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Monthly Client Newsletter | July 2011

H appy Independence Day! Debate continues in Washington on determining the correct approach to manage the mountain of national debt. And while we cannot control the outcome of this discussion, there certainly are things each of us can do to improve the management of our own personal finances. Outlined here are a few things to consider.

National Spending? Here are some facts
After the Floods: What everyone should know
Common Tax Scams for 2011
Cutting Your Grocery Bill
New 2011 Mileage Rates

National Spending? Here are some facts

With all the "huffing and puffing" coming out of Washington D.C. it might be nice to have some facts about revenue collections and spending as you discuss the situation with friends and colleagues.


Add
Plus: Misc. Federal Receipts


minus
equals
¹ Income Security includes programs like unemployment, food and nutrition, and Federal employee retirement benefits.
² The Federal government uses "netting" logic to reduce published outlays to $3.456 trillion (3.744 - .288). They are separated here to show true spending. "Net" outlays in 2011 are an estimated $3.819 trilion (+10.5% vs. 2010).

Some Observations

	Approximately 56% of spending is for "mandatory" programs like social security, medicare, and veteran benefits. 44% of spending is for discretionary programs.
	Our Federal government spent approximately 40-50% more than it brought in during 2010. This is projected to be over 60% in 2011.
	If the individual income taxes collected each year were doubled, the budget would still show red ink in 2011 and would barely cover the 2010 deficit.
	Three times more is spent on legal and government administration than on agricultural support.
	Estimated net Federal outlays increase by 10.5% in 2011. The estimated spending increases in some key Federal functions are:

	General Government:	up 39.3%
	Veteran's benefits and services:	up 30.5%
	Administration of Justice:	up 13.5%
	National Defense:	up 10.8%
	Medicare:	up 9.5%

So as the political rhetoric hits high gear and politicians debate increasing our $14 trillion in national debt you now have the facts no matter which side of the aisle makes more sense to you.

After the Floods: What everyone should know

April showers brought...May floods. Record levels of snow melt and violent spring storms brought many fellow citizens face to face with floods and related flood damage. As many realized, flood damage isn't covered by homeowner's insurance policies. To keep this from happening to you, here is what you need to know about flood insurance:

Everyone potentially lives in a flood zone: flooding can be caused by storms and river overflows, but it can also be caused by inadequate drainage. Just because your area has not been flooded before is no guarantee that it won't flood in the future. In fact, almost a quarter of flood insurance claims come from moderate to low risk areas.

The National Flood Insurance Program (NFIP) offers insurance to protect your business, home, and belongings: you can buy NFIP insurance through private companies and agencies and can buy flood insurance as long as your community participates in the program. NFIP insurance covers up to $250,000 for your house, up to $100,000 for its contents, and up to $1 million for non-residential buildings and contents.

Plan Ahead: there is usually a 30 day waiting period before coverage goes into effect, so don't take a "wait-and-see" approach.

Don't rely on Federal Disaster Assistance: federal disaster assistance is available only if the President declares a disaster, and more than 90% of disasters are not declared federal disaster areas.

Flood Plains Change. When you purchase a new home, research flood plains and historic plats for high water levels. Often water tables cycle over many decades and an area that may be dry for a number of decades could be located in an old lake bed or river backwater that had water fifty or more years ago.

If you want more information, visit www.floodsmart.gov.

Common Tax Scams for 2011

Each year the Internal Revenue Service issues a list of the top tax scams. They call their list the "Dirty Dozen Tax Scams". While all of them are not applicable to the vast majority of taxpayers, here are some of the most common that are:

	Identity Theft and Phishing. Thieves pose as employees of the IRS and attempt to steal your identity. This is often done over the phone or via official looking emails. Please remember the IRS never institutes contact via emails and never give personal information over the phone or via email.
	Filing False Returns for Refunds. The biggest culprits continue to be improperly claiming dependents or filing invalid claims for the Earned Income Credit and Child Tax Credits.
	Improperly Replacing Informational Returns. In this scenario, correct W-2s and 1099s are replaced with incorrect "corrected returns". The new "corrected" returns report lower income amounts that are then used by the IRS to match against the filed tax return. This lower income allows the filer to lower their tax obligation.
	Abuse of Charitable Organizations and Donations. This includes attempts by donors to shield assets from tax by improperly controlling personal investments inside a charitable organization or by improperly sheltering income within a charity to avoid paying personal income tax.
	Hiding Income Offshore. Promoters of this scam solicit clients by advertising ways to move income out of the United States with the sole purpose of avoiding tax, often by hiding assets in offshore accounts.
	Nontaxable Social Security with Exaggerated Withholding Credit. By overstating withholdings and misreporting the "taxable" portion of Social Security taxpayers in this group look to avoid paying tax on Social Security benefits.

Cutting Your Grocery Bill

Coffee prices on the futures market have gone up over 90% in the last 12 months. The increase has caused Starbucks to recently announce that its packaged coffee price will rise 17% effective this month. The same is happening to other commodities like nuts and select fruits and vegetables. So what can one do to help manage your grocery bill? Here are some ideas:

	Make a list. Base your list on a weekly menu and then create your shopping list based upon ingredients. Try to keep the list to a minimum.
	Pay attention to your "inventory". Most cupboards, freezers, and refrigerators have items that are aging. Try to plan your menus around what is on hand. Reducing waste is a key way to save money on groceries.
	Eat before you go. This is a suggestion most every one has heard, but all of us have broken at one time or another. Even a small snack prior to stepping into a store can help you buy less.
	Know the score. Stores have made shopping behavior a science. Dairy and meat products are in the back of the store for a reason. End aisle displays are meant to draw your attention and have us "assume" products there are always on sale. Popular items are at floor level, while higher margin items are often at eye level. Even candy and sweets are positioned to make you walk by them. All these techniques are done to get you to buy more.
	Coupon only what you buy. Only use coupons on items you would otherwise buy at full price. That way you know you are saving money versus spending more. Remember an item you buy at 50% off is still increased spending if you do not typically buy the product.
	Avoid the precut/pre-sliced. Further processed foods and convenience pack foods save time, but are often less healthy and cost much more.
	At checkout. Buy nothing! Those magazines are tempting, but are often just a drag on your budget. There is a reason these areas of the store are filled with candy and gum, just don't nibble on the bait.
	Look at your receipt. Scanners are often filled with errors. Be especially careful to check sale items against your receipt and make sure you get your deal.
	Volume discount without the volume. Many stores will give you the deal price even if you do not buy the required quantity. So if a deal is two for a dollar you may be able to purchase one for 50 cents instead of paying the higher regular price.
	Share. Often times buying larger packaged items and sharing them with a neighbor, parent, or friend can save both of you money. This is especially true when shopping at club stores. You may not need thirty rolls of toilet paper, but could enjoy the unit savings with a shopping buddy.

New 2011 Mileage Rates

Standard Mileage Rates
Mileage	2011 Rate/Mile
	1/1 - 6/30	7/1 - 12/31
Business Travel	51.0¢	55.5¢
Medical/Moving	19.0¢	23.5¢
Charitable Work	14.0¢	14.0¢

Mileage Rates

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