Over the last five years more and more people are stepping outside of the box and recapturing huge amounts of wealth that would have been lost to costly conventional banking and finance methods.  Methods that is costly and inefficient to families and businesses.  New ideas are starting to catch on and a transformation of how we think and use our money is building momentum.  By changing our thinking about how we use our money, you can change the course of your financial future.  Optimizing your cash flow will empower you to accelerate to your goals and recapture wealth that can be redirected to your family and community where it belongs.

Every dollar we make is a valuable resource.  It is has to be put to work somewhere by someone.  That can be you or someone else like the bank.  How do we know where to put it that will give us the maximum result?  First we have to identify what kind of vehicles are out there.

Consider this, where you put your money each time you get paid will determine how fast you pay off your debt and create wealth.  Every dollar you earn could be used to limit interest accrual or earn a return.  If you take home $5,000 a month and spend $3,500 a month in expenses you have a $1,500 surplus.  Where do you get the most benefit from that surplus?  If you let it sit in a checking account you are just loaning it back to the bank.  You could put it in a savings account at 1% and earn $1.  Even if savings rates went up to 7% you would earn just $8 a month.

What about sending your surplus to your mortgage company?  It is unreasonable to think that every month you could send all $1,500 to your principal.  Even if you took $700 of it each month it would take you 171 months to pay off a 30 year mortgage of $250,000 costing you $101,000 in interest.  The opportunity cost of that $700 a month could be even more.  Every time you make an extra principal payment that money is trapped at the bank and comes off the back end of your mortgage.

Checking accounts, savings accounts and conventional mortgage liquidity traps all work in favor of the banks.  The more of your money they can get from you without having to give you anything in return the bigger and bigger they get.

We believe the most effective vehicle to optimize your cash flow is in an all in one account.  These accounts are excellent alternatives to conventional financing, checking and low interest savings accounts, because of the way interest and principal is impacted each time cash flow goes through the account.  Your monthly income goes to work for you immediately saving you more in interest than what your saving account would pay in returns.    Thus enabling you to harnesses the power of your monthly cash flow to rapidlyreduce what you owe, paying off your mortgage in 5-7 years, reducing interest accrual by up to 80% of what you would pay conventionally.  These vehicles are designed like a credit line, secured or unsecured, that monthly cash flow can be directed into without losing liquidity and allowing you to access your funds at any time over a 5 to 10 year period without limitation.  You can eliminate having to ever borrow from anyone but yourself again and puts a powerful wealth building tool at your fingertips.   Unfortunately this strategy is not main-stream so it requires some thinking out of the box and some help from a financial strategist with experience in unconventional financing vehicles and cash flow management, see what the risks below are.

See Case Studies here.

What is even more amazing about this cash flow optimization strategy is how effective it is for homes that are underwater in value.  You do not need home equity or a refinance for this to work.  Millions of families lose their homes each year unnecessarily to poor advice and lack of knowledge.  Families or businesses with a positive cash flow could apply the same cash flow strategy inside an unsecured all in one account to accelerate mortgage principal.  If your home is worth $100,000 but you owe $200,000 chances are the only solutions you have been getting until now are; sell your home, walk away from it, file bankruptcy or rent a room.  Easy to say when it is not your home.  All it takes is some innovation and using what you earn more effectively and you could soon be out from under your homes negative equity.  This strategy will not help everyone unfortunately but it will help many families in this crisis save your home.

WHAT ARE THE RISKS?

Risk 1- Lack of discipline.  Commit to practicing better habits and changing the way you think about your money.  You will be paying off debt much quicker but you have to put forth the effort spend wisely so you don’t go back into debt.
Risk 2- No budget.  If you don’t control where your money is being allocated each month chances are your money is not going to be used as efficiently as possible, and until you are out of debt that should be a priority.  Get a budget in place and use innovative strategies like the Credit Card Strategy to stick to it.
Risk 3- Interest Rates/Inflation.  Structured properly interest rates are a non factor.  The size of the loan and rate caps help to mitigate risks.  Seek professional help before attempting to find financing, not from bankers or brokers but from an independent financial strategist, Kingdom Financial Strategists www.mykfs.org, who specializes in cash flow optimization strategies.
Risk 4- The financing.  For this strategy to work you will need an open ended secured or unsecured financing vehicle that allows for rate protection, cash flow optimization and easy access to your cash.  There are only a few banks across the country that offers these vehicles.  If you do not have prior experience in alternative financing then you should seek expert advice.   Bankers and brokers will not be able to give you the advice you need because they are taught to sell you on rate and payment and they get paid more for selling fee based loans with high interest payouts.

