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The Most Sacred Financial Document

Sacred Document Credit Report and Credit Score

Planning is important to make sure your financial house is in order. It is vital to know where you are today, where you want to be in the future and to have a game plan on how to get there. Many times we overlook one of the most sacred financial documents when devising this plan and that is the credit report.

A credit report is the key or the roadblock to many of the financial decisions we make today. Think about it, large life decisions such as buying a home, a new car, any large purchase on credit, or simply obtaining a credit card rely heavily on this one document and the score that is affiliated with it. Having an excellent credit report and score will allow you the freedom and flexibility to utilize credit most effectively.

There are a couple things you should be doing on a regular basis to make sure your credit report is accurate and your score remains at a peak level.

  • You are entitled to a free credit report every twelve months from each credit reporting company. This will not provide you with your credit score, but should be used as a tool to confirm the information on your report is accurate and current. There are many websites you can go to in order to obtain these reports and annualcreditreport.com is recommended from the Federal Trade Commission’s website.
  • You should check your credit scores annually as well to make sure they have not changed significantly since the last time you checked, especially if you have not had anything adverse happen to your credit. Unlike your credit report, you are not entitled to free access of your credit scores annually. There are a few ways to obtain your credit scores. Some credit card providers (you can check with your current card providers) will provide you with your score and inform you as changes take place with your score for free. In addition, you can always use myfico.com and obtain your score from each of the three bureaus. This option will cost you roughly twenty dollars per bureau, sixty dollars for all three. You can also obtain a free score at www.creditkarma.com, but keep in mind the score you receive here will not provide you with the exact score from the bureaus. It will give you a good sense as to what your credit score is and where you stand versus other people, plus there is no fee for their service.

The credit report and its associated score is the holy grail of lending. It could very well mean the difference between an okay rate, better rate, and the best rate provided to potential borrowers. Depending on the size of the purchase, this difference could mean a savings of tens of thousands of dollars over time. As an example, according to Bankrate’s mortgage calculator the rate currently for a thirty year mortgage with twenty percent down for someone with a 740 plus credit score would be around 4.75%. For someone with a score between 640 and 659, the rate would be 5.375%. At first glance, this may not seem like a huge difference in rate but it would mean a $45,000 increase in cost assuming you purchase a $400,000 home and finance $320,000. That is real money and having the best credit score will save you every time you borrow.

I simply provided you with one example of where a great credit report and score will save you money, but think of the other times we borrow money. Imagine if you compound the savings mentioned above (for purchasing the house) and you saw similar savings when buying a car, paying for a child’s education, utilizing home equity for renovations, credit card rates and other ways of borrowing too. Not having the best rate could mean the difference in reaching your goals.

Making sure your credit report is accurate and you are maintaining an excellent credit score is vital to your financial success. We would be more than happy to assist you with any questions that you may have on this topic, including discussing your credit report and score. Feel free to contact us, Mitlin Financial, at (844) 4-MITLIN x12 if you or someone you know needs assistance in this area. 

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

 

Small Business Owners Looking for a Tax Deduction

SEP IRA Small Business

 

Is this going to be a good year financially? Did you have a new product or service that was a huge success? Do you think you will pay too much in taxes due to that success? Would you prefer to pay less in taxes and keep more for yourself and save for retirement at the same time?

Setting up a retirement plan could alleviate some of the stress of your tax bill and put you on the right path for retirement. As a small business owner, your business is typically set up in one of two ways. You may be established as an independent contractor or 1099 employee, which is typical in some service businesses, or you may be a corporation. Small businesses that are set up as corporations are very often S- Corps. Under either circumstance, you can take advantage of setting up a retirement plan, which will lower your tax burden while putting monies away for your financial future.

Retirement plans can be set up and funded by a small business regardless of their business structure. The type of plan, the amount you can contribute and your overall tax deduction may differ based upon your structure. Let’s take a look at one of the most popular options that would be available, the SEP IRA.

