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Tuesday, February 10, 2015

Important Information about Filing Your 2014 Tax Return

If you have a taxable investment account that invests in mutual funds, unit investment trusts, exchange traded funds, foreign securities, or municipal bond funds, you will receive a 1099 from LPL Financial that shows the reported income and classification of that income (ordinary dividends, qualified dividends, capital gains, etc.). It has become very common for the issuers of these securities to change the tax classification of dividend payments after the original 1099 tax statements have been issued. This has resulted in the issuing of corrected tax statements after the tax filing deadline.

In order to minimize the issuance of corrected tax statements, LPL Financial is going to delay the original statements until either mid-February or mid-March. Once completed, your statements will be available on AccountView, and they will also be mailed out.

Tuesday, February 3, 2015

Buying a House

In my over 20 years of helping my clients with their financial goals, I have had the opportunity to observe hundreds of home purchases. Many times I am able to continue to follow the financial impact of these transactions on the overall financial plan. Here are some of my observations:

· People often buy homes that they cannot afford. Stated another way, they forget to consider all of the costs of home ownership including remodeling, improving, and furnishing a new home. I have seen home affordability guidelines that recommend up to 36% of your monthly income going to your house payment. This is too high. If you overbuy on your home, you are more likely to use credit cards or your retirement funds to pay for unexpected expenses. This can be devastating to your overall financial plan.

· People do not save enough money for the down payment and closing costs. If you do not have enough cash to put 20% as a down payment along with the closing costs, you need to be more patient. If you find saving for a down payment to be difficult, you cannot afford the house. It would also be a good idea to have a couple thousand set aside for immediate furnishing and repair needs.

· People let emotions override good financial decisions. One of the biggest mistakes is to start looking at homes or going to open houses without first establishing your budget. After looking at homes that are much higher than your price range, the lower priced homes won’t look as good. All of a sudden you fall in love with walk-in closets, second floor laundries, and granite countertops. Unfortunately, these features are rare in your price range. All of a sudden you are raiding your retirement accounts and paying steep taxes and penalties to get these amenities. Not good.

Your home is probably your largest and most important purchase. It is also one of the few financial decisions that involve so many emotions. Ideally, you want a place that you can enjoy and feel safe and secure. This is better achieved by minimizing the financial stress of maintaining a home you cannot afford.