Consider some alternative methods of using every dollar you make before continuing down the same path you have been traveling.  You just might find some simple adjustments to the tires will give you the edge you have been looking for to accelerate to your goals.

Your first step is; get qualified help before you make any changes. You shouldn’t have to take unnecessary risks with your finances.  Find an independent financial strategist that works for you exclusively (not for bank or lender) and let them help you navigate through every step of the process.

For advice and a free cash flow analysis contact Stephen Vincelli with Kingdom Financial Strategists, 727-502-7157, visit www.mykfs.org.  Stephen is a financial strategist with over 10 years in the financial services industry.

Is it all negative, or are there opportunities to consider because of the crisis?

Many economists think a Greek default is inevitable. As we enter 4Q 2011, Greece has a debt-to-GDP ratio of about 160% (and that percentage is rising). While Greece accounts for less than 3% of Eurozone GDP, ripples from a Greek default could strain the European banking sector and global financial markets.

Struggling for the best worst-case scenario. Greece is redoing its financial system, but it is still facing one of five potential (and painful) outcomes.

1. Greece renegotiates its debts & forces its lenders into write-offs. Many Greek banks are nationalized; Greece endures a long recession.
2. Greece can’t renegotiate its debts. It sinks into a multi-year depression exacerbated by additional austerity measures.
3. Greece rejects further austerity cuts recommended by the EU. A standoff with the International Monetary Fund and European Central Bank results; the ECB and IMF blink and continue bailout payments to Greece; Italy and Spain see the way Greece made the ECB and IMF cave in and later wrestle the ECB and IMF into submission in the same way; Germany gets frustrated with all this and ditches the euro.
4. Greece rejects more austerity cuts & the EU stops bailout payments. Civil unrest jeopardizes the country. Its banks close; its public services halt. The CIA has advised that a coup may occur in Greece in such a scenario.
5. Greece lapses into a banking/cash flow crisis & leaves the euro. This is the “doomsday” scenario. Assume #4 occurs with Greece also electing to go back to the drachma. That could mean a run on Greek banks, and then Spanish and Italian banks. A return to the drachma could mean frozen borrowing for Italy and Spain and possibly lead to insolvency for major banks in Europe. Picture 17 nations trying to agree on and quickly implement an EU version of TARP. Havoc could result for stocks and the global economy.

This all sounds very gloomy, but prospects may emerge from the gloom.

A(nother) golden opportunity? In the event Greece defaults, the search for safe havens could mean a quick flight to gold. If a Greek bailout succeeds, there may still be fiscal instability among EU members, and presumably an easy monetary policy fostering loose credit. If Greece defaults, then you could see big drops in the spot prices of currencies plus some competitive devaluation. All of this could make gold look very, very good.

On the other hand, if true systemic risk hits global markets, investment banks and hedge funds might need capital fast – and gold is easily liquidated. So a gold selloff could also possibly occur if the situation becomes dire.

What about Treasuries & the dollar? Treasuries remain popular, and demand for them could jump after a Greek default. What other choices do central banks have if they want to shop around for a stable, readily available, reasonably liquid investment? The euro is hardly a rival to the greenback right now.

How about emerging markets? Here is another option. The BRICs and some of the other emerging-market nations have managed to ride out the recent volatility fairly well – there has been some “decoupling”, if you will. No one is saying these markets would be immune from a continental banking crisis or a flight from stocks, but you have to concede that emerging markets have the capability for independent behavior.

