The Consumer Price Index (CPI) - Only the Tip of the Iceberg

Who does not want to believe that inflation is somewhere below 3 or 4%? But then again, who would like to believe that money really does grow on trees? Are you kidding aside, unlike money in the trees, the story, the Americans still led down primrose path about inflation. What I mean is that it should have low inflation today is a full-blown urban myth.

consumer price index (CPI) serves the government well. As the cost of living adjustments for Social Security, Medicare, Medicaid, welfare payments, wages and pension adjustments for civil servants and retirees are all tied directly to the CPI, the index having low saves the government nearly a billion dollars.

But what about you?

apparently low CPI in combination with low interest rates and easy credit encourages overspending and increased use of credit. If he knew that the real inflation rate is at least 10% annually, would be as comfortable incurring debt at your current rate? I do not think so. You would realize you were going to need more income in the year (s) to come up not long to eat your resources. Experts agree that the cost of living is rising faster than revenue.

In fact, The Wall Street Journal on January 3, 2006 reads in large letters: ". For Americans in 2005, earnings did not keep pace with consumption boom" Spending has not outpaced spending in the U.S. since 1933. According to an article in 2005, preliminary data show that the American government spent $ 39 billion more than it earned. Access to credit has become more important than ever before. According to the Plastic Safety Net: the reality behind debt in America, October 2005, food and other basic loan is paid more frequently.

Are you crazy when on the one hand you say the CPI is low, the economy is growing, but on the other hand, your personal experience says something very different? Heating bills go up 50%, housing prices rise by 45% between 2000 and 2004, property taxes soar along with college tuition and medical premiums. Go figure! People are tapped out and living on the edge.

government is a whole tool kit of strategies to maintain a low "official" rate of inflation. One of them involves preserving what is called unstable goods and services or from the index or "weighted" in such a way that they have a lot of influence (ie, property prices, property taxes and energy costs.) As far as real estate, consumer price index is used rent image, called rental equivalence for monitoring housing costs as a way to avoid factoring in real housing costs. It is very important because 30% of the CPI has to do with housing! Real estate tax increases do not get factored in at all. Read this article, basic rates:

Richard Benson, president of the Specialty Finance Group, LLC and PrudentBear.com, and his wife took on the task of monitoring their personal expenses, to reveal your true rate of inflation. Their starting point was the happy fact that they owned their cars and houses (paying more). Even so, they discovered that the basic costs are rising 80-10% annually, including health insurance, automobile and property costs, electricity, high speed internet, telephone, property taxes and monthly maintenance. Food (groceries), gas for cars and clothing costs are not included. Imagine what the real inflation rate for those with mortgages, especially if they are purchased within the last 5 years!

When this "unofficial" basic fact of escalating costs and probably 10% of the actual rate of inflation is considered, it is a serious break. However, when combined with the fact that interest rates are the highest in two years, and that the housing bubble peaked and may soon burst to start the recession, it's really numbing thought. For the past five years, homeowner Mania is driving the economy, personal finance spending through a "cash out" mortgages to pay for all the savings and income can not.

A report written by Lehman Brothers investment firm said that while residential building is only 5% of our national economy, one third of economic growth in this period can be attributed to the housing boom. Goldman Sachs Group Inc. and the Center for Economic and Policy Research estimates that if the housing market does not change dramatically, the U.S. stands to lose between 1-6000000 jobs. And that does not include jobs in other industries that are dependent housing construction.

no corrections spending rate for the average American (and world citizens), the era of modern-day slavery lurks dangerously close. Similarly, in the ownership of human masters, the risk today is one of the co-owned credit lending institutions. Since all chunks of revenue pledged to pay interest loans (on behalf of "to have everything" and "Live Rich"), families and individuals pay the real price -. The gradual loss of personal freedom

It's time to wake up from wishful thinking and smell the truth of the economy shape shifting to one that requires individuals to access credit as a basic necessity. Unfortunately, as a positive and optimistic will change the way the system works. Right solutions require the acquisition of secret information about how money works, the personal conviction on the basis of this secret about the money to change the personal finance habits and grassroots cooperation with other like-minded people. It is nothing less than a lifestyle revolution.

LET'S TALK TAX STILL The Best Tax Shelter Around — Your Personal Residence!

With today's economy many homeowners are struggling to make ends meet. If you are a homeowner, you may recognize the above. But home ownership is still one of the best investments that can be made. In fact, Uncle Sam has thrown you a tax shelter that is beyond compare. May you deduct mortgage interest paid on your loan and deduct property taxes paid in the state. These deductions are based on being able to itemize your deductions on your tax return.

If you do not currently own a home, this tax is a significant advantage enough to make you look seriously at home ownership. There are, of course, exceptions to every deduction. One of the complexity of home ownership tax deductions surrounding points.

as "Count", the deductible?

