HC Money Matters by Herald-Citizen

Andrea V. Burckhead N. Y. Life 931-525-5433

Shelly Christian Bank of Putnam County 931-525-1295

John Crouch Farm Bureau 931-528-1571

Judy Freeman Bank of Putnam County 931-525-1295

Joe Harpe Farm Bureau 931-528-1571

Diane Herron Luna-Birdwell 931-528-5862

Hope Laycock Bank of Putnam County 931-525-1295

Bob Luna Luna-Birdwell 931-528-5862

Nat Manley Edward Jones 931-526-3171

Tony Meyers Tax Plus 526-8299

Jewell Miller Bank of Putnam County 931-525-1295

Bill Scruggs Raymond James 931-520-0778

Natalie Stout The Realty Firm 931-520-7750

Bryan Street Farm Bureau 931-528-1571

2 Herald-Citizen Sunday, February 17, 2013

Rules of thumb for first-time home buyers

home purchase is the biggest investment many people will ever make. Though the housing market can fluctuate, prospective homeowners still look at home ownership as a way to secure their financial futures while also putting a roof over their heads. Because it is such a significant investment, the home buying process can be intimidating, especially for first-time home buyers. But even though the housing market can be unpredictable, there are some things that prospective buyers should know regardless of whether it’s a buyer’s or seller’s market when they begin their search. • Be ready to commit to a location. Buying a home is not like renting an apartment. If renters need to break a lease, they might be able to do so at little or no cost to them. In addition, many renters sign a 12-month lease, which gives them some flexibility with regard to moving should they need to relocate for a new job or simply decide they need a more accommodating living arrangement. That flexibility is far more costly to home buyers, who must pay transaction costs when buying or selling a home. Those fees can be considerable, so prospective home buyers should be ready to make a long-term commitment to living in the area where they’re searching for a home. Buyers may end up losing money if they’re forced to sell shortly after buying a home. But even those who break even will be stuck with costly transaction fees at least twice in a short period of time. • Address bad credit. Unless a buyer

can afford to buy a home with cash, the buyer will need a mortgage to purchase a home. Mortgages come with an interest rate, which will be higher for those with poor credit scores and histories than those with solid ones. Buying a home is not an overnight process, but one that should begin long before buyers look at any properties. The best way to begin the home-buying process is for a buyer to obtain a copy of his or her credit report, examine it to make sure it is accurate and then work to raise that credit score to a level that makes one attractive to prospective lenders. A low interest rate can save you thousands of dollars over the course of a typical 30-year mortgage, and a credit score and history goes a long way toward determining what that interest rate will ultimately be. • Be ready to put down 20 percent. When buying a home, first-time buyers might be surprised to learn the down payment is typically 20 percent of the cost of the home. That down payment does not include transaction fees, closing costs or the often considerable cost of moving into the home. So buyers hoping to purchase a $400,000 home should be ready to pay an $80,000 down payment. While it’s possible to qualify for a low-interest mortgage that allows buyers to make a smaller down payment, a smaller down payment will also result in a higher monthly mortgage payment. For those who aren’t prepared to put down 20 percent, it might be in their best interests to put off the home-buying process until they can comfortably afford to do so. • Don’t underestimate the value of a

real estate agent. Veteran home buyers might be confident that they can navigate the home-buying process on their own. However, first-time buyers should enlist the help of a professional real estate agent, ideally one who specializes in buying homes. A real estate agent can help make the process less stressful and provide valuable advice as to where to look for a home, how to make an offer and a host of other suggestions first-time buyers may not be knowledgeable about. • Buy a home in a good school district. A good school district isn’t just beneficial for home buyers with children. Buyers who don’t have children and don’t plan to have children should still look for a home in a good school district, as numerous studies have shown buyers will pay more for a home that’s in a good school district. Good schools help maintain demand for property, and consistent demand should ensure a property appreciates in value over time, making a home in a good school district a better investment than a home in a bad school dis-

Enlisting the services of a professional real estate agent is one way first-time home buyers can make the process less stressful.

trict. • Get pre-approved. Many first-time buyers fail to get pre-approved before beginning their search for a home. Failing to get pre-approved means buyers won’t know how much lenders feel they can afford, and buyers may spend lots of time looking at homes they like but will never be able to buy. Pre-approval also enables buyers to more easily make an offer when they find a home they like. Buying a home can be both frustrating and fun. First-time buyers should employ a few time-tested tricks of the trade to ensure the process goes as smoothly as possible.

Herald-Citizen Sunday, February 17, 2013 3

Signs you may be heading for substantial

any men and women with heavy debt are vague when asked to describe how they got there, often expressing a notion that the debt seemingly piled up overnight. Though it’s possible to incur a substantial amount of debt in a short period of time, many debtors witness their financial pitfalls gradually increase, with interest rates adding up over time. Men and women who know their debts didn’t occur overnight may have missed the warning signs that they were heading for financial trouble. The following are a few signs that your problem with debt might be on the way to spiraling out of control. • Minimum payments: Every credit card statement includes the outstanding balance as well as the minimum payment due. In addition, statements now include a forecast of when the debt will be paid in full if consumers make only the minimum payment, and those with

