December, 2009
By Michael Kalscheur, CFP®
Senior Financial Consultant, Castle Wealth Advisors, LLC

Some of you may have heard of our hometown football team: the Indianapolis Colts. You may have also heard that they went into this past Sunday’s game with a perfect record. However, in the middle of the third quarter, the coach pulled some of the best players to protect them from injury. The Colts ended up losing the game and their chance for a perfect season.

Some fans have complained about this, saying the Colts should have “played to win.” The coach and players have defended the move, saying that a perfect season was never their ultimate goal. They want to win the Super Bowl, and are willing to do what it takes to give them the best chance to do that.

Whether you agree or disagree with Coach Caldwell’s call, there is something to be learned from this. Namely, the importance of knowing what your ultimate goals are and deciding what you are willing to sacrifice to reach those goals. Goals spell out what you want to accomplish today, tomorrow and beyond. Some goals can be accomplished quickly, but others take months, years or even decades.

Where do you see yourself, your spouse, your children and your business 5 years, 10 years or 15 years from now? If you can answer these questions, you can write your goals. Here are some ideas that might make your financial goal list for 2010:

  • Get control of your cash flow

    Tired of getting to the end of the month and not knowing where all the money went, or never seeming to have enough money to fund your other goals? By monitoring your cash flow you can find out where your money is going and then make a determination if that is the best use of it. However, you need to track expenses before you can make changes to your spending habits.

  • Pay off installment debt

    Once you have your cash flow in order, you could have some extra money each month. What should you do with that? If you have installment debt, particularly credit card debt, chances are paying this debt down is the best use of that money. Think about it this way: if you are paying 19% interest on a credit card, what kind of investment could guarantee you a better rate of return?

    Also be careful of high balances on adjustable rate loans, such as home equity lines of credit (HELOC). Many of these loans currently have low interest rates (3% - 4%). However, interest rates won’t stay low forever, so now is the time to start getting these loans under control. If you don’t, you could be looking at drastically higher payments down the road. For example, back in the summer of 2002, you could get a HELOC for as little as 4%. Two years later interest rates were at 8.25%. That would take the monthly interest payment on a $50,000 HELOC from $167 per month to $344 per month.

  • Restart your retirement savings

    Although 2009 has turned out to be a pretty good year for the stock market, most people still have not recovered from losses in 2008. Therefore, it’s time to start putting a little extra into your 401k plan at work. Another option is to open a Traditional or Roth IRA. Remember that you can fund a Traditional IRA’s up until April 15th, 2010 and still deduct it on this year’s tax return.

  • Refinance your house

    Interest rates are at extremely low levels. We are seeing clients receive 30 year mortgages around 5%. The normal rule of thumb is that if you can cut 1% off your mortgage rate, it’s a good idea to refinance. However, we have found lenders who can refinance or modify a loan for under $500, greatly expanding the opportunities for people to cut their monthly mortgage payment.

    On the other hand, maybe you want to have that mortgage paid off sooner rather than later. 15 and 20 year mortgages are under 5%. The lower interest rate on a 15 year mortgage can help offset the higher payment needed to pay the loan off. For example, a traditional 30 year fixed mortgage for $200,000 @ 6% has a monthly payment of $1,200. However, a 15 year mortgage at 4.5% is only $1,530. Just $330 a month pays off your mortgage in half the time.

  • Cut your taxes

    There are lots of different things you can do to make sure you qualify for all the tax breaks that Uncle Sam allows:

    • 529 Plans – Save for college and your state may give you a state income tax credit or deduction. 32 of the 43 states with a state income tax now offer some kind of benefit, including Indiana, Illinois, Michigan, Ohio, Rhode Island, etc.
    • 529 Plans – Save for college and your state may give you a state income tax credit or deduction. 32 of the 43 states with a state income tax now offer some kind of benefit, including Indiana, Illinois, Michigan, Ohio, Rhode Island, etc.
    • Energy Credits – If you purchased and installed insulation or energy efficient windows or doors this year, you can qualify for a 30% tax credit, up to $1,500. Solar hot water heaters, geothermal heat pumps and wind turbines also qualify for the credit, with no credit limit.
    • New vehicle this year? – Even if you didn’t qualify for the “Cash for Clunkers” program, if you purchased a new car, truck, motorcycle or RV after February 17th, 2009, you can deduct the state and local sales tax, and any excise taxes on your federal return. Income limitations do apply.
    • Help with College costs – The American Opportunity Credit replaced the Hope Credit this year, providing a federal tax credit of up to $2,500 per student. No college student? No problem. Go back to school yourself and claim the Lifetime Learning Credit, good for up to $2,000 per return.

Michael Kalscheur, CFP®, is a Senior Financial Consultant at Castle Wealth Advisors, LLC. Castle specializes in helping families and closely-held business owners with strategies to protect and transition family assets from one generation to the next. Castle’s senior partners also work with clients throughout the country in making logical decisions to help them fulfill their personal and business financial goals. For more information visit, call 1-888-849-9559 or contact Michael directly at .