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regardless. You don’t typically pay any inter- est unless you tap it; they are free to establish at most banks. You never know when you might need to access capital quickly.
always buy. Leasing is a way for auto dealers to make more of a profit. I realize there
are certain tax benefits for leasing but they don’t generally pencil out after considering the payments and residual value. Plus if you drive over the mileage limits plan on getting hammered in extra fees.
are overweight, don’t buy a box of donuts. If you have high cholesterol, don’t eat a bacon and egg sandwich. If you are an uncontrolled spender, stay away from credit cards. Credit cards are a convenience item. They are valu- able tools for those who can manage their spending which absolutely means paying off the balance each month. Let me repeat—DO NOT CARRY A BALANCE ON YOUR CREDIT CARD. I love them because they provide a statement to record exactly where money is spent, as well as a handy year-
end summary for tax planning purposes. Additionally they allow users to accumulate rewards points or cash back after purchas- ing a certain amount on the card. They also allow us to avoid packing large sums of cash which could be lost or stolen. If a credit card is lost or stolen we aren’t really out much. Just call the card company or bank to report it and they will immediately cancel the card. Now all of you cash-carrying cowboys out there, just calm down before you start screaming. I think keeping some cash in your pocket is a good idea. Just keep it to a reasonable level. Credit card companies have
changed the landscape of consumer spend- ing. Transactions are even secure online, just make sure the site contains “https” before purchasing: the “s” stands for “secure.”
borrowers. Be careful here. Not only will you experience awkward family get-togethers, but you could also see no payments come
in for months at a time. More times than
not we see these situations turn people against one another and it’s a quick way to lose a friend. They can work out, but be
sure to have the loan drawn up legally and with some compensation for late payments. Communicating and discussing expecta- tions up front is critical. As for hard dollar loans, I don’t recommend them. Most people with good credit histories can get financing through traditional banks or financing insti- tutions. Those who are desperate will turn to this structure when nothing else is available. If you do lend money in this fashion, make sure the collateral is something that you really want to own or can quickly re-sell if
it comes to that. I mainly dislike the lack of liquidity and high risk with these loans.
savings earning little to no interest. Take advantage of 401k plans, HSAs and other tax deferred options. Establish 529 plans for col- lege funding. Don’t buy what you can’t afford! That sounds simplistic but I’m quite often amazed at how much people spend when they have no idea how they will pay for it.
In summary, debt doesn’t have to be a four- letter word. We can use debt to our advantage if we don’t abuse it. Keeping interest rates as low as possible, and avoiding penalties and fees
are basic essentials. But also remember that having debt can actually allow you to use your capital in other ways, hopefully to enhance
your net worth. Savvy investors and executives understand this idea of compound interest and leverage. If your goal is to increase net worth, consider keeping cash invested in higher yielding assets than your debt service interest rate. This can allow your net worth to expand faster than if you used all of the capital to pay off the debt.
Bonus material: Market recap and outlook for 2013: The U.S. equity markets looked past the news media circus of the Congressional debacle and delivered patient, long-term inves- tors a 14.6% return,* all while huge sums of cash sat idle on the sidelines as many investors were “convinced” that the U.S. would collapse. Our expectations are for another fairly solid year for the markets in 2013. We are especially optimis- tic about emerging market equities as well as emerging market bonds. We see positive trends developing for Japan as well. Here at home we expect technology stocks to perform well as cor- porations finally unleash some cash and begin to upgrade their systems. We also expect the financials and consumer cyclical stocks to per- form well as the economy continues to improve and spending increases. For more details on our market outlook and specific recommendations contact us at www.petersonwealthservices.com *(S&P 500-a market weighted index of the largest 500 companies in the U.S.)
DISCLAIMER: The above information and content are general in nature for informational pur- poses only and do not constitute financial advice or investment recommendations. Speedhorse Magazine makes no endorsements and bears no liability for your use of the information provided in this column. Always consult a suitably qualified financial professional and/or tax professional on any specific problem, issue or investment opportunity.
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FINANCIAL FORUM