substantial debt may notice that they won’t be paying off their debts any time soon if they only make the minimum payment. Men and women who can only afford to make the minimum payment on an outstanding balance should recognize that as a warning sign that they are carrying too much debt and should begin an analysis of their finances immediately before that debt gets out of control. • Frequent use of credit: Using credit wisely is a great way to build your financial reputation. But using credit poorly can do significant harm to your reputation, affecting your ability to rent an apartment, finance a vehicle or secure a home loan, among other things. If you find yourself using credit to make purchases you should be making with cash (or a debit card), such as fast food, your morning coffee or monthly utilities, then you’re likely setting yourself up for significant debt in the future. Such purchases have a way of adding

up. Before you know it your balance could be higher than you had anticipated and you might have already used your cash supply for other purchases you assumed were affordable. Credit cards should not be used to pay for life’s necessities or every day expenditures, as doing so only increases your cost of living when you factor in the interest you will have to pay when using credit to pay for these necessities. • Routinely checking balances: Though it’s important to stay on top of your finances, there’s a difference between checking your accounts for discrepancies and checking to determine your available balances. The former is responsible, while the latter suggests you may have a problem with impulse spending. If you don’t have a general idea of what the balances on your credit cards are and you find yourself frequently checking those balances before making purchases, then consider that a warning that you don’t have a

handle on your debt. • No savings: One of the most telltale signs that you might be carrying substantial debt, which, thanks to interest charges will likely only increase, is a lack of savings. You should be saving money every pay period. If you’re not capable of saving, then your debts are likely exceeding your income, which puts you on a crash course with substantial debt. If you’re not saving money but you are still piling up debts with purchases made on credit, expect to face some serious consequences down the road. Few people can say they have never experienced a problem with debt at least once in their lives. But those who often overcome issues with debt are those who recognized some telltale warning signs that a storm of debt was coming and acted quickly to keep those debts from becoming overwhelming.

Is Estate Planning Only For The Rich? In a word, no. What estate planning means to you specifically depends on who you are. Your age, health, wealth, lifestyle, life stage, goals, and many other factors determine your particular estate planning needs.

By definition, estate planning is a process designed to help you manage and preserve your assets while you are alive, and to conserve and control their distribution after your death according to your goals and objectives. For example, you may have a small estate and may be concerned only that certain people receive particular things. A simple Will is probably all you’ll need. Or, you may have a large estate, and minimizing any potential estate tax impact is your foremost goal. Here, you’ll need to use more sophisticated techniques in your estate plan, such as a trust and other tax and estate planning tools.

Bill Scruggs, Financial Advisor

Raymond James Financial Services, Inc., Member FINRA/SIPC

430 N. Washington Avenue Suite A, Cookeville, TN 38501

(931)520-0778

www.raymondjames.com/bscruggs

You may also want to plan your estate if you have special circumstances such as: • You have minor children or children with special needs • Your spouse is uncomfortable with or incapable of handling financial matters • You have property in more than one state • You have special property, such as artwork or collectibles • You have a business or farm you wish to keep in the family Estate planning allows you or anyone to implement certain tools now to ensure that your concerns and goals are fulfilled after you die. Your objective may be to simply make sure that your loved ones are provided for. Or you may have more complex goals. Therefore, estate planning is important whether you are wealthy or whether you have a small estate. In fact, estate planning may be more important if you have a smaller estate because final expenses will have a greater impact on your estate. Wasting even a single asset may cause your loved ones to suffer from lack of financial resources.

4 Herald-Citizen Sunday, February 17, 2013

Getting ready for tax season

new year not only brings a host of new opportunities, but it also brings a host of familiar obligations. One such obligation is paying taxes, which doesn't have to be done until mid-April. But waiting until the last minute with respect to taxes can make the process even more difficult, and putting it off certainly won't help those people who vowed to stop procrastinating in the new year. Getting a headstart on tax season can be beneficial in numerous ways, not the least of which is avoiding the lastminute rush to file your return come the filing deadline. Even if you have yet to receive your W-2 (which you should have in hand by January 31), there are steps you can take to get ready for the coming tax season. * Gather your documents. Your W-2 is

likely not the only document you will need to prepare your tax return. Statements regarding your investments, student loan payments, mortgage and a host of other documents might be necessary for you to fill out your return. You should start receiving these documents in January, so gather them as they come in and keep them in a convenient place. This will ensure you don't get frustrated when filling out your return while increasing the chances you earn all of the credits and deductions you deserve. * Examine past returns. Many people have questions when filling out their tax returns, but those who wait until the waning days of tax season to prepare their returns ignore those questions in an effort to make the filing deadline. When you start preparing for tax sea-

son early, examine past returns and see if there are any questions you wanted to ask in the past that you didn't have time for. Write these questions down as you comb through your past returns and bring the questions to your tax preparer when the time comes. If you don't plan on hiring a professional to prepare your taxes, you can contact the IRS with your questions, and the earlier you do so, the more quickly you are likely to have your questions answered. * Take your time. When you decide to get an early start on your taxes, you allow yourself to take your time preparing your return. This reduces the likelihood of getting stressed when filing your return. Many people get a bit nervous when filing a tax return, but that stress can be even greater if you leave

everything until the last minute. If you're starting early, take your time when working on your return and don't succumb to any potential stressors. * Consider hiring a professional. Starting early also gives you an opportunity to determine if preparing your own return is too tall a task. If that's the case, consider hiring a professional to prepare your return. If you decide to hire a professional, do so early so that person has more time to devote to your return. If you wait too long, chances are the tax preparer will be buried with many other customers' returns and won't be able to devote as much time to preparing your return as you would like. More information about getting ready for tax season is available at www.irs.gov.

