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Francis Vayalumkal

When purchasing a house, putting 20 percent down was a normal practice. People saved up money so that they had enough to cover the 20 percent and the closing cost. That was the olden days. Back then, the median price of a home in the U.S was around $125,000 – about half of what it is today. As the price of homes increased, down payment almost doubled, making it more difficult for buyers to put down their expected down payment to qualify for a loan. This is when the lenders desperately looking for ways to sustain their business volumes relaxed their down payment rules and came out with financing up to 100 percent of the price.

The 100 percent loans were the most popular and consumers didn’t want anything but the 100 percent loans. The high LTV and low credit standard lending was only good for a short time. The recent real estate downturn has been a reality check for both lenders and consumers. A large number of highly leveraged loans are turning into foreclosures. In many instances, the easy credit that banks extended has translated into homeowners who are financially overextended and banks strapped with bad loans.

According to data from the National Association of Realtors, almost half of all first-time buyers between 2005 and 2006 financed the entire transaction through 100 percent mortgages. Of those who made a down payment, 30 percent put down 10 percent or less. The average first-time buyer leveraged about 98 percent of the purchase; a statistic that many economists find alarming at a time when the savings of the average American is lower than it's been since the Great Depression. Repeat home buyers – thanks in large part to large profits they reaped through selling previous homes – typically made down payments of more than 15 percent, a statistic that underscores the fact that real estate is still one of the best investments someone can make.

With the recent changes in the real estate and the home financing industry, many of the 100 percent loan programs have gone away. There are still many ways to get 100 percent financing but the credit standards have tightened up to avoid making the same mistake again. In future we can all expect to put some money into the home-buying transaction and still be creative in the financing.

In a rising market, 100 percent leverage can pay off; but it's a potentially risky strategy. If you're considering a home loan mortgage, don't view the down payment as your enemy. If you can make a substantial one, it may turn out to be a safe and sound investment that saves you tens of thousands of dollars in interest. Down payments can provide you with three things: (1) positive returns in the future because of possible equity appreciation; (2) peace of mind knowing that you aren't overextending your finances; and (3) the convenience of lower monthly mortgage payments. Spend some time with your loan officer to figure out how much of an advantage you have when you put down a certain amount as down payment.

Francis Vayalumkal is a loan officer at Market Street Mortgage and can be reached at (813) 932-4578, Ext. 234 or via e-mail at

Finance | Financial advice | Immigration | Special Needs | Accounting | Business | Labor Law | Asset Protection

Nitesh Patel

Single people have different financial responsibilities and planning needs than married couples. Nonetheless, they need to prepare their financial futures just the same. Everyone, whether male or female, single or married, needs to think through their financial goals based on their financial position now and what they would like it to be in the future.

When it comes to preparing for their financial futures, single people often sell themselves short by overlooking an important part of their financial equation: insurance. In particular, health, disability and life insurance can help protect against a substantial risk of financial loss, married or not. In fact, nearly half of all Americans filing for bankruptcy do so because of medical expenses. (“MarketWatch: Illness and Mystery As Contributors to Bankruptcy,” Harvard Law School and Harvard Medical School, Feb. 2, 2005)

What many don’t realize is that a long-term injury or illness can occur at any time, preventing a person from working for months or years. It also could preclude one from being able to purchase life insurance.

It’s obvious that the younger you are, the lower your chances are of dying. However, the chances of suffering a disability are significantly higher. For example, nearly one out of three 25-year-old females will become disabled for 90 days or more before reaching age 65. For males, the chances are one out of five. (“What are the Odds” calculator, Ironically, people will insure their car, home and even jewelry without hesitation but don’t think about protecting one of their most valuable assets: their ability to generate income.

If you have not already done so, you should consider the importance of having health, disability income and life insurance protection.

Health Insurance

You probably have some type of coverage through your employer - most people do. If you do not have health insurance, you are putting yourself at risk of incurring financially overwhelming medical or hospital expenses if you were to suffer an injury or illness. With an individual policy, you can keep premium costs down by electing higher co-insurance limits or a larger deductible. The premium cost to have full coverage for ordinary doctor visits and run-of-the-mill illnesses may be more than if you were to pay for them out of pocket. Instead, you may be better off choosing a policy with a “stop-loss” provision to limit your share of overall health care costs to a manageable sum.

Disability Income Insurance

Another very important way to protect yourself financially is to insure your ability to generate income. This is especially true for self-supporting singles without other people or sizable assets to rely upon. A disability can have a devastating impact on one’s finances: expenses for a mortgage/rent, groceries and other basic necessities continue and may even rise if you cannot work.