Would it still be worthwhile to own blue chips? Keep in mind that the Dow did not fall to 4,000 after the Lehman Bros. and Washington Mutual failures and the initial rejection of TARP by Congress. Stocks did pull out of that plunge, and spectacularly so; bargains abounded, for that matter. So it might certainly be worthwhile to hold onto stocks in the coming months, especially as some European governments have hinted at possible capital injections for banks if the need arises. On September 13, German chancellor Angela Merkel noted that the EU would not let Greece fall into “uncontrolled insolvency” and reports surfaced of China getting ready to purchase Greek debt. Treasury Secretary Timothy Geithner even got involved in the search for solutions in mid-September.

Europe’s biggest private lenders may be deemed “too big to fail” by the EU and ECB, and if unwinding of any financial institutions is needed, the authorities should do everything within their reach to try and make it gradual.

It could be that Wall Street has already priced in a Greek default and will just wince, not stumble, at its confirmation – assuming the news arrives with more inevitability than frenzy.

The biggest fear of all: contagion. Italy and Spain may be “too big to fail” in the eyes of the EU and IMF, but they also face big debt problems. Standard & Poor’s cut Italy’s credit rating to ‘A’ in September; Moody’s Investors Service is weighing downgrades for Italy and Spain before November.

How diversified are you? These debt issues in Europe may linger for years. With the market so volatile, don’t forget the wisdom of having a diversely allocated portfolio.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. All indices are unmanaged and are not illustrative of any particular investment. The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the NYSE and the NASDAQ.

Things you can do before and for the New Year.  Your list may be long, but get started today!

The end of the year is a good time to review your personal finances. What are your financial, business or life priorities for 2012? Try to specify the goals you want to accomplish. Think about the consistent investing, saving or budgeting methods you could use to realize them. Also, consider these year-end moves.

Think about adjusting or timing your income and tax deductions. If you earn a lot of money and have the option of postponing a portion of the taxable income you will make in 2011 until 2012, this decision can bring you some tax savings. You might also consider accelerating payment of deductible expenses if you are close to the line on itemized deductions – another way to potentially save some bucks.

Think about putting more in your 401(k) or 403(b). The IRS hasn’t announced the contribution limit for 2012 yet. Given the moderate inflation of late, we might see the annual limit rise to $17,000 from the present $16,500, or not. In 2011, you can contribute up to $16,500 per year to these accounts with a $5,500 catch-up contribution also allowed if you are age 50 or older. Has your 2011 contribution reached the annual limit? There is still time to put more into your employer-sponsored retirement plan.

Can you max out your IRA contribution at the start of 2012? If you can do it, do it early – the sooner you make your contribution, the more interest those assets will earn. (If you haven’t yet made your 2011 IRA contribution, you can still do so through April 17, 2012.)

We don’t yet know if the 2012 contribution limits on traditional and Roth IRAs will rise from 2011 levels. If the IRS leaves limits where they are now, you will be able to contribute up to $5,000 to your IRA next year if you are age 49 or younger, and up to $6,000 if you are age 50 and older.

Should you go Roth between now and the end of 2012? While you can no longer divide the income from a Roth IRA conversion across two years of federal tax returns, converting a traditional IRA into a Roth before 2013 may make sense for another reason: federal taxes might be higher in 2013. Congress extended the Bush-era tax cuts through the end of 2012; their sunset may not be delayed any further.

Some MAGI phase-out limits affect Roth IRA contributions. If the phase-out limits aren’t adjusted north for 2012, phase-outs will kick in at $169,000 for joint filers and $107,000 for single filers. Should your MAGI exceed those limits, you still have a chance to contribute to a traditional IRA in 2012 and then roll those IRA assets over into a Roth.

Consult a tax or financial professional before you make any IRA moves. You will want see how it may affect your overall financial picture. The tax consequences of a Roth conversion can get sticky if you own multiple traditional IRAs.

If you are retired and older than 70½, don’t forget an RMD. Retirees over age 70½ must take Required Minimum Distributions from traditional IRAs and 401(k)s by December 31, 2012. Remember that the IRS penalty for failing to take an RMD equals 50% of the RMD amount.

If you have turned or will turn 70½ in 2011, you can postpone your first IRA RMD until April 1, 2012. The downside of that is that you will have to take two IRA RMDs next year, both taxable events – you will have to make your 2011 tax year withdrawal by April 1, 2012 and your 2012 tax year withdrawal by December 31, 2012.