Plan and ask questions to avoid back taxes

e hear in the media all the time about people who owe the IRS back taxes. Maybe you have been or are in that situation. There are many organizations out there that will help you resolve your tax issues. Sometimes you are lead to believe that it's not your fault and the mean old IRS is just hassling you. People are even shown being proud and happy when they settle for a lesser amount than they originally owed. Many of us believe that our taxes are to high. But, as the saying goes "it is what it is". It is the law and we should abide by the laws of the land. Federal tax liability is determined by the gross income less deductions and credits. Taxes are paid if you have income,

therefore if you have income you should be able to pay your taxes. So why do people get into the situation of owing back taxes? According to tax preparers the main reason people get into trouble are those who are self employed. The self employed are responsible for not only their federal taxes but also their social security and mediocre taxes. Many don't make estimated quarterly payments based on their projected income during the year. So, when it comes to file taxes they have a balance due that they can't pay because the income has been spent and they didn't budget for tax consequences. It is so important to talk with your tax preparer throughout the year to help

you plan for taxes related to your income. We all can pay our taxes timely if we just consider it another part of our everyday budget along with the mortgage, rent, utility bills, etc. The IRS is a pay as you go system, which is why taxes are taken out of your paycheck if you are an employee. Your W-4 is a vital part of your decision making process in determining your tax liability. Again, let your tax preparer help you with this. In conclusion, there should be no reason anyone owes back taxes. Careful planning and asking questions early on should allow individuals to pay their taxes.

Tax Preparation

526-TAXX (8299)

801 S. Willow Ave., Cookeville, TN Email: tdmyerstaxplus@gmail.com Cell: 644-5266

Tony Myers, Owner Enrolled Agent

Lowest rates in the Cookeville area... why pay more at competitors? Available 24/7, Just call me if I am not in the office

I have more than 20 years experience. Our fees are some of the lowest in the area and we can even have your fees taken out of your refund. Call me or come by the office to see what I can do for you.

Herald-Citizen Sunday, February 17, 2013 5

The basics of estate planning

ith regards to finances, the future is a big part of many people's financial planning efforts. Be it the kids' college tuition or the day when retirement finally arrives, financial planning is all about the future. Though college and retirement funds garner the most attention, men and women must also make time for estate planning. Estate planning is the process of arranging for the disposal of an estate and is done to help minimize uncertainty upon an individual's death. This planning also reduce taxes and additional expenses that might arise if a person passes away without having left a will or another means of disposing of his or her estate. Regardless of the size of an individual's estate, there's no reason not to have an estate plan in place. The following are some of the basics of estate planning, which should be a priority for men and women, young and old.

More than just a will An estate plan is more than just a will. Though an up-to-date and specific will is an important element of a good estate plan, there are other elements as well. In addition to a will, an estate plan should assign power of attorney, which gives a person of an individual's choosing the right to manage that individual's financial affairs if they are unable to do so themselves. Power of attorney should be assigned in the case of a person's death, but also if an unforeseen medical issue arises and a person is no longer capable of managing their affairs. There are two types of power of attorney that are essential to know when es-

tate planning. Springing power of attorney goes into effect when circumstances that the individual specified, such as incapacitation, occur. In order for this to go into effect, the agent designated must typically produce proof of an individual's incapacitation. Durable power of attorney goes into effect immediately and the agent does not need to prove incapacitation. When choosing an agent to assume power of attorney, individuals need to make this decision wisely, choosing someone they trust who can competently manage their affairs. Assessing your assets Assets include a host of things, from investment accounts to real estate to retirement savings. Individuals must take careful inventory of all of their assets and determine to whom these assets should go if they die or who should gain control of them if individuals become incapacitated. This means leaving no stone unturned. If there are any questions about specific assets, then legal wrangling or even government taxation upon these assets is likely to take place. Understanding trusts Many people hear the word trust associated with financial dealings and immediately assume it only applies to the wealthy. Nothing could be further from the truth. A trust enables men and women to put conditions on the distribution of their assets upon their death, including when and how these assets will be distributed. In addition, a trust might just protect these assets from creditors or lawsuits and help any heirs

avoid probate court, which can be a costly and tedious process. Though trusts aren't necessarily for everyone, they also aren't exclusive to the very wealthy. Allocation of assets Many people make the mistake of leaving all of their assets to their spouses upon their deaths. While this is well-intentioned, it doesn't always work out best for men and women with children. Individuals can leave an unlimited amount of money to their spouse upon their death, and that money cannot be taxed. However, when the surviving spouse dies, if he or she leaves that money to their surviving children, then they are likely going to pay significantly more in estate tax. In

Having More Retirement Accounts Is Not The Same As Having More Money. When it comes to the number of retirement accounts you have, the saying “more is better” is not necessarily true. In fact, if you hold multiple accounts with various brokers, it can be difficult to keep track of your investments and to see if you’re properly diversified.* At the very least, multiple accounts usually mean multiple fees. Bringing your accounts to Edward Jones could help solve all that. Plus, one statement can make it easier to see if you’re moving toward your goals. *Diversification does not guarantee a profit or protect against fees.