The SEP IRA allows a business owner to defer a maximum of 25% of their income into the retirement plan each year, which in turn will lower your tax liability. The 25% maximum applies to those business owners who are on payroll and paying themselves via W-2, which is the least common method for independent contractors. Paying yourself via W-2 will allow you to defer a maximum of 25% of the compensation listed on your W-2 for the year.  

Those business owners that are simply using a Schedule C to determine their income for the year, which is most common for 1099 employees, have a maximum contribution of 20% of net income. Schedule C or 1099 employees are synonymous with the same type of employment status and are treated the same for retirement plan purposes.

It does not matter whether you are limited to 20% or 25%, the maximum dollar amount you can contribute for 2018 is $55,000. This amount changes annually, visit the IRS website for current limits. Keep in mind, a SEP IRA simply needs to be set up and funded before your tax filing deadline. The contributions are not mandatory and can change from year to year based upon your annual success. This gives you a lot of flexibility from year to year and plenty of time to review your year-end tax situation prior to contributing.

As an example, if you are an independent contractor (1099) in the 25% tax bracket who had a net income of $200,000 and set up a SEP IRA. The SEP IRA would allow you to make a maximum contribution of $40,000 (20% of your net income). This would lower your taxable income from $200,000 to $160,000. In turn, your tax bill will be reduced by $10,000. Essentially the $40,000 contribution made to your SEP IRA only cost you $30,000.

The SEP IRA will work the same way for those businesses set up as corporations. The only difference will be that they will be able to contribute 25% of their W-2 wages. Keep in mind that you if you are paying yourself via W-2, you can only include the W-2 wages to determine your maximum contribution. Shareholder distributions are not included as compensation for calculating your SEP IRA contribution.

You need to be aware that if you have employees this may not be the best option because you will be required to contribute for employees that have been with you three years or more. The percentage used to determine your contribution would be used for your employees as well, which may create a financial burden.

Mitlin Financial assists our clients in setting up retirement plans for them and their businesses. We would be more than happy to assist you with any questions that you may have on this topic, including which retirement plan would be best for your business. Feel free to contact us, Mitlin Financial, at (844) 4-MITLIN x12 if you or someone you know needs assistance in reviewing their options.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Building Relationships on Mutual Respect and Trust with Lawrence Sprung

I recently had the opportunity to be a guest on the ArrowLight Podcast with Chad Gravallese.  This podcast gave me the opportunity to discuss many of the tenants I use in building relationship with people.  I hope you find this episode interesting and of value.

In today’s conversation with relationship building guru and financial expert, Lawrence Sprung, we learn about quality over quantity when it comes to building relationships in your business and career.

You’ll Learn:
» How to build trust over time through nurturing and following up.
» Little things you can do to show that you listen and care.
» How to set boundaries with clients so that you can manage a healthy balance of business and family life.

 


LINKS AND RESOURCES:


Get involved with the American Foundation For Suicide Prevention: Click Here
Learn how you can support the Keith Milano Memorial Fund: Click Here

 

This podcast represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Assets, Advocacy, and Attitude

 

 

Advisors Magazine recently interviewed Lawrence Sprung about how Mitlin Finanacial Inc. has positioned itself in the Wealth Management industry and how they work with clients.  Take a minute and read this interesting article that was published in their September 2018 edition.AssetsAdvocacy and Attitude AdvisorsMagazine 092018

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

5 Credit Card Myths Hurting Your Financial Future

Five Credit Card Myths Hurting Your Financial Future

 

Convenience and risk all with the swipe of the wrist. Credit cards are a tool that many of us use in order to buy things in a convenient fashion, eliminating the need to carry cash. When used properly this tool can add value to our financial lives. Credit cards offer the ability to buy things now and pay later, build credit and accumulate rewards. However, they can also be used to accumulate debt, huge interest costs, and put you in a financial hole if not managed properly.