Plan your RMDs wisely. If you do so, you may end up limiting or avoiding possible taxes on your Social Security income. Some Social Security recipients don’t know about the “provisional income” rule – if your modified AGI plus 50% of your Social Security benefits surpasses a certain level, then a portion of your Social Security benefits become taxable. For tax year 2011, Social Security benefits start to be taxed at provisional income levels of $32,000 for joint filers and $25,000 for single filers.

Consider the tax impact of any 2011 transactions. Did you sell any real property this year – or do you plan to before the year ends? Did you start a business? Are you thinking about exercising a stock option? Could any large commissions or bonuses come your way before the end of the year? Did you sell an investment that was held outside of a tax-deferred account? Any of these moves might have a big impact on your taxes.

You may wish to make a charitable gift before New Year’s Day. Make a charitable contribution this year and you can claim the deduction on your 2011 return.

You could make December the “13th month”. Can you make a January mortgage payment in December, or make a lump sum payment on your mortgage balance? If you have a fixed-rate mortgage, a lump sum payment can reduce the home loan amount and the total interest paid on the loan by that much more. In a sense, paying down a debt is almost like getting a risk-free return.

Are you marrying next year, or do you know someone who is? The top of 2012 is a good time to review (and possibly change) beneficiaries to your 401(k) or 403(b) account, your IRA, your insurance policy and other assets. You may want to change beneficiaries in your will. It is also wise to take a look at your insurance coverage. If your last name is changing, you will need a new Social Security card. Lastly, assess your debts and the merits of your existing financial plans.

Are you returning from active duty? If so, go ahead and check the status of your credit, and the state of any tax and legal proceedings that might have been preempted by your orders. Review the status of your employee health insurance, and revoke any power of attorney you may have granted to another person.

Don’t delay – get it done. Talk with a qualified financial or tax professional today, so you can focus on being healthy and wealthy in the New Year.  Give us a call today at 866-594-9919 if we can help you plan!

A recent survey found that over 60% of women feel they are better at handling money than men are. However, married women sometimes find themselves in perplexing financial situations – conditions that might be avoided with a little planning and/or foresight. With vigilance, you can plan to steer clear of these 7 mistakes.

1. Not saving enough for retirement after marriage

If your spouse earns a huge salary and has invested avidly, you may have less impetus to save for retirement yourself. Your IRA, 401(k) or 403(b) may start to seem more supplemental than primary. Yet what happens if the relationship ends someday and you personally end up with a retirement savings shortfall? Keep contributing to your own retirement accounts.

2. Dipping into retirement savings once married

If your spouse is really wealthy or has much greater net worth than you do, your retirement nest egg may seem minor in comparison. Your spouse may tell you that with all the investments and savings that you collectively possess, you taking a loan out of your 401(k) won’t be that bad. Well, drawing down your own retirement savings could look like a very bad move 20 or 30 years from now. Who knows what changes life could have in store? Resist the temptation to siphon off your retirement savings.

3. Trusting a reckless spouse with your finances

When you love someone who is cavalier with money, look out. Beware of ceding financial control or your financial say in such a situation. If you marry someone with severe debt problems, don’t think that you will be financially immune from the effects of those problems. If your spouse is a wastrel or has a terrible credit rating, do not “hand over the keys” to the household finances. Watch what goes on with the bank accounts, investment accounts and credit cards among you– keep communication open and encourage transparency.

4. Forfeiting some or all of your financial identity

You may have taken your spouse’s name, but that does not mean you need to give up your own credit card for a shared one, merge your personal checking account into a joint one, and so forth. If you don’t use a credit card for several months or years, you won’t have to pay a fee but it could show up as “inactive” on your credit report. The credit card issuer may move to close the account, and losing the credit history of that card could hurt your credit score. Retain individual savings and investment accounts and individual credit cards.

5. Divorcing with an “equal” rather than equitable financial settlement

If a divorce happens, the impulse may be to amicably split things “50/50” … or, the focus may be on keeping custody of your kids or keeping your home with your financial potential a distant second. However, you must keep your financial future in mind.