To learn why consolidating your retirement accounts to Edward Jones makes sense, call your local financial advisor today.

addition, when deciding to simply leave all assets to a surviving spouse, this is, in a sense, leaving the difficult decision of asset allocation to the surviving spouse. What's more, should both husband and wife pass away in an accident at the same time and all assets were left to a spouse, this can make it very difficult, contentious and costly for surviving family members to divide up any assets left behind. Estate planning is something few people will embrace with open arms. But as morbid as estate planning might seem, it's a necessary step for adults who want to secure their own futures should they become incapacitated or the futures of their loved ones when individuals pass away.

6 Herald-Citizen Sunday, February 17, 2013

Breaking down life insurance L

ife insurance is widely considered a necessity for adults with dependents. Married men and women typically purchase a life insurance policy before or shortly after walking down the aisle, though some defer that purchase until they have children. Life insurance can be a significant and important investment, so it’s wise for men and women of all ages to consider the following points about life insurance to determine if it’s the right move for them. • Life insurance is not just for people with dependents. Conventional wisdom may suggest life insurance is only for people with dependents. However, life insurance is a potentially valuable investment for anyone whether they have dependents or not. Men and women likely won’t want to saddle their

loved ones who inherit their estate with their debts, outstanding medical bills or funeral expenses, and life insurance can help pay those bills. • Peruse any employer life insurance policy. Many employers pay for life insurance policies for their employees, and such policies may be enough for men and women without dependents and any significant financial obligations. However, employer-paid life insurance policies likely won’t be sufficient for men and women with dependents, whether those dependents include a spouse or a spouse and children. • Term coverage can prove very expensive. Some men and women feel term life insurance is a better investment than permanent coverage. How-

ever, term coverage can become very expensive as a person ages, so permanent coverage may prove a more practical option. In addition, men and women who choose term coverage should know that certain medical conditions that may arise as you age might be deemed as uninsurable, potentially putting those who will inherit your estate in a precarious financial position upon your death. • Even men and women without a job need life insurance coverage. Many married couples in which only one partner earns a salary assume only the working spouse needs life insurance coverage. However, should the homemaking spouse pass away, the duties that person performed, such as taking care of the home and looking after any kids after school, must now be pro-

vided for, and such expenditures, especially after school child care, can be very costly. A life insurance policy can help finance those services.

• Let your own finances determine how much coverage you need. When purchasing a life insurance policy, many people use two years’ salary as their guideline. However, your personal finances should ultimately dictate how much coverage you will need. Consider how much money is left on your mortgage, your investment portfolio, your spouse’s earnings, and all of your assets before deciding how much coverage you need. You may need more or significantly less coverage than the standard suggested by an insurance agency.

Is Your Retirement Guaranteed? Talk To

Andrea V. Burckhard LUTCF Agent

New York Life Insurance Company

931-525-5433 on the Square

The company You Keep®

Things to consider before investing in a rental property Investors must consider a host of factors before deciding to invest in a rental property.

POWERING YOUR

portfolio potential

At First Tennessee Advisory Services, Inc., we understand that there is no one-size-fits-all approach when it comes to investing. That’s why we provide each of our clients with an actively managed portfolio that has been carefully selected to meet each individual’s unique financial goals. That portfolio is then continually monitored by a dedicated Investment Adviser Representative to ensure that all stated objectives are being met. It’s all part of our commitment to make your hard-earned money work even harder for you.

Tod Williams, CFP®

Vice President and Senior Investment Officer

(931) 528-4750

Investments: | Not A Deposit | Not Guaranteed By The Bank Or Its Affiliates | Not FDIC Insured | Not Insured By Any Federal Government Agency | May Go Down In Value First Tennessee Advisory Services, Inc. (FTAS) and First Tennessee Brokerage, Inc. (FTBR) are wholly owned subsidiaries of First Tennessee Bank National Association, Investment management services are available through FTAS and FTBR. Brokerage services are provided by FTBR. Member FINRA, SIPC. ©2010 First Tennessee Bank National Association. www.firsttennessee.com

Herald-Citizen Sunday, February 17, 2013 7

eal estate has long been considered one of the best investments a person can make. Even though buyer confidence might have waned somewhat in light of the recent economic swoon and its impact on the housing market, many investors still view real estate as a solid investment. Among the ways people invest in real estate is to purchase a rental property. Rental properties can provide income for landlords long after the mortgage has been paid off, and the potential for such income into retirement is a motivating factor for men and women who want to invest in real estate. But investing in a rental property is not for everyone, and there are a host of factors potential investors should consider before deciding to become a landlord. • Approval: Getting approved for a home loan for a home you plan to live in is different than getting approved for one when you don’t intend to live on the property. Lenders don’t necessarily frown on non-owner occupied homes, but they do make it harder to secure loans for investment properties. Interest rates tend to be higher, and many lenders ask for higher down payments than the standard 20 percent for more typical home loans. However, buyers who want multi-family units and intend on living in one of the units should be able to qualify for a more traditional owner-occupied loan, which will likely mean a lower interest rate and a more typical down payment. • Taxes: Homeowners gain certain tax exemptions, but those exemptions do not always apply to investment properties, which could make the cost of an investment property even more than investors anticipate. The tax burden of an investment property may prove considerable, and some investors might not be able to manage such a heavy burden. In addition, mortgage relief programs, such as those that arose during the recent recession, typically exclude non-owner occupied properties, so investors might find themselves in financial hot water should another recession occur in the future and the investment property lose value as a result. • Tenants: Though some real estate rental markets, such as those in densely populated cities, are extremely competitive and advantageous to landlords, the rental market in general can be hard to predict. A significant number of renters are college students and young professionals, and one byproduct of the ongoing economic woes has been the decision by many young people to save money by living at home while in college or returning home once they have earned their degree and entered the job market. Another byproduct is a poor job market that has little to offer to young and inexperienced professionals, who can’t find work and subsequently cannot rent their own apartments. When considering investing in a rental property, think about your prospective tenants. Are there enough of them to allow you to create a competitive market wherein you can charge a rent that