Disability income insurance can replace a good part of your paycheck if you become unable to work because of an accident or illness. Some employers offer short-term and possibly long-term group disability coverage. However, if your employer does not provide this type of coverage, the amount your employer provides is not sufficient or you are self-employed, you should consider purchasing an individual policy. You can customize a policy to accommodate a wide range of financial (and budget) needs.

Life Insurance

Many people think you have to be married with children to need life insurance. But, as a single person, you should think twice before you dismiss life insurance altogether. You may not have an immediate need for it, but think about your future. Do you plan to get married and start a family some day? Will there be a time when others will rely on you financially? If you buy now when you are young and in good health, you can “lock in” coverage at a lower premium and guarantee you will have insurance to help you protect your (family’s) financial future.

To keep your costs down, you can purchase a term policy with the option to upgrade to a whole life policy. If and when you choose to upgrade at a later time, the new whole life premiums will be based on your health at the time you purchased the term policy, regardless of your health at the time you upgrade.

While there are many factors to think through with regard to your short and long term financial needs and goals, talking with an insurance representative can help. A trusted representative can help you decide what kind of insurance is best for you and how much you may need in order to achieve financial security in the long run.

Single or married, insurance is one way to help you manage some of life’s risks and is an important part of a sound financial and personal plan. The financial goals you have for today may be simple and few, but planning with the future in mind can help you reach the financial goals of a lifetime.

Nitesh Patel is a financial representative with the Northwestern Mutual Financial Network based in Clearwater for The Northwestern Mutual Life Insurance Company, Milwaukee, Wisconsin). To reach Patel, call (727) 799-3007 or e-mail

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Kamlesh Patel
CRUNCHING ‘EM NUMBERS: small business gets tax breaks in new law


The Small Business and Work Opportunity Tax Act of 2007, signed into law on May 25, offers tax breaks for you and your business – and also contains less beneficial provisions that may require changes to your tax plan.

Here’s an overview:

Additional Section 179 deduction. For 2007, you can expense up to $125,000 of business assets, including furniture, equipment, and computer software. Under prior law, the maximum Section 179 expense for this year was $112,000. In addition, the special rule for the Gulf Opportunity Zone is now effective through 2008. This rule applies to specific areas affected by Hurricane Katrina and allows an extra Section 179 deduction of as much as $100,000.

Extended Work Opportunity Tax Credit. The credit, scheduled to expire after 2007, has been extended through Aug. 31, 2011, and the definition of several “targeted groups” was expanded. The credit offsets part of your income tax when you employ workers such as veterans or vocational rehabilitation referrals.

Simplified family business filing requirements. If you wanted your spouse to take an active role in your business but hesitated because you thought you’d have to file a partnership return, now may be the time to act. Starting this year, you can elect to allocate business income on your joint Form 1040 tax return.

Tip: Splitting business income can affect future social security benefits.

Expanded kiddie tax. For 2007, when your under age 18 dependent child receives net unearned income of more than $1,700, the excess is taxed at your rate. Beginning in 2008, the tax will apply to children under age 19 and to students under age 24.

summer can be tax-cutting time

Now that the April filing deadline has passed, you probably aren’t thinking about income taxes. But during the warm days of summer, you can make choices that will cut your taxes for 2007 and beyond. Vacation homes. If you’re planning to spend several weeks at the beach house that you rent out for the rest of the summer, you might want to check out the tax rules concerning personal use. By adjusting the number of days you use your vacation home, you may be able to deduct any rental loss you incur.

Combining business and vacation travel. Travel expenses are deductible if the travel is undertaken primarily for business purposes; thus you may wish to combine attendance at an out-of-town business conference with a visit to family or friends. (The expenses attributable to the personal part of the trip, though, remain nondeductible.) When doing any business traveling, make a distinction in your records between expenses for lodging and transportation and those for meals and entertainment. Only the latter are subject to a 50% deduction limitation.

Hire the kids. If you own your own business, pay your children to work for you. You’ll get a deduction at your higher bracket, while the children will be taxed on their wages at their lower rate. They won’t be taxed at all on the first $5,350 of earned income. Wages you pay to your under-18 child may be exempt from social security and Medicare tax. (This exemption applies only to your own children.) The pay must be reasonable for the work actually performed.

Fixing up the house? If you’re planning to make improvements to your home, get details on the tax credit available for making energy-saving changes to your residence.

the who, when, and how of business succession planning

Succession planning is important for a family-owned business. Before you sit down with your tax and legal advisors to draw up a succession plan, you should think through three key issues: who do you want to succeed you, when do you want the transition to take place, and how do you want to structure the transition.