Points are one type of charge to close to your lender. If you pay points when you buy your new home, you can be fully deducted in the year of acquisition. However, if you refinance your loan, then the points must be deducted over the life of a new loan. In the event that you are deducting points per year, and then decide to refinance again, you will be able to refuse to pay the balance point when the old mortgage.

There are some limitations:

points should not be more than the amount generally charged in your area. Funds provided to the closure must be at least equal points. the loan must be used for the purchase or construction of major local taxpayers. Points are given as a percentage of the amount of loan principal. points clearly indicated on the settlement statement as charges for a mortgage.

Limits on Mortgage Interest Deduction

Predictably, there are restrictions on the mortgage interest deduction. Only the interest on the first $ 1 million home acquisition debt is deductible. (Acquisition debt is defined as debt to buy, build or substantially improve the residence.) Home equity debt limit less than the fair market value of the home minus the acquisition of debt or $ 100,000 ($ 50,000 if married filing separately).

the biggest tax advantages of homeownership

Probably the biggest advantage of home ownership occurs when you decide to sell your home. If you have lived and owned a personal residence for two out of five years, you can sell the house and are not taxed on income up to $ 250,000 for singles and $ 500,000 for couples. This rule seems to be very straight forward and simple, but beware, there are many exceptions.

work to move -if you have to move from their area (50 miles) and are unable to meet the two year period, can be proportional to time based on a formula using the ratio consists of a number of days that owned and lived in a house on the total number of days in the relevant 24-month period (c. 730), multiplied by the exclusion amount.

health problems require a sale- if health problems forced him to move from your principal residence, can be proportional to time on and off based on the formula above.

Ideally, a couple who kept good records of time to buy property and live in the house for two years, sell it for profit, and then repeat this procedure. However, there are many pitfalls that cause tax problems, such as special rules surrounding home office and move / rent / return situations that affect the two five conditions (this includes setting up depreciation recapture). Given the many rules and nuances of tax laws, many people opt to hire a licensed tax professional, such as the registered agent.

When you consider the possible gain from the sale of the house, and tax breaks that the government makes available to you, homeownership is still one of the best investments you can make.

Top 7 Ways to Minimize Your Income Taxes

Here are 7 tips that will help reduce taxes and keep more in your pocket:

1 Participate in company retirement plans. Every dollar you contribute will reduce your taxable income and thus your income taxes. Similarly, enter your company's flexible spending account. You can separate the money for medical expenses and the cost of kindergarten. This money is "use it or lose it", so make sure you estimate well!

2 Make sure you pay enough tax to avoid penalties. Uncle Sam charges interest and penalties if you fail to pay at least 90% of your current year tax or 100% from last year's tax liability.

3 Buy kuću.Hipoteka interest and a real decline, and may allow you to itemize other deductions such as property taxes and charitable donations.

4 Keep your home for at least two years. One of the best tax advantages available today is the home sale exclusion, which allows you to exclude up to $ 250,000 ($ 500,000 for joint filers) to get to sell your home from the proceeds. However, you must have owned and lived in your home for at least two years to qualify for the exclusion.

5 Time investment sales. If your income is higher than expected, sell some losers to reduce taxable income. If you will be selling a mutual fund, sell before the end of the year to avoid tax allocation in the upcoming dividend or capital gain. Also, you should set aside tax-efficient investments in taxable accounts and non-effective investments to reduce the tax you pay on interest, dividends and capital gains.

6 If you're retired, plan your retirement plan distributions carefully. If a retirement plan distribution will push you into a higher tax bracket, consider taking money from taxable investments to keep you in lower tax brackets. Also, pay attention to the 59 - ½ age limit. Withdrawals taken before this age can lead to penalties, other than income tax.

7 Bunch your expenses. Certain expenses must exceed a minimum before they can refuse (medical expenses exceed 7.5% of your adjusted gross income and miscellaneous expenses such as tax preparation fees must exceed 2% of your AGI). To deduct these expenses, you may need to bunch these types of expenses in one year to the program. To achieve this, perhaps pre-medical and miscellaneous expenses at 31 December to above the minimum.

The most important thing to be aware of tax deductions and credits that apply to you, and plan for the taxable event. And do not be afraid to ask for pomoć.Koristi from consulting an experienced tax professional far outweigh the cost to hire that professional.

by

Kristine A. McKinley, CFP, CPA, and founder of Beacon Financial Advisors, teaches individuals and families how to invest and plan for retirement, college, and other financial goals. Kristine offers financial and tax planning on the hour, a fee only basis.

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Why You Must Change Your Mindset Before You Can Reduce Your Taxes