will put a significant dent in the mortgage? Are there enough potential tenants to allow you to be choosy and establish minimum income requirements, or will you likely be forced to accept any and all comers just to pay your mortgage? If the potential tenant market does not inspire much confidence, then that should be a red flag to prospective real estate investors. • Help: Few people who invest in a rental property can handle the job on their own. Making repairs or finding tenants often requires the help of a professional, and those people are likely to cost money. Men and women who aren’t especially handy won’t want to pay a plumber to fix a tenant’s sink or a repairman to replace a cracked floor tile when such issues inevitably arise, so you may have to offer a discounted rent to tenants who can pull double duty as a superintendent to all of the units within the investment property. Especially large units, such as apartment complexes, may require a full-time superintendent, whose salary must be paid by the owner of the building. Another helper a prospective landlord may need is a property management agency that helps landlords find tenants when there are vacancies. Vacant rental properties can negatively affect a landlord’s finances, as landlords rely on rental income to pay their mortgages. As a result, many landlords enlist the services of a property management agency to ensure their properties are well marketed when there is a vacancy. These agencies typically list and show the property, and some will even oversee repairs. But like a live-in manager or a full-time superintendent, property management agencies are an expense and one that prospective investors must learn about and calculate into their budgets before buying an investment property. Investing in a rental property can be a sound business venture that pays substantial dividends down the road. But such an investment isn’t for everyone, and prospective investors should make their decision as informed as possible before buying a rental property.

8 Herald-Citizen Sunday, February 17, 2013

How to improve your next loan application

ew people go a lifetime without applying for some type of loan. Whether the money will be used to finance an education or purchase a home, loans are an integral part of our economy. While applying for a loan is commonplace, getting approved for a loan is not always easy. Many people have gone through the loan application process, which can be tedious and time-consuming, only to be denied by the lending institution. Such rejection can be defeating, but there are things prospective borrowers can do to strengthen their application before reapplying for a loan. • Examine your credit report. Credit history bears considerable weight when applying for a loan, so men and women whose applications were rejected should examine their credit reports to see if any discrepancies exist that might have hurt their chances of being approved. Such discrepancies occur on a regular basis, and they can affect an in-

Applicants who were rejected for a loan can take several steps to improve their chances for approval when they reapply.

dividual’s credit score significantly. • Pay down debts. Even applicants who meet all of the eligibility requirements for a loan might be a red flag to prospective lenders if those applicants already have a substantial amount of debt. If your loan application was denied and you carry a lot of debt, pay down that debt as much as possible before reapplying for a loan. Credit card debt should be the first to go, as other types of debt, including student loans that are always paid on time, show that you’re capable of handling an installment loan (such as a mortgage or car payment). Whether it’s fair or unfair, significant credit card debt indicates to lenders that you are not financially responsible and not a worthy loan candidate. • Find a guarantor. An unsuccessful loan application might have little to do with the applicant and a lot to do with the lending institution’s policies. Some lending institutions may not lend to applicants with a very short or nonexistent credit history. In such instances, applicants may feel they are trapped in a catch-22. However, an applicant in such a position may want to ask a friend or family member to be a guarantor on his loan application. A guarantor is a person who agrees to pay the loan if the applicant cannot. For instance, many young people with little or no credit history ask their parents to be

guarantors on an auto loan so they can purchase a reliable vehicle or simply earn a lower interest rate to make the loan payments more affordable. Just be sure the person you ask to be your guarantor has a strong credit rating, and don’t be surprised or upset if a close friend or family member does not want to be a guarantor, which is a significant responsibility that many people would prefer to avoid. • Save more money. Some loan applicants are rejected because their initial down payment, or lack thereof, is simply not enough to make the resulting monthly payments affordable. In the case of a mortgage or a vehicle loan, the less money you can put down, the more your monthly payment is going to be. A lending institution will examine your down payment and calculate what your monthly payment will be should you be approved. If the institution deems that monthly payment too high, then your application will be denied. If that’s the reason your application was rejected, then save more money so you can make a more significant down payment when you reapply for a loan in the future. Being rejected on a loan application can be defeating. But there are several things applicants can do to improve their chances of being approved when they reapply down the road.

