Category Archives: wealth

Unemployed? You’re the Answer

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The May Jobs Report was very disappointing.  The unemployment rate remained unchanged at 9.1%, but the most alarming bit of news related to the drop in the number of new jobs created.  According to an article in USA Today, employers only added 54,000 jobs, which represents the smallest gain in eight months.  Many economists predicted an addition of 175,000 jobs during the month of May.  

For African-Americans, the bad news doesn’t stop there.  During the month of May, the unemployment rate for African-Americans rose to 16.1%.  While the unemployment rate for African-Americans has always been higher than the national rate, paired with the recession and the housing crisis, wealth creation is clearly not at the “top of minds”, survival is.  Survival is nothing more than maintaining with less.  If you’ve mastered survival, it’s now time to step up and out of your comfort zone to develop a strategy / plan to recover.

As you develop your strategy, consider the following questions:

1.       Are you doing everything you can to position yourself to compete in today’s job market?  In February, I developed the Aim to Win in This Economy series.  Two of the posts within the three-part series focused on personal branding and education.  When you’re unemployed, your “job” is to find a job.  Don’t waste your time by exploring opportunities half-heartedly – make sure you are giving your all to the job search.  If you’ve been beaten down by rejection after rejection, make a concerted effort to recover your swagger.  While I’m not a fan of the saying, “fake it till you make it,” it is a necessity during your job search.  Employers want to hire people who are confident in their abilities.  If you can’t convey confidence during the interview process, you will not get the job.  As you pursue opportunities, “clothe” yourself in the confidence that you are the best person for the job – have faith in you.

2.       Is it Time to Broaden Your Horizon?  In order to see the beauty of a rose-bush, the bush has to be pruned, and the flowers in the field need rain to grow.  I will stop with my poetic moment, but my point is that we grow the most as a result of our failures and setbacks.  If you have been beating the pavement, but coming up empty-handed, perhaps you should consider relocation – seek opportunities in other cities.  This is definitely a move that will take you out of your comfort zone, but you’ll never know what may await you if you don’t try.  The Huffington Post recently posted an article entitled The 10 Cities With The Most Job Postings: Indeed.com.  Factual information posted on job search sites may assist you in targeting cities.  However, keep in mind that the number of job postings does not always correlate with actual hires.  While job postings are an indicator of a city’s economic health, sometimes companies post openings but defer fulfilling them due to market shake-ups (e.g., May’s Job Market Report).   If you’ve considered exploring opportunities in another city, there’s no time like the present, but be realistic about your expectations.

3.       Is There an Entrepreneur in You?  The final entry in the Aim to Win in This Economy series was What’s Your Passion?  If you are talented and have always dreamed of creating your own business, now is the time.  Some of us are self-starters – if we aspire to do something, we simply do it.  There are others that have to run out of the “comfortable” options (i.e., steady job, difficult boss, health scare, etc.) before taking a leap of faith to pursue the dream.  While there aren’t many businesses that you can start without some money in hand, there are programs available to assist you with funding.  Earlier this week, the Obama administration partnered with Rutgers Business School to host the first Urban Entrepreneurship Summit.  The primary objective of the Summit was to explore ways to build new public-private partnerships to ignite urban job creation.  Based on the speaker line-up for the conference, there was a clear emphasis on African-American entrepreneurship.  In addition to initiatives like this, the Small Business Administration (SBA) recently rolled out two new programs that are designed to assist small business owners with capital needs.  The Small Loan Advantage and the Community Advantage initiatives offer a streamlined application process for SBA(7) loans.  Key benefits include loan amounts up to $250,000, shorter application process, and a 5 to 10 day approval process.  As you can see, the federal government has a vested interest in your success as a small business owner.  Do your homework and get to work.

Although the May Jobs Report may have fallen short of expectations, don’t allow historical data to predict your future.  History does not have to repeat itself.

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.

 

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