Author Archives: Khooppres

Don’t Walk Away From Your Investment

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So, recently I’ve been hearing about people abandoning their homes.  What is that about?  While I know that there are still people out of work, it’s not the jobless individuals that I’m perplexed by; it’s those individuals that are employed but choose to walk away.  It should never be easy to walk away from something that you have given your hard earned money for.  Whether you’ve found yourself the victim of sub-prime lending, job loss, or poor money management, you shouldn’t choose to walk away before you’ve exhausted all of your options.    

The decrease in home values may also factor into homeowners’ decisions to abandon their homes.  I understand how heartbreaking it can be to see the value of your home drop or to one day wake up owing more than your house is worth.  However, I still don’t believe that walking away is always the right answer.  If it is possible for you to avoid foreclosure, you should.  Banks are willing to work with homeowners that are at risk of losing their home or find themselves owing more than their home is worth.  Contrary to what you might think, the bank does not want to foreclose on your home. If you are faced with a potential foreclosure, do not allow embarrassment or shame to prevent you from exhausting all of the options available to you.  After all, a foreclosure remains on your credit report for seven years.    The following are a list of options that homeowners should consider if faced with a potential foreclosure:

  • Consider applying for the Home Affordable Modification Program (HAMP).  HAMP is a federally funded program with an objective to assist homeowner’s in modifying their home loans to lower the monthly payment to 31% of their gross monthly income.  If you have an FHA loan, try modifying your loan through the FHA Home Affordable Modification Program
  • If you don’t qualify for HAMP, inquire about Home Affordable Foreclosure Alternatives (HAFA).  The primary objective of this program is to help homeowners settle their mortgage debt without going through foreclosure.  Ultimately, the program streamlines the short sale approval process for homeowners that owe more than their home is worth.  While a short sale is not ideal, it is a better alternative than foreclosure.  Although both will impair your credit for a period of time, all things considered equal, you will qualify for credit sooner with a short sale.  Additionally, most loan applications ask whether or not you have ever foreclosed on a property, and by law, you are required to disclose the truth.  Loan applications do not address short sales.  If asked, you can say that you sold your home
  • If your inability to pay your mortgage is due to temporary circumstances, you should consider requesting a reprieve.  A reprieve is a written agreement that allows the borrower to make reduced payments for an agreed-upon period of time.  At the end of the time period, the borrower must make their regular payment plus an agreed-upon amount that will cover the portion of the payment not made during the forbearance period
  • Consider requesting a mortgage extension.  A mortgage extension is another option for individuals with short-term delinquencies.  If your lender approves a mortgage extension, the delinquent payments will be added to the end of your loan

As you can see, there are options available to you.  Don’t get discouraged, get to work!  We all have experienced a level of disappointment regarding the current state of the housing market.  It will take some time for the market to recover, and home values may never be where they were in 2008 before the recession.  However, home equity is often the most significant contributor to net worth for the average middle class American.  If you walk away, you lose the opportunity to recover your investment.  I hope this Post has been helpful.  Every situation is unique; seek professional advice to ensure that you’ve done everything you can to save your home.

Eliminate Surprises for 2011 Tax Year

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So Monday was Tax Day, and for some of us, it wasn’t a good day.  If you were “surprised” this year, the best thing to do is start planning now for next year.  I am not only equating the “surprise” to the requirement to pay additional taxes.  If you received a huge refund, tax planning can be beneficial to you too.  After all, why should you “loan” the government money at 0% interest? 

Depending on your perspective, one may feel it’s better to receive a refund than to have to write a check.  I once agreed with this philosophy, but my outlook is different now.  Generally, no one wants to pay more taxes, but how is your tax bill different from any other bill?  It’s only a problem when you don’t have the money.  While it doesn’t feel good to write a check to Uncle Sam, I now understand that doing so means that I didn’t “lend” my money interest free.  Ultimately, a goal of breaking-even is a good idea.  Included below are some key considerations that can assist in eliminating surprises for the 2011 Tax Year:

Keep an “Eye” on your Adjusted Gross Income (AGI) – Your AGI is a significant element in determining you taxes.  Your AGI is your income from all sources minus any adjustments to your income.  Adjustments to your income can include, but are not limited to:

  • Certain business expenses (teachers, reservists, etc.)
  • One-half of self-employment tax
  • Alimony Paid
  • Penalties for early withdrawal of savings (i.e., certificate of deposits)
  • Student loan interest
  • Contributions to 401k or Individual Retirement Accounts (IRAs)

The best way to reduce AGI is to contribute to a 401k or retirement account.  The taxes on contributions to retirement accounts are typically deferred – meaning this reduces your taxable income and lowers your taxes.  Typically, you have until the tax deadline to contribute (i.e., Monday, April 18, was the last day to retroactively fund a retirement account for the 2010 tax year.)