Make early R retirement a reality

Herald-Citizen Sunday, February 17, 2013 9

etirement is a goal for nearly every working adult. Long considered a time to enjoy the fruits of a life’s worth of labors, retirement has become something else entirely over the last several years, when the struggling economy has convinced many aging workers that their opportunity to safely retire may never present itself. But retirement does not have to feel like a wild goose chase with the end goal nowhere in sight. In fact, many men and women who develop a plan early on can retire early, reaping the rewards of their success at an age when many people are still wondering if they can retire at all, much less retire early. • Conduct an immediate audit of your finances. The road to early retirement begins, quite frankly, very early. If your retirement goal is to retire early, conduct an audit of your financial situation as soon as possible, even if you are a relative newcomer to the professional sector. Examine all of your debts and other liabilities, as well as your income and your potential earnings. It may be diffi-

cult to forecast potential earnings, but paint a realistic forecast with regard to your earning potential, and then use that to determine your standard of living and how much money you will need to maintain that standard upon retirement. This should give you an idea of how close or how far you are from early retirement and what you need to start doing now so early retirement can be a reality later on. • Don’t sell savings short. Men and women who retire at the traditional retirement age can count on certain benefits that early retirees aren’t eligible for. Senior discounts can decrease the cost of living for typical retirees, who can also access retirement accounts like a 401(k) or an IRA without paying a penalty. Younger retirees are not eligible for senior discounts, and accessing a retirement account before a certain age can result in a substantial penalty. So men and women whose goal is to retire early should not underestimate the value of a healthy savings account. Retiring early will require a more robust savings account than if you were to

retire at a more typical age, so calculate how much more you will need to save in order to retire early. Once you have calculated that figure, ask yourself if it’s realistic that you can save that money and what effect this increased emphasis on savings may have on your quality of life between now and the day you’ve targeted for early retirement? If you cannot realistically save enough money or if you have to sacrifice too much to make early retirement happen, then you might want to reconsider this goal. • Accept sacrifices. Making sacrifices with an end goal of early retirement may be easier for younger men and women who have yet to grow accustomed to a certain standard of living. Regardless of their age, however, those who hope to retire early will need to accept that they will have to make certain sacrifices to achieve their goals. These sacrifices can be considerable, such as downgrading to a smaller home, or relatively minor, such as cancelling a cable television subscription, but for the average worker they will be

necessary to make early retirement happen. The earlier you can make these sacrifices the easier they will be, as it won’t be as hard to sacrifice something you’re not used to having. In addition, the earlier you make these sacrifices the quicker you will be on the road to early retirement. • Periodically reassess how it’s going. The road to early retirement will have its peaks and valleys, so periodically reassess how your plan is going and if you need to alter the plan in any way to make early retirement a reality. This reassessment should be conducted annually, and you must be completely honest with yourself. If the plan is going off course, determine the cause and if there’s anything you can do to catch up or if you need to change your targeted retirement date. Early retirement is a goal for many people. And despite the uneasiness many people feel with regard to retirement, early retirement can become a reality for diligent men and women who develop a plan and stick to that plan in the years to come.

Bill Scruggs, Financial Advisor

You may also want to plan your estate if you have special circumstances such as: • You have minor children or children with special needs • Your spouse is uncomfortable with or incapable of handling financial matters Without proper retirement planning, playing golf every day may be unrealistic. • You in more one state Lifetime Income Annuity you can But,have withproperty a New York Lifethan Guaranteed • You have special property, such artwork or so collectibles generate the extra income youasmay need, you won’t dig yourself into a hole. Talk to us today to learn more. What are you waiting fore? • You have a business or farm you wish to keep in the family

Andrea V. Burckhard, Agent Estate planning allows you or anyone to implement certain tools now to ensure that your New York Life Insurance Company concerns and goals are fulfilled after you die. Your objective may be to simply make sure 320 E. Broad Street, Suite 1A, Cookeville, TN 38501 that your loved ones are provided for. Or you may have more complex goals. Therefore, Office: 931-525-5433 | Fax: 931-525-6636 | Cell: 931-265-1959 430 N. Washington Avenue estate planning is important whether you are wealthy or whether you have a small estate. www.AndreaBurckhard.com | avburckhard@ft.newyorklife.com Suite A, Cookeville, TN 38501 In fact, estate planning may be more important if you have a smaller estate because final (931)520-0778 Issued by New York Life expenses Insurance andwill Annuity Corporation (NYLIAC), A Delaware a wholly -owned subsidiary York asset Life Insurance have a greater impact on Corporation, your estate. Wasting even ofa New single may Company, cause 51 Madison Avenue, New York, NY 10010. Product may not be available in all jurisdictions. Guarantees are backed by the claims-paying ability of the issuing company. www.raymondjames.com/bscruggs loved ones toGuaranteed sufferLifetime from lack ofis 211-P100. financial resources. For most jurisdictions, the policy your form number for the New York Life Income Annuity State variations may apply. AR03354A_1211 | SMRU00462816CV (Exp. 12/15/2013)

Raymond James Financial Services, Inc., Member FINRA/SIPC

10 Herald-Citizen Sunday, February 17, 2013

Financial lessons can begin during childhood Introduce children to financial concepts at an early age so they can use these lessons throughout their life.

oney may not buy happiness, but money does make people feel more secure. Although money is not a way to measure selfworth, understanding its role in society can help mold a child into a responsible adult. Many parents fail to recognize the significance of teaching children about finances, but it is never too early to impart lessons about money. Although some concepts may be difficult for younger kids to grasp, understanding money can help set youngsters on a positive financial path. Raising a responsible person is not only about advising him to avoid drugs and alcohol or to get a good education. It also is about how to manage money and save

