3. For the smallest one, pay as much more per month as you can reasonably afford
4. Make sure that extra amount is applied to principal (not to future payments)
5. Keep focusing your extra payment energy on that smallest debt each month until that one is paid off (bravo, now you have one less monthly bill!)
6. Then, take that extra cash flow and focus in the same way on the next smallest
   debt
7. Keep that up until it is paid off (now you’ll have more cash flow, again)
8. Focus on the next smallest, and then the next. And so on

Again, this is not a fast process but it works. This means you won’t be focusing
on paying down the one with the highest interest or the largest outstanding balance. The point is to try to focus on cash flow. You want to pay down debts that you can get rid of quickly, freeing up cash flow that you can use.

If fate smiles upon you and you do come into some money, be sure to do two things
with it: save some and use some to pay down debt. As with the process above, pay
down the smallest debt first. You want to make a meaningful difference in your
monthly expenses.”

Divorce can be traumatizing.  Not always, but even in the most amicable situations separation is a nuisance. Yes, this is how I spent my summer vacation.

Think you’re done once you’ve had her beheaded, Henry (VIII)? Review the beneficiaries on your retirement accounts. Do you still want your ex on them? You might. Be sure to rummage through your papers and contact the custodian for that 401(k) from your stint at Apple fifteen years ago. You may have neglected to roll it over. Hell Henry, you may still have Anne Boleyn on that account.

Do you have life insurance? (If not, why not?) Who gets the proceeds? If you have minor children you may want to consider placing life insurance in a trust. Do you have a will? Do you really want the state’s “intestate” rules to decide who gets what when you kick the can?

(I am insurance-licensed. Don’t fire me, e-mail me.)

Does your ex have life insurance? What will substitute for child support if he goes sky diving and it doesn’t work out? You may want to makestipulations in your divorce agreement (not to prevent his self-indulgence but to require you be the beneficiary on his policy until Rocket and Elektra are a certain age.)

Is it clear from the divorce agreement who is claiming the children? Can either of you file with the more favorable head of household status? Sometimes both can — if you have two children and meet other tests. Maybe one of you now qualifies for the earned income credit. You may want to adjust your salary withholding to avoid sticker shock or that lesser horror, an unduly large refund (when you really needed the cash during the year.)

(My snazzy tax software can help project the results.)

Are you prepared for the pending financial changes?. The child support could be substantial — even if you share custody and are paying for Ripley when he is with you as well. Child support is based on respective incomes, not how much pizza your teen eats at each location. And no, it is not tax-deductible.

Are you the child support recipient? Prepare a budget to help navigate your new situation. It can be difficult in the beginning — you’ve lost the efficiencies of one household — and your earning power may be reduced because of increased domestic responsibilities. You’ll make it through. and the raw emotions from your past life will pass. You might marry again (and again and again), Elizabeth (Taylor), and Richard might even be available for a second fling (Burton, that is, not Streitfeld).

I am excited to be participating in a free October webinar, Financial Planning For Families with Special Needs. Write to me.

It’s daunting.  You can barely pay the bills, fret about keeping your job, and your triplets will be in college at the same time.  (And then your accountant congratulates you on your increased income, but you didn’t realize your taxes go up and your credits go down — more on this soon!). So when Suzie Orman suggests you “maximize your retirement savings” you think — I already am — and it’s zero. What  to do?

First, are you an employee? If your company offers a retirement plan (let’s hope so), start with at least minimal contributions.  Your take home pay will go down but will be partially offset by the tax savings.  Regular, ongoing contributions, no matter how small, is the best way to build a nest egg.  Hopefully your company provides some sort of a “match” to the retirement plan.

No plan?  Again, see if you can scratch out a minimal monthly contribution amount —forced savings. Some investment companies will allow as little as $50 per month, but you may need to make a larger initial contribution.  Consider a Traditional IRA if you need immediate tax savings; otherwise a Roth IRA may be preferable.  There are specific rules governing both types of plans, so you may want to consult a financial adviser.

Self-employed?  You will most likely be able to choose from a variety of plans, including SEPs, SIMPLES and 401-K’s. Contribution thresholds vary depending on the plan, your business structure, salary and profit.  All have conditions under which you must provide retirement benefits to any (non-owner) employees.

Worried about retirement and college?  The old adage is to take care of yourself first, but your kids generally get to college before you retire (!) and you may want to have something to offer besides getting on the hook for more debt (“PLUS loans”).  You may want to consider the flexibility of a Roth IRA for this very reason: while Roths are “retirement vehicles” you can also withdraw your investment for  higher education purposes without incurring income tax or penalty. This may be an attractive option if you are not sure which basket to put your funds into, or if you are an older parent like the author — my parenting started late so my retirement age hits before my children will be going to college (not a great financial strategy!)  As always there are details galore so educate yourself and consider seeking professional advice.

(Oh yes. I know what day it is — but don’t you think I’ve thought enough about taxes for the moment?)