Asset Planning, Inc Blog

The latest from the team.

Impact of Applying for Business Credit Cards

Every time you apply for a personal credit card your average time length of your credit accounts decrease and in turn decreases your credit score. It is sad news if you were looking to open a new personal credit card account; however, applying for a business card will not reduce the average time length of your credit accounts. The personal credit bureaus do not receive reports on the amount you spend on a business credit card, as well as your credit line.

For Example, theoretically speaking if one was to use up an entire credit limit from a business credit card, it would have no impact on a personal credit score. In contrast, if the same was done a personal credit card, it would dramatically reduce your score even if the balance was paid in full when the statement arrives.

Bottom line, not only do business credit cards provide more sign-up bonuses, they also have less of an impact to your personal credit score. You don't need an established business to get approved for a business credit card and you can often get approved for existing businesses which you run as the sole owner or which you are thinking of starting. It is advisable to be cautious of what you apply for, the interest rate and any penalties that come with any credit card including business credit cards.

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President’s Budget Would Cap Retirement Accounts

President Obama's budget proposal would cap multimillion-dollar tax-favored retirement accounts. The budget plan would prohibit tax payers from accumulating more than $3 million over all IRA accounts. The proposal would generate $9 billion in revenue for the Treasury over the next decade.

According to Ed Slott, an IRA specialist and certified public accountant, IRAs have evolved from a retirement-planning technique into an estate-planning tool for some wealthy families because tax laws allow the accounts to be passed onto heirs. The cap would apply to the total of all of an individual's tax-favored retirement accounts.

The plan was unveiled on April 10 as part of the proposed budget for 2014.

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Congratulations to Sandy and Carol!

Congratulations to Sandra C. Field and Carol Somoano for being the recipients of the 2013 Orange Coast Five Star Wealth Managers. This was published in the April issue of Orange Coast magazine.

They were among 2,293 award candidates considered in the Orange Coast area of which only 19% of the candidates received the award. The award candidates were identified and considered by one of three sources: firm nomination, peer nomination, or prequalification based on industry standing. Self-nominations are not accepted.

Our two award recipients satisfied a 10 objective eligibility evaluation criteria associated with quality service providing wealth manager split into two parts, eligibility criteria and evaluation criteria.

The required eligibility criteria are as follows:

Credentialed as an investment advisory representative (IAR), a FINRA-registered representative, a CPA or a licensed attorney.
Actively employed as a credentialed professional in the financial services industry for a minimum of five years.
Favorable regulatory and complaint history review.
Fulfilled their firm review based on internal firm standards.
Accepting new clients.

Evaluation Criteria:

One-year client retention rate
Five-year client retention rate
Non-institutional discretionary and/or non-discretionary client assets administered
Number of client households served
Education and professional designations

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It is very easy to want to sign up for credit cards that offer miles and points for purchases you make, especially with sign-up bonuses offering 50,000 miles or points when you apply and receive the credit card. Yet, you should take into consideration how this might impact your credit score.

You should think twice on getting these kinds of credit cards if:

1. Interest rates on these are especially high.

2. You shouldn't apply for them unless you know you can definitely pay off the entire balance each month

3. You are having trouble budgeting or you can't resist making unnecessary purchases just for the sake of increasing your points or miles.

4. You have a score lower than 700

5. Don't apply for these kinds of credits cards if you seek to increase your credit score, especially if you are thinking of taking out a home loan in the near future.

In the short-term your score could decrease; however if you are strict with yourself, make considerable purchases and pay your balance off in full each month, then the score will increase and also you will be able to redeem points and miles.

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How Your Credit Score is Calculated

Your credit score is determined by the following:

-35% payment history

-30% amount owed

-15% length of credit history

-10% new credit

-10% types of credit.

The percentages are based on the importance of the five categories for the general population. For particular groups; for example, people who have not been using credit long, the relative importance of these categories may be different.

PAYMENT HISTORY is considered the most important variable. The next most important variable to watch are the AMOUNTS OWED. Having debt doesn't mean you are a high-risk borrower. Keep in mind that if a high percentage of your available credit has been used, it may suggest that you take on more debt than you can probably handle. This might reflect as a risk of you not being able to pay back your loans.

It is important to not max out your credit cards and keep a low credit utilization rate. Example:

If your credit limit is $5,000, don't charge more than a $1,000 if you want to keep your utilization rate below 20%.

Spend healthy and keep that payment history a priority!

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Defining Credit and Credit Cards

First: What is a credit score?

In the U.S, a credit score is a number used to predict the likelihood of you not paying back loans. There are three main credit bureaus in the US A and they are Equifax, TransUnion and Experian; however Fair Isaac Corporation dominates the US credit score business and issues FICO scores ranging from 300 to 850.

The higher your credits score the better; however there is a limit. A score of 650 is always better than a score of 550 and a score of 750 will get you access to lower interest rates than a score of 650. Here is the catch, after a gaining a score of 760 you won't necessarily get lower interest rates than someone with a score of 830. As long as you maintain a score above 750 you will be in great shape.

Please stay tuned for our weekly series on credit cards and FICO. Next week I will post on what your FICO score is, what it means and how it is calculated. Feel free to share with other family and friends!

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The Sequester, What Will Happen?

Neither a Democratic nor a Republican bill aimed at replacing the so called sequester was able to get enough support to win a test vote on Thursday. The budget cuts for fiscal year 2013 will not take effect all at once on Friday. Instead, they will go into effect gradually through the end of the fiscal year on Sept. 30. The sequester would cut about $1 trillion over nine years.

Beginning today:

-Across-the-board cuts under sequestration formally take effect today. The cuts amount to "only" 2.3% of total federal spending.

-Sequestratoin is likely to reduce real GDP growth in 2013 by 0.6%, with the effects concentrated in the second and third quarter.

-Having passed the March 1st deadline to avoid sequestration, the next date to watch will be March 27th when current spending authority expires.

-Social Security, Medicaid, veteran benefits are exempt from the sequester.

U.S markets on Thursday shrugged off the budget drama in Washington. Financial stocks held their ground Friday as investors, with plenty of time to adjust their portfolios, looked past looming federal spending cuts.

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How to protect your privacy while online

Click here to read a useful article explaining how you can stop companies, like Facebook, from tracking your online activity. 

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Mortgage Referral

Mortgage rates recently hit an all time low & if you haven't already refinanced your mortgage, now might be the time to do so. We have found a new mortgage resource that is very professional, timely, and offers competitive rates. If you would like a referral, please feel free to contact us.

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Social Security Statements Online

Last year, to reduce costs, the Social Security Administration (SSA) stopped mailing annual paper statements to anyone under age 60. These statements are a great tool to use for retirement planning. The statements provide a history of your annual earnings and estimates of your social security benefits at various retirement ages, along with estimates for disability and survivor benefits.

Last week, the SSA added the ability to access your Social Security statements online. Here is the website to start the process to access your statement:

I recommend that you review this at least once a year to make sure that your income is recorded accurately in the Social Security database. Your future monthly benefit is based on your average earnings over your lifetime. If your earnings are incorrect, your benefit will most likely be wrong.

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