John Crouch Agent

for the future. Financial situations have changed. An adult can give pause and think about just how much money has changed through the years. While once upon a time a savings account may have been enough to get by even into one’s golden years, today’s children will eventually have to learn more difficult lessons about saving for retirement and investing their money wisely. Gone are the days when the majority of people retire with healthy pensions. Today’s children will need to understand saving for retirement, managing healthcare costs and budgeting for diminished government-supplied benefits, all while making sense of the myriad financial

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products and services available today. To ensure children are prepared for all that is in store, lessons in money management can begin as early as a child is capable of understanding what money is and how it can be used. Setting children on a strong financial path There are many ways to teach kids about money. Here are some ways to get started. • Introduce children to money as soon as they can count. Repetition will help children learn the values of currency, and children can begin by counting the number of coins deposited into a piggy bank. • Talk about money in day-to-day activities. Use examples to show children how money is a factor in daily life. When making purchases at the store, talk about how much each item costs. If school supplies are needed, explain the expenses associated with buying these items. • Use concrete examples. When beginning early lessons on money, it is easier for children to grasp concepts in a visual sense. Pay at stores with cash and change to show how money that was once in a wallet is now depleted. If an allowance is given to children, pay in monetary denominations that are easy to count, such as dollar bills, allowing kids to save a few dollars and spend a few at the same time. • Be open about the family’s finances. While you don’t have to share all of the minute details, encourage children to ask questions about bill-paying and how you earn a salary. Kids may know their parents go to work but may not equate that action with earning money to pay for housing and necessities. Show a checkbook ledger or a budget spreadsheet to illustrate the flow of assets. • Explain the differences between needs and wants. A child who has seen the latest toy commercial may go to her parents saying she “needs” to have that item. Make a lesson out of identi-

fying what is needed to live comfortably and the things that are luxuries. This also may be a valuable lesson for adults as they see which luxury items (such as a new car or big-screen TV) are not really a necessity. • Set personal goals together. Goals can be tied to saving money. For example, a child may want to save money to pay for a particular video game. An adult may want to devote more to charity. Goals can teach valuable lessons about money management. • Take kids to the grocery store. Research indicates about one-third of a person’s take-home pay is spent on grocery and household items. Therefore, the grocery store can be the ideal place for kids to learn financial lessons. Some stores now have self-scanner guns that enable you to keep track of what you’re spending as you shop. Let kids use the scanner so that they can see how purchases add up. • Give children the opportunity to earn their own money. Children can learn lessons about money more easily when it’s a hands-on experience. For those who are too young for a job, chores around the house can be done to earn an allowance. Set rules about how much money can be spent versus saved. Having their own money to spend may help kids take more pride in themselves and give them a sense of independence. • Be honest about your own mistakes. Learning often involves making mistakes along the way. Share personal experiences with children about how you may have tripped up with regard to money so they will understand that no one is perfect. • As children get older, introduce more complex topics. Topics such as interest, using credit and investing money can be introduced slowly as a child gets older. At this point you also can mention what is going on in national and local economies.

Herald-Citizen Sunday, February 17, 2013 11

Financial tips for young professionals Despite an unpredictable economy, today’s young professionals can still employ several strategies to secure their financial futures.

oday’s young professionals face a future that’s perhaps more puzzling than any generation of young people has encountered in r decades. An economic stall that has carried on for half a decade coupled with an uncertain job market has made it difficult to anticipate what lies ahead. Money management is a priority for the young professionals fortunate enough to have found steady employment in a difficult job market. However, many young professionals are unsure about managing their finances once they begin earning their first steady post-college paychecks. The following are a few basic financial tips for young professionals who want to make the most of their money in the years to come. • Think retirement. It might be hard for ryoung people who just started their professional careers to start thinking about retirement. But saving for retirement should begin the moment you accept your first job offer. If your company offers a 401(k) plan, enroll as soon as you’re eligible (many companies do not allow new hires to enroll until they’ve completed a 90-day evaluation period). If you find a company that matches your contributions, that’s even better. If the company does not offer a 401(k), then speak to your bank about opening an IRA, or individual retirement account, and set up automatic deposits into that account to coincide with each pay period. • Don’t go crazy with credit. Many 30somethings have horror stories about overusing credit cards in their 20s and fighting to get out of debt for years. Don’t fall into that trap. An entry-level position might not pay very well, but don’t dig yourself into a hole by living above your means and financing such a lifestyle with credit. It’s beneficial to sign up for a credit card once you start working full-time so you can start to establish a credit history that, if you use credit wisely, will help you down the road. But don’t go crazy with credit. Instead, use credit cards sparingly and pay balances in full whenever possible.

• Open a savings account. It might sound simple, and it is, but open a savings account if you don’t already have one. Many young professionals fail to open a savings account when they start working, as some may feel a retirement account such as those previously mentioned are enough for saving for the future, while others feel their checking account can double as a savings account. But neither of those approaches are correct. A checking account linked to a debit card means you’ll routinely be dipping into your “savings account,” while you incur steep penalties for using retirement money should you need to withdraw funds in the case of an emergency. A traditional savings account will earn you interest (many checking accounts do not), help you secure your financial future and ensure you have cash on hand in the case of an emergency. • Start repaying your student loans. Young professionals with student loans to repay should begin repaying those loans as soon as possible. Many student loans afford borrowers a sixmonth, interest-free window after graduation during which no payments must be made. But when that sixmonth grace period expires, borrowers must begin repaying those loans or seek a deferment or forbearance. A deferment is a period during which repayment of your loan is temporarily delayed and, depending on the type of loan, the government may pay the interest that accrues during the deferment. A forbearance is for those borrowers who don’t qualify for a deferment but still need to delay making payments. A forbearance can typically last as long as 12 months, but during that period interest will accrue on your loans and you will be responsible for paying that interest as well as the loan principle. But young professionals should begin repaying their loans as soon as possible, and ideally pay more than the minimum each month to decrease the amount of interest paid over the life of the loan. Making loan payments each

month helps build credit history, and the sooner a person starts repaying the sooner he or she will be free of the burden of monthly payments. The economic climate many young people are now entering is certainly no walk in the park. But some simple financial strategies can help young professionals establish themselves financially regardless of how weak or strong the economy is.