Quite often, a woman will be instrumental in building a business or professional practice with her spouse – but she may not be a part of that successful company or professional entity after a divorce. If you divorce and have helped your spouse build a business to greater or lesser degree, you may not only find yourself out of work but taking a job that pays less or having to learn new skills to compete in the job market. Your earnings potential and retirement savings potential may be affected. If you should divorce, seek an equitable settlement that considers your future financial potential; this is even more important than retaining material wealth or real property from the marriage.

6. Losing touch with your career path

If you have happily put a career aside to raise kids, keep in mind that you might find yourself returning to work sooner rather than later. Life events, economic necessity, personal desire and growing children may all be factors. Yet a long, total absence from the workplace can make it difficult to step back in – the technology or outlook of any given field can change radically across a few short years. Try to keep a foot (or at least a toe) in your career via consulting or networking efforts.

7.  Not knowing where your accounts are held

I have met way too many widows who not only did not know where their investment accounts were held, they also were unsure how much if any life insurance was available.   Try to keep a summary document of where all of your accounts are held along with phone numbers. List out life insurance policies, where wills and other estate documents are held, and have a plan in place in the event your spouse goes before you do.

The takeaway: You can plan your financial life together, but make sure you have a plan in place to account for these 7 common mistakes.  A little planning can go a long way!   Please call us at 866-594-9919 if we can help you plan!

Help! Where do we go from here?

There is definitely a lot of bad news coming down the pike.  From the United States’ massive fiscal problemsto potential defaults in Europe to the massive inflation and economic slowdown in red hot China.  If you also consider the Japanese global supply restraints and the Middle East oil crisis, there really is a perfect financial storm brewing.  Will it be a tropical storm or a category 5 hurricane?  That is the question.

Bad times don’t have to beat you down.  We serve a mighty God who can steer us through the storms. This doesn’t mean we will be bulletproof, but it does mean we can place our trust in Him rather than monetary instruments.  This shouldn’t be an excuse for complacency and “sticking the mighty head in the sand”.  Instead, it is a time to put our faith into action.  We should seek to do all we can to proactively protect the wealth entrusted to us and leave it to God for the results.

Plan ahead

He wants us to plan ahead for good times and bad.  In our desire to multiply all the Lord has provided, this means we should be taking the extra steps to be wiser stewards in how we:

* Earn income

* Give generously

* Spend money

* Invest a surplus

By bringing our faith to the front and center, seeking wise counsel, and taking action, we have a better shot at producing positive results even while the world is falling apart.  Have you noticed that there are two economies?  The world’s and God’s?  Where do you place your trust?

Most of us will be quick to respond “of course we choose God!” Yet, is this the way we live? If it is, why do so many Christ followers worry and fight so much about money?  Why do most Believers not handle their money any differently than non-believers?

It all starts with your attitude

Many Christians are still stuck in the rut that money is the root of all evil.  They look negatively at wealth and cite passages like:

Again I tell you, it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God. – Matthew 19:24

READ MORE

I have been advising and counseling others on how to build true wealth for the past fifteen years. I have seen my personal share of ups and downs and witnessed thousands of others. The 2008-2009 financial crises was sure a wake-up call for many investors as they watched the financial system they trusted for their future collapse in a few short months.

It got me thinking about how many people, Christians included, built and continue to build their financial houses on sand.  I am reminded ofMatthew 7:24-26:

“Therefore everyone who hears these words of mine and puts them into practice is like a wise man who built his house on the rock. The rain came down, the streams rose, and the winds blew and beat against that house; yet it did not fall, because it had its foundation on the rock. But everyone who hears these words of mine and does not put them into practice is like a foolish man who built his house on sand.”

Five steps to help you build a solid foundation

Early this year I set out on a journey to see who thrived in 2009 and who barely survived.  I conducted nearly 600 interviews to determine if there was a solid difference between those who did well in difficult times and those who fell apart.  The numbers were alarming!  Only 5% thrived and moved forward financially during the difficult times in 2009 while 95% of those I interviewed took major setbacks and fell deeper into debt or lost major ground.

Of the 5% who thrived, there were some major common threads:

1)      They identified what they valued most in life. They had spent time finding what they loved to do and how to get paid generously for it.