Recently, when sitting with a client they shared with us the situation their mother was in and I saw the need to share this information. The client was working with their mother in order to obtain a mortgage for a new home. As far as the kids knew mom should be in a good position to obtain a mortgage, but unfortunately the mortgage was declined. When they investigated further, it was discovered that mom had significant credit card balances which were having a detrimental effect on her debt to income ratio. The children approached their mom and asked her why she was carrying these balances and she explained that she was told her credit score would benefit from having an outstanding balance on her credit cards.

Luckily the children were aware that this was not the case and she was most likely causing a negative effect on her credit score, not to mention the significant interest expenses she was incurring. Mom is lucky to have her children on her side as they are working with her to become debt free and educate her on what the “truths” are regarding credit cards.

This experience ignited the need for me to help bring to light the truth about credit cards. Here are five credit card myths that may be hurting your financial future. 

  • Carrying a balance on my credit card will help my credit score. This is a complete myth and will actually do the opposite, it will hurt your score. The credit bureaus want to see that you can pay your debts and do so on time. The best way to utilize a credit card is to simply pay off the balance each month. This demonstrates that you have the ability to take on manageable debt and pay it off on time. There may be instances where you cannot pay in full and you will want to pay at least the minimum payment. It is always vital to pay on time, paying late will certainly hurt your credit score. Bottom line, not paying your credit card in full because you believe it is helping your credit score is incorrect and you should develop a plan to correct this. 
  • You should not have a credit card and only use a debit card. This myth was born from the idea that with a debit card you will only be able to spend what you have, where with a credit card you can accumulate debt beyond what you may have saved. Though this thought process makes sense credit cards tend to be safer. We are living at a time where data breaches and fraud is on the rise. It is true that both debit and credit cards offer protections against these issues, but credit cards tend to have stronger protections for the card holder. Should you have a fraud while using a debit card (even if you are swiping it as a credit card) the funds could be taken out of your bank account and it may take your bank a few weeks to clear it up. This could tie up the funds in your account and even result in bounced checks or insufficient funds while the fraud is investigated. Fraud on a credit card is not going to cause an issue with your bank accounts as they perform an investigation. Also credit cards often provide additional protections for your purchases that debit cards typically do not.
  • Interest begins to accrue right after my credit card purchase. This is another complete myth with no truth behind it. It is true that credit cards can come with significant interest rates attached to them, but they do not start accumulating until after your payment is due. Essentially by paying your bill on time, you will not incur any interest expense and the credit card will simply provide you with an interest free loan from the date of purchase until the payment is due. This is the ideal way to use a credit card for the consumer, not the ideal outcome for the credit card company.
  • Never pay an annual fee for a credit card. Paying an annual fee for a credit card is not necessarily a bad thing. This is a personal choice and you need to evaluate the cost benefit of the fee. Many cards available today have tremendous benefits attached to them. There are cards available that provide you with anything from additional purchase insurance or warranty coverage, airline credits, internet access on flights, baggage fees, travel insurance, access to premier lounges, access to a concierge, and many other benefits. You need to review what the benefits are, evaluate whether you will use them and decide if the card is worth the expense. The benefits for many consumers outweigh the cost.
  • Having too many credit cards will hurt my credit score. This is another common myth and having several cards can actually help your credit. The credit bureaus will look at the amount of credit you have available and how you are using it. Your score can benefit by having a lower utilization of a higher credit amount. One caveat here, this may not hurt your credit, but it may present a hurdle when obtaining a mortgage. The mortgage company will love your higher score, but they will not be fond of you having access to a larger pool of credit and this could present a challenge. The number of credit cards you have, or will want to have, may depend on the stage of life you are in and what your goals are at the time.

Credit cards can provide you with a great way to pay for things, build credit and ensure against fraud, but there are many myths out there and it is important to understand the facts. We have outlined what we believe to be the top five myths we have seen, but there are many more. It is critical to educate yourself on what is fact and what is myth. You will want to use credit cards in a way that they will enhance and not hinder your financial future.

Mitlin Financial assists our clients in addressing these myths and we would be more than happy to assist you with any questions. Feel free to contact us, Mitlin Financial, at (844) 4-MITLIN x12 if you or someone in your family needs assistance in debunking credit card myths.

 

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

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