Identify Ways to Increase Your Tax Deductions – The two terms that you should be familiar with for deductions are standard and itemized.  Most people can take a standard deduction, but each year, you should assess whether or not you can itemize your deductions.  Itemized deductions include, but are not limited to:

  • Mortgage Interest
  • State Taxes
  • Charitable Donations
  • Personal Property Taxes
  • Tax Prep Fees

Once you’ve identified your itemized deductions, you should use the higher of your standard or itemized deductions.  The key to leveraging this element is to plan!  If you have not been giving charitable donations, doing so can decrease your taxes significantly.

Explore Opportunities to Take Tax Credits – Tax credits directly offset the amount of tax you pay.  There are tax credits for college expenses and adoption.  In recent years, there have also been credits for first time homebuyers, energy efficient upgrades to homes, and certain tax credits for the elderly.  As a part of planning for your tax year, you should speak to your accountant or research tax credits to ensure that you are aware and able to take advantage of any that may be applicable to you.

If you find yourself with the opposite scenario, you are receiving a significant tax refund check each year, you should explore ways to limit the amount of taxes that are being taken out of your wages throughout the year.  This can be accomplished by adjusting your withholdings.  An article by Center for Personal Finance Editors, Adjust Your Withholdings Now for 2011 Tax Year, reported that approximately 100 million Americans overpay their tax bills each year by $2,200.  If you find yourself in this scenario, increase your number of allowances.  To complete this task, you will need to submit a new Form W-4 to your employer.  The IRS has information on their website, www.irs.gov, which can assist you in determining the appropriate amount of allowances for you. 

Filing your taxes does not have to be a stressful event.  With proper planning, you can figure out your tax liability for the year, and plan the best approach for your situation.  For many of us, it becomes stressful because we have to react to activities that occurred throughout the year and have certain tax implications.  A key element to wealth building is tax planning.  You can’t do one without the other.

 

Wealth Gap: Are We Hurting Our Children?

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In the book, Rags to Riches, I talk about the wealth gap in the African American community.  As a Black female, I am very concerned about the current state of affairs; and the fact that the gap between the “haves” and “have-nots” is continuing to grow.  I am not only referring to the wealth gap when comparing us to others; I am also referencing the gap that exists within the Black community.

Our behaviors significantly contribute to our inability to create wealth and keep it.  As I was considering my post for this week, I ran across this article, Your Take:  How the Racial Wealth Gap Hurts Children of Color, on www.theroot.com .  Every parent wants their child to be successful, but oftentimes, I think we forget the link between wealth and success.

In our community, we often place significant importance on what we drive, how we look, and whether or not our child has the latest fashions and shoes.  This isn’t merely my opinion, there’s significant evidence to support my statement.  Based on the information in the article noted above, it is imperative that we begin shifting our focus if we want our children to be positioned to compete.  This means that we have to modify our behaviors so that our children understand the importance of education and wealth.  In essence, we must consume less, save more, and not only emphasize education for our children, but begin to educate ourselves as well.

Parents are their children’s first teachers.  I am reminded of the first verse in Whitney Houston’s song, The Greatest Love of All:

I believe the children are our are future
Teach them well and let them lead the way
Show them all the beauty they possess inside
Give them a sense of pride to make it easier
Let the children’s laughter remind us how we used to be

What behaviors are you modeling for your children?  Because of my extensive research for the book, I am not surprised by the statistics included in the article, but my heart is indeed heavy.  I don’t think this is what our ancestors had in mind during the Civil Rights movement.  Are we taking a step back in time?  Don’t we owe it to our children to position them better than this?  What will be the legacy of this generation?

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