2)      They discovered their meaningful purpose in life. They concentrated on using their key strengths and abilities to add value to the world and bless others.

3)      They designed their compelling vision for their future. Most had three, five, and ten year goals almost memorized!  They knew where they were heading and had a good idea on how they were going to get there.

4)      They had a real personal mission statement. Though many of them did not call it a “mission statement”, they lived their life like they were on a mission.  Their financial and business lives had clarity and purpose; they created a sense of urgency, and were persistent in their attempts to succeed.   If your personal goals and dreams have deep meaning to you then you are far more likely to succeed financially.

5)      They not only set goals, they created an action plan. This helped them implement their mission, live their values, and work toward achieving their vision.  They hired a good team of advisors and had great council and accountability to set their paths straight.

Because of my key learning and my desire to help others see how they can thrive and not just survive, I wrote a new EBook called “Thrive in Your Life – Creating the life you were meant to live”.  It describes the Five to Thrive Principles I uncovered as I interviewed those who were succeeding financially.

Thrive Principle One:  Become a passionate income earner

Of those who become wealthy, very few become wealthy from the stock market itself.  By far, the number one way to becoming wealthy is through finding a way to get paid doing something you absolutely love.

Thrive Principle Two: Become a generous giver

Many fail to give back to our society because they insist they have the lack of two precious resources – time and money.  However, those who are most successful often give more than 10% of their income away and spend countless hours volunteering and sharing their time and talents to bless others.

Thrive Principle Three:  Become a wise investor

Investing does not just mean haphazardly investing in a mutual fund.  Most investors hand over their hard earned dollars to let someone else handle their investments.  This can often be the worst thing you can do.  Those who are successful invest rather than gamble.  Warren Buffet, for example, does not invest a dime in anything unless he is quite certain it will go up in value.  That is investing.   Gambling, on the other hand, is committing money to a stock, a mutual fund, or something else without a clue as to whether it will go up or down.  Too many people gamble rather than invest.

Thrive Principle Four:  Become a cautious debtor

If 2008-2009 didn’t teach us anything, debt can be a hue deterrent from gaining wealth.  There are good, bad, and ugly uses of debt.  Far too many American use debt foolishly and it keeps them enslaved rather than reaching the desired destination – financial freedom!

Thrive Principle Five:  become a prudent spender

Those who succeed financially evaluate each spending decision from a variety of angles.  They look at price, value, durability, and how it lines up with their life purpose.  Just because you have more money doesn’t mean you can or should spend more, especially if your spending doesn’t line up with you life’s values.  Those who are successful, despite having wealth, still carefully analyze.  Want to the results of being wealthy and missing this principle?  How many lottery winners, sports stars, actors and actresses, and other celebrities go bankrupt after earning millions of dollars?

As July ebbs into August, we have no resolution on the federal debt limit issue. The possibility of default is still in play. Republican leaders want major cuts to entitlement programs as a condition of raising the debt ceiling; Democrats agree on the necessity of cuts but also want tax hikes for the wealthiest Americans to bring in added revenue.

A trillion-dollar divide

On July 14, CNBC.com reported that both parties had tentatively agreed on nearly $1.4 trillion worth of reductions to the federal budget. That’s not too surprising: $1.4 trillion is the projected size of the budget gap for the fiscal year ending in September. Republicans have called for $2.4 trillion in cuts.

This federal belt-tightening is going to lead politicians, economists and consumers into the second part of the debt cap conversation. Two very important questions demand our attention.

If we cut trillions from the federal budget, how will that affect GDP?

In fiscal year 2009, federal spending represented 24.7% of U.S. gross domestic product. The Office of Management and Budget projected this figure to grow to 25.4% in FY 2010 and stay at 25.1% in FY 2011. The percentages haven’t been this high since 1946.

The OMB thinks that federal spending will average about 23% of GDP between here and 2020; the Congressional Budget Office thinks the percentage will be slightly greater. It is worth noting that the federal government has only gathered (on average) 18.5% of GDP in tax revenues annually across the past 30 years. A decline in GDP means less tax revenue coming in, and less tax revenue may increase pressure to trim Medicare and Social Security. That’s a scenario that implies a quick sunset for the EGTRRA/JGTRRA tax breaks that Congress has extended.

