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Tuesday, January 29, 2013

College Savings Plan Questions

“Do you know anything about 529 plans?”  This is a question that arises quite often in my business.  My answer is typically, “Yes, but a 529 plan may or may not be the best fit for you and your family.”  “But, we want to save for our kid’s college,” is the response I get.  And yes, 529 plans are one of many ways to save for college.  There are several questions to think about as the college saving decision is made.  Below are a few:

·         How much of a tax advantage do I want?

·         How much flexibility for the use of funds do I want?

·         How long before my kids go to college?

·         Do I want one account for each child or one account that covers all children?

·         Do I want the money to be available for higher education only or is secondary education a concern?

·         How do I want saving for college to potentially affect my ability to receive financial aid?

·         How much control do I want over the money?  

·         How much would I like to contribute per child?

These are 8 of the many questions that need to be answered before a decision can be made on what type of account will work best for a particular situation as it pertains to saving for college.  Make sure you meet with your financial advisor to help walk you through the process of choosing the right college savings strategy. 

Friday, January 18, 2013

Thoughts on Buying a Home

As a follow up to a previous blog post on selling our house this past summer, I also picked up a few ideas on buying a house (although I hope to never have to use them again).
·         Don’t be intimidated by the purchase agreement.  The purchase agreement is a legal document similar to one that would be signed in any other financial transaction.  Read it over carefully, but don’t let it scare you. 
·         Know the ideal price you would like to pay for the house and the maximum amount you will pay for the house before you write your first purchase agreement.  Knowing this number before you start the negotiations will help to keep some of the emotion out of the decision.
·         Decide how much cash you have to put down on the house and then weigh the other factors.  What will my interest rate be?  Is it a favorable rate over the term of my loan?  Will this seem like a good rate in 5-10-15 years?  Is it more favorable to put more money down on the house or keep more in cash knowing there is a likelihood for upfront expenses to fill a new house?  Should I have the seller pay some closing expenses to help preserve cash?
The biggest confirmation I had with our move this summer was one that I suspected all along.  The more emotion we could keep out of the decision making process the better off financially we would be.  There is one slight problem though—buying a house may be the most emotional decision a person ever makes.  Don’t be afraid to bring in a third party to check your math or go through the properties with you.  Ask them for an unbiased opinion.  It can only help.  Good luck!