The question of who will succeed you in the business can be the toughest of all, largely because there is so much emotion involved. Most owners want to pass the business on to the family. But are your children willing to take on the business, and if so, are they capable of running it? Will it cause a family squabble if one or two children want to run the business, but others are not interested? Resolving these issues may take a lot of honest, open discussion with family members to discover their true feelings. If there is not an obvious family successor, other alternatives include selling the business to an outsider, promoting an existing employee to head the business while you retain ownership, or even selling the business to the employees.

When you make the transition depends on a number of factors, such as your age, health, retirement goals, and the readiness of a successor. Consider whether you want to maintain some involvement with the business or make a clean break. Remember, though, you should always have a contingency succession plan in case of sudden death or disability.

How you structure the transition depends partly on the answers to the earlier questions and partly on financial considerations. Think through issues such as whether you need retirement income from the business or whether you primarily want to minimize estate taxes. Knowing your goals for the transition will make it much easier to tailor a succession plan that fits your specific situation. For assistance with this critical business task, give us a call.

Kamlesh H. Patel, CPA, can be reached at (813) 289-5512 or (813) 846-5687 or e-mail or

Finance | Financial advice | Immigration | Special Needs | Accounting | Business | Labor Law | Asset Protection

Satya Shaw

A successful retirement does not just happen; you have got to plan for it. The long ramp toward retirement focuses on saving and investing, but once retirement starts emphasis shifts to spending and safeguarding. Even though the greatest challenge in retirement, and probably your greatest fear, is outliving your money, most people spend less time planning their retirement than they do planning a vacation.

What does retirement planning involve? Here are the steps: First, determine what you would ideally like to do in retirement, and then discuss it with your spouse and other loved ones. Will you spend your time traveling, enjoying hobbies, helping others, working part time, or what? Second, estimate the retirement income you'll have from savings, Social Security, pension and all other sources. Third, estimate your expenses making sure to take account of inflation, taxes and health care costs, which are likely to be an increasing part of your budget.

Steps two and three should be done for each five-year period of your retirement and then revised annually. Fourth, if you have more income than needed, you only need to safeguard your investments to make sure they're not lost or shrunk by bad decisions. If you have insufficient money for retirement (expenses exceed income), then you'll need to postpone retirement, work part-time or possibly use a Reverse Mortgage to access the equity in your home. Either way, it is highly recommended that you minimize your exposure to loss and maximize the full potential of your financial resources by working with a financial adviser. They can help you determine the risk you can afford, investment options and how to position your money for best results without sacrificing safety. Retirement is going to be long, filled with uncertainties, including emergencies, and going it alone is one of the greatest risks you can take.

Be realistic in your planning. For example, be aware that for a couple age 65, there is a 50 percent probability that one will live beyond age 90. Acknowledge that even a low rate of inflation can make a big difference in prices over the 20 to 30 years you'll be in retirement. For example, average inflation of 3 percent means $1 today will be worth only 55 cents in 20 years and 41 cents in 30 years. Since 78 million boomers are entering retirement over the next two decades, the price of everything related to retirement, especially health care, is likely to rise faster than overall inflation. Inflation is a cruel tax for those on fixed incomes, and chances are your income in retirement will increase a lot slower than prices.

The boomer explosion is going to overwhelm government-provided services and benefits. This means that the relative benefits of Social Security and Medicare are going to shrink under the pressure of increased retirees. There will simply be more people receiving entitlement benefits than workers paying the bills. Every study, government and private, indicates there will be a shortage of money to support these programs. To pay for this shortfall, the government must raise taxes of all types. The increased taxes, inflation, relative decrease of benefits combined with escalating medical care costs will be especially burdensome for those in retirement without rising incomes from wages and salaries.

If you haven't evaluated it yet, investigate the risk you're taking with your retirement money. Would you have a loss if the stock market lost ground? You might if your money is still in your ex-employers 401(k) plan, or if you own securities, even mutual funds, whose value is determined by the market. Generally, investments in stock have done well long term, but you may need your money before a long time. From November 1973 to October 1974, the S&P stock market index fell 48 percent, and it took over six years to recover. The last bust in the stock market was 2000-2002, and we have yet to fully recover. In the meantime, inflation marches forward with the shrinking dollar purchasing less. Much of your income in retirement is likely to be derived from your savings and investments, and you simply can not afford risk of loss and the compounding of inflation. If you lose some or all of your retirement money to bad investments, you'll increase dramatically your chances of realizing your greatest fear: outliving your money.

How do you safeguard against the challenge of too many years and not enough money? Like law and medicine, financial planning is best left to professionals. Your job in retirement is to enjoy life free of investment worries.

Satya B. Shaw, CPA, can be reached at (813) 842-0345.

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