Will consumer spending continue to grow with less federal spending? The 2008 stimulus either propped up consumer spending or at least encouraged consumers to think more positively about it. There has been talk of a $196 billion haircut to federal nondefense discretionary spending across the next two fiscal years; one liberal think tank, the Economic Policy Institute, thinks this could remove 900,000 jobs from the economy next year and 1.3 million jobs in 2013, which would not bode well for housing, discretionary spending, retail sales, durable goods orders, consumer credit –the list is long. Conservatives counter with the belief that the economy has recovered to the degree that it doesn’t need such massive federal spending, and that the economy will strengthen further over the next couple of years.

If the economy wanes, what happens to stocks?

The mood on Wall Street doesn’t always correspond to the mood on Main Street, but this much is certain: pre-retirees can’t stomach another stock market downturn. Investors who are a decade or less from their envisioned retirement dates cannot imagine pushing back retirements even further. Recently, the mood on Wall Street has been cautiously bullish – but if the bulls bolt thinking that the economy is stagnating or sliding back into recession, the near future may call for some active or tactical portfolio management.

Let’s hope the “what if” stays hypothetical

The brinkmanship will probably give way to an accord at the tenth or eleventh hour, and we may see small short-term cuts as a prelude to bigger long-term cuts and reforms to entitlement programs.

What if no deal is reached by the August 2 deadline set by the Treasury Department? The Bipartisan Policy Center forecasts that the federal government would have to spend $134 billion less than planned during the rest of the month. So $134 billion would be removed from the U.S. economy in 29 days. This is more than 10% of America’s monthly GDP. Imagine that happening for a start, and then factor in a 9% jobless rate and the possibility of a stock market swoon and higher interest rates.

It is not a pretty scenario, and it is one the U.S. will hopefully avoid. If a new Reuters poll is any indication, most economists think disaster will be averted – 38 of 40 economists recently surveyed by the news agency believe legislators will reach a deal before August 2 rolls around.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty.

Wendy’s used to ask “where’s the beef?”  This week I ask, “where’s the jobs?”  Like you, I’m not seeing them!

This past week, after the jobs report, I was amazed at how few jobs were created in June… With trillions of dollars that have been poured into the markets, how could we see such dismal results?  I mean bailouts, quantitative easing, and stimulus -oh my!  And all we saw was a lousy 18,000 new jobs last month?

Are you kidding me?  That’s not even 500 new jobs per state. How can we continue a jobless economic recovery?  Until people are working and producing again and the housing market stabilizes, I don’t see us getting out of this economic mess any time soon.  That doesn’t mean the stock markets can’t rally here and there, but long-term we will have a tough uphill climb until we solve the job/production issue.

If people aren’t working, they aren’t spending money and thus companies aren’t hiring – it’s a vicious cycle. The merry go round won’t stop until we give business owners (the ones who create the jobs) incentives to hire.  Changing America from its current socialist state to a more capitalist environment would sure go a long way!

America used to be a pro-business country. We used to be the world’s “producer”.  Now we are the world’s “consumer”.  Jobs in the U.S. continue to be sent overseas and we as a nation continue to lose our competitive edge.

It’s no wonder, China is at our heels and on pace to take over as the world’s “top” economy.  They are “producers” – they produce products and profit.  We, in turn, borrow money and “consume”.  The “consumer”, if he doesn’t control his spending, eventually becomes a servant to the “producer”. The tables must turn for America to continue her greatness.

May we curb spending and get back to being the world’s greatest producer!  May we get back to our roots and may God Bless America!

What are your thoughts?  What do we need to do to get back on track?

I’d love to hear your thoughts…

When we look at the U.S. debt situation, the  word “hopeless” often comes to mind, even if you are quite the optimist. Though no situation is ever truly hopeless when we serve a sovereign God, we still need to be realistic.