DO D O YOU Y O U HAVE H AV E ENOUGH ENOUGH TO T O RETIRE R E T I R E ON? ON? ENOUGH E N O U G H INFORMATION, I N F O R M AT I O N , THAT T H AT IIS? S? With our retirement income expertise, we can help bring your future into focus. These days, you need more than just Social Security, investments and a pension. You need the tools, resources and expertise to plan for retirement. And you’ll find them all right here. For instance, we use an established discovery process to help determine how much you’ll realistically need each month for your retirement – and how to best meet that challenge. So let’s have a conversation. What develops from there can be a professional relationship that lasts a lifetime.

visit us at www.raymondjames.com/luna-birdwell to learn more. Bob Luna, Branch Manager Diane Herren, Financial Advisor 440 S. Lowe Ave, Suite 29 | Cookeville, TN 38501 931-528-5862 | 866-528-5862 bob.luna@raymondjames.com ©2013 Raymond James Financial Services, Inc., member FINRA/SIPC Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC Raymond James is a registered trademark of Raymond James Financial, Inc. 12-RPRet-0055 EK 12/12

12 Herald-Citizen Sunday, February 17, 2013

What to do with your retirement account before the next economic downturn Investors age 50 and older should begin to reduce the risks associated with their retirement accounts, choosing more stable investments as they age.

struggling economy can have both instant and longterm consequences. When the economy is suffering, consumers tend to spend less in the short term while making financial decisions that affect them over the long haul. One of the biggest quandaries men and women face during a recession or economic downturn is how to approach their retirement accounts, most notably a 401(k). When the economy begins to struggle, men and women may notice their 401(k) plans are struggling right along with it, losing money that most were counting for their retirements. This can induce a certain degree of panic, as account holders worry about their financial futures and how they are going to get by should the recession last and their retirement accounts continue to shrink. But such panic might be unwarranted. According to the investment management firm Vanguard, participant saving and investing behavior had returned to prerecession levels by 2010, and participant account balances actually rose 13 percent between 2005-2010, despite the considerable market shock that occurred during the recession of 20082009. Those figures illustrate that even during a particularly bad economic swoon investors will return to their typical behavior sooner rather than later. Therefore it pays to avoid overreacting at the onset of a downturn and maintain your peace of mind. While some people manage to maintain a cool head during times of economic struggles, others may lose sleep when

the next recession or downturn rears its ugly head. To avoid succumbing to such stress, consider the following tips to protect your retirement accounts should the economy once again take a turn for the worse. • Pay attention to your portfolio. Young people just beginning their professional careers are often told to enroll in a 401(k) program as soon as possible, but to avoid making any changes in the near future once the account has been set up. While no investors, young or old, should allow a knee-jerk reaction after a bad financial quarter to dictate how they manage their retirement accounts, that doesn’t mean you should ignore an account entirely. Pay attention to your portfolio, examining it at least once per year so you can make adjustments to your investments if need be. Just don’t allow a sudden reaction to a bad quarter dictate these adjustments, which should only be made after a careful examination of your retirement account’s portfolio and its performance. If you’re happy with the performance, don’t change a thing. • Reduce your risk as you age. Financial experts can often predict when the economy will thrive and when it will struggle. But unless you are such an expert, avoid playing with fire. As you age, reduce your risk with regard to your investments. Young people can afford to take on more risk because they have more time to make up for a risk that doesn’t work out. Men and women age 50 and older have no such luxury and should reconfigure their retirement accounts as they age so their investments are less risky and more conservative.

This strategy should be put to use even if you lost a substantial amount of money during a previous recession or downturn. It might be tempting to try to make up for lost money, but that strategy carries considerable risk, and you might end up depleting your retirement savings a second time. • Spread the money around. When contributing to a retirement account such as a 401(k), the standard is to deposit 6 percent of each paycheck into that account. If you’re depositing more than 6 percent into your retirement account, consider decreasing your retirement contribution to the standard amount and depositing the extra money into a highinterest savings account. The savings account won’t put your deposits at risk, and if the economy is faring well, you will still be doing well with your 401(k) while ensuring some of your money won’t suffer should the economy suddenly take a turn for the worse. • Don’t cash out too early. When the economy struggles, many investors have discovered they simply don’t have the stomach for investing. That’s perfectly understandable with certain investments, but a retirement account should not be one of them. Cashing out a retirement account too early could incur substantial penalties that, if your retirement account was affected poorly by a bad year, may only further deplete an account you likely spent years building. Avoid the temptation to cash out early if your retirement account is struggling. It’s often not worth the steep price.