Steven L White

During the past few weeks several people have asked me a couple of the same questions. First, “should I pay extra on my mortgage every month”? Second, how much should I invest each month in my employer sponsored 401k plan? For today, let’s address the first question about accelerating the payoff of your mortgage. My answer is “it depends”. Let’s ask a few questions about putting the extra money towards your mortgage. Does paying extra on your mortgage add any value to the subject property? No, it doesn’t. Does the extra payment give you back a “realized” rate of return? No again. If you need the money due to an emergency or opportunity can you immediately access the money? No. If you are unable to access the money what is your alternative plan? Use a credit card, borrow from 401k or IRA? None of these are prime alternatives. If you end up needing the money the only way to access it is to refinance the mortgage, add a line of credit or a second mortgage all of which you must qualify for and you pay the bank interest and fees on YOUR money and YOUR unrealized equity. What if the home looses value and the money is less?

The point I am driving home is if you are going to pay extra on your mortgage make sure other strategies are in place and well funded. Because if your money is not performing for you or providing any benefits then what’s the sense of it just sitting there doing absolutely nothing? Take inventory and ask yourself these questions, what is the balance of my “rainy day” account? Your rainy day account is designed for liquidity and accessibility. It’s typically a money market account, or multiple money market accounts if you have been abundantly blessed. Your rainy day account is primarily used for emergencies, cash flow and employment gaps. Do you have any credit card debt that you are paying on? Pay off credit card debt first as your rate of return on your money is much more than a mortgage.

Evaluate how much you are setting aside for retirement, participating whole life insurance, disability insurance and, long term care if you are near retirement . How about education account for your children? How about your separate “wealth building” account? If there is anything that I have learned about money is that it has a hierarchical order and following this order produces greater benefits, greater protection and growth opportunities if structure properly. In the end, it’s ok to pay off your mortgage if all of the other important componentsof your financial house are in their proper place and working with maximum efficiency and adequate funding.

Steven L White

Just a quick note to make you aware of an interesting tool that is changing the way we do business and changing the way many of our clients view their financial world. I have just added a link to my site of the “Living Balance Sheet”. Check it out by clicking on the link and watch a 3 minute video. Look for more information in the near future of how this tool is impacting people lives and businesses. Have a prosperous day!

Steven L White

Summer is not over yet and  some of you are already discovering that you will be paying Uncle Sam his fair share of taxes for 2007. Nothing wrong with paying taxes I just feel that we as a community can find good use of our hard earned money. One of the most common overlooked tax strategies is Long Term Health Care Insurance. According to America’s Health Insurance Plan’s ‘A Guide to Long Term Care’ (2004), people of age 65 face at least a 40% lifetime risk of needing long term care. The Government does not and can not pay for Long Term Care Insurance for the estimated 77 million baby boomers. Hence the government is making it easier for you and I to own and pay for the insurance. 

 Business owners can offer Long Term Care Insurance as an employee or executive benefit to key people. Owners can choose to discriminate or not as to whom you like to offer Long Term Care Insurance. If you belong to and association you may receive a 10% discount on the premium with some carriers. Long Term Care Insurance is portable; use it as an employee retentiontool and if your company qualifies, deduct the premiums from your taxable income. Any benefits paid to the employee are generally exempt from taxes and you can have your policy paid up in 10 years if you want. According to Annual Benchmark study by Genworth Financial, long term health cares costs currentlyaverage $70,912 per year and are rising. The Long-Term Care planning handbook, Federal Handbooks Inc. is stating the average claim period is 2.5 to 3 years or longer with Alzheimer’s patients. Remember how long Ronald Reagan lived! With these statistics it is apparent that the rapid depletion of assets is a viable and predictable possibility.

 So ask yourself the million dollar question;Pay the IRS or pay myself and receive a huge benefit?  Ok, let’s look at the alternative to Long Term Care Insurance. There are only 2 others in my opinion; One-the government in the form of Medicaid, and 2- your family. Medicaid has a 5 year look back period of assets. You don’t get to choose where you receive the care and you have to be financially poor to qualify for Medicaid. Believe it or not, certain professions will teach you how to transfer or hide your assets in preparation for Medicaid. Why on earth would you do that? Can you spell tr-o-u-b-l-e? Option 2 is to have a relative or loved one take care of you. Sounds nice but that person will have to change their lifestyle and likely quit their job. And do you really want them dressing, bathing or feeding you? Bottom line… Ladies and gentleman consider Long Term Care Insurance as and integral part of your overall financial strategy. You and your family will be glad that you did.

Steven White

I had already chosen to write something about tax deferral strategies today, however, I met with my very good friend Kris last Friday and that meeting completely changed my mind. Kris and I have been trying to get together for a few weeks because a mutual friend of ours recently passed away at a very young age of 39. Let’s call our friend George. We decided to meet at George’s favorite place the Brewery Bar II in Lone Tree. So we did and for the next hour and a half we reminisced about our dear friend. We yukked it up about good times, crazy times, and quiet times. We talked about how much we miss him, how much we will miss watching his two children grow up with their dad. We will miss the tremendously funny stories about George’s kids getting into trouble and their crafty attempts to fool dad from finding out. George was a great dad; he loved his two children, did what ever he could to raise them safely, properly and in a loving way. He participated in their sports activities, scouting activities and school programs. He wanted them to have a future, a stable home and perhaps attend a college of their choice. Then it hit me like a ton of Bricks, did George have adequate life insurance?I honestly did not know and George didn’t talk about these matters.  

 Ladies and gentlemen, life insurance isn’t for you and me. It’s for those who have no voice at the table of negotiation. It’s for the children so they don’t have to change schools or have to move away from their friends and out of their neighborhood to a strange place. It’s for the spouse left behind so he or she can pay the bills, buy groceries, raise children, save for college and have time to grieve and adjust. It makes no difference what’s in your retirement account if your loved ones have to change their entire life and suffer financially and emotionally in your absence. My financial strategy for you today is this: Protect for the maximum today because tomorrow may not come. And those that you leave behind deserve the very best of circumstances to complete the legacy that you started.

As seen in the Villager News Paper 2007

Steven L White