Faith is a great thing when it is placed in the right hands.  Take God, for example.  Trusting in Him is a “sure bet”.  We may not get all we want, but He will certainly provide for all of our needs like it says in Philippians 4:19,“And my God will meet all your needs according to his glorious riches in Christ Jesus.” (NIV)

The trouble in this world begins when we place faith in the wrong hands.  In this case, we often place far too much trust and confidence in our political leaders.  This is where my concerns lie, in that, I do not believe politicians will ever do what is necessary to fix the U.S. budget issues.  I mean leaders who can’t come to an agreement on less than 1.5% of the budget ($50 billion in cuts) certainly are living in never-never land.

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Many Americans don’t want it to be raised.
Could our economy hold up if it isn’t?

Congress must think (and act) fast

In the middle of May, the national debt limit of $14.3 trillion will be reached. This means the federal government must increase the debt ceiling sufficiently to cover U.S. obligations through the end of 2012. It will undoubtedly happen, but not before a loud round of partisan politics is finished.

What does the public think?

In April, a CBS News poll showed that 63% of Americans opposed raising the debt ceiling. Polls often ask simple yes-or-no questions, and the respondents may not have understood the consequences here. If the debt ceiling isn’t raised, America will end up defaulting.

What would default mean?

Picture something like the Wall Street downturn of 2008-2009 happening again … but in a broader context.

As Treasury Secretary Timothy Geithner explained succinctly in a letter to Senate Majority Leader Harry Reid (D-NV), a default would mean that “the Treasury would be prevented by law from borrowing in order to pay obligations the Nation is legally required to pay, an event that has no precedent in American history.” A default would limit, halt or impact Social Security and unemployment benefits, veterans’ benefits, federal worker salaries and payments to members of the armed forces.

These aren’t the only calamities that would happen. America sells Treasuries to finance its federal government operations, and other nations and investors have bought them with absolute confidence – we haven’t defaulted since 1933. A default would elevate borrowing costs across the board. It would act like a tax. You would see higher interest rates, with implicit damage to equity prices and home values. The ripple from this could hurt retirement savings, consumer spending and investment.

Moreover, a default would shatter the conviction other nations have in our political framework. It might be decades before we could count on cheap debt again.

GOP’s memo to Obama: no higher debt limit unless we cut trillions.

The President is adamant about raising the debt ceiling. On May 9, Speaker of the House John Boehner (R-OH) said it could only happen if “significant” cuts to the federal budget could be made: “We’re not talking about billions here. We should be talking about cuts in trillions if we’re serious about addressing America’s fiscal problems.”

The GOP leadership does not want to see emergency tax increases. Addressing the Economic Club of New York, Boehner said that “raising taxes is off the table” because “it will have a devastating impact on our economy.” On May 7, Senate Minority Leader John Kyl (R-AZ) requested that revisions to the tax code to address the deficit be kept “totally off the table” as such moves would only amount to backhanded tax hikes.

“We do not have a revenue problem; we have a spending problem,” Boehner noted. “Let’s address the spending problem.”

How would privatizing Medicare help?

House Budget Committee Chairman Paul D. Ryan (R-WI) claims that his controversial plan to privatize Medicare by 2022 would save the federal government $5.8 trillion over the next ten years. Ryan’s proposed voucher system would assign $8,000 annually to a typical 65-year-old for purposes of buying a private health plan. (The voucher amount would vary per person, with richer and/or healthier seniors getting less.)

The non-partisan Congressional Budget Office disagrees and says out-of-pocket medical costs would double for seniors through Ryan’s plan. The CBO estimates that with this voucher system, the typical 65-year-old would pay about $12,510 out-of-pocket each year for medical care above the $8,000 of “premium support” provided. In contrast, it says that under the current Medicare structure, the same 65-year-old would pay $6,150 out-of-pocket in 2022 (providing Medicare payments to doctors are not greatly reduced).

How long before this impasse gives way to agreement?

It could take days, it could take weeks. “I am guarded in my optimism,” House Majority Leader Eric Cantor (R-VA) remarked on Bloomberg Television this week. Secretary Geithner claims that the federal government could use “extraordinary measures” to keep borrowing money into the beginning of August. Noting that there was “no hard date” to hike the debt limit, Boehner said that “allowing America to default would be irresponsible. But it would be more irresponsible to raise the debt ceiling without simultaneously taking dramatic steps to reduce spending and reform the budget process.”

What are your thoughts?  We’d love to hear from you…

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