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GFG Newsletter

Summer 2013 Newsletter By Thomas Green, CFP®

IMPROVING GOOD FINANCIAL HABITS

GOOD: Putting a focus on your finances.

IMPROVED: Enlisting the help of an expert.

There is so much information floating around out there from many different sources….newspapers, television, family, and friends. Many of us can benefit from a financial professional to help make sense of it all.

GOOD: Purchasing life insurance to pay for final expenses.

IMPROVED: Adding additional coverage to do more.

The cost of a funeral can cause significant financial burden for loved ones left behind. According to the Federal Trade Commission, the cost of an average funeral in the United States can easily exceed $10,000. But there are many other expenses your family may face if you die unexpectedly. Life insurance protection can help pay medical bills, eliminate debt, protect a mortgage, provide liquidity, help with college expenses, and more.

GOOD: Creating a budget.

IMPROVED: Agreeing on a spending plan.

We all know that spending is more fun than budgeting. When you create an unrealistic budget to cut expenses, it's hard to stick to it. Instead, think of your priorities and create a spending plan that is in line with your personal goals. Cut spending in areas that aren't important to you. This keeps you from being a slave to your money and instead helps you realize what your money can do for you.

GOOD: Putting aside money for unforeseen expenses.

IMPROVED: Building an adequate emergency reserve fund. The first step in building financial security is creating an emergency fund. Saving three to six months of expenses keeps you secure in the face of unforeseen circumstances. These can include layoffs, home repairs, or medical emergencies.

GOOD: Starting to save for retirement.

IMPROVED: Creating a specific goal plan to reach your retirement goals. Saying you will start saving and actually having a plan in place to meet your goals are two different things. Most people have good intentions about saving, but good intentions aren't always enough. Americans are living longer than ever, fewer companies are offering pension plans, and health care costs continue to rise. Ask yourself, "Where do I want to be financially in 10 or 20 years?”, "How long do I have before I need to access my savings?”, and "How much risk am I comfortable with?” This is the first step to structure a plan to get you where you need to be financially.

Source: "Good Financial Habits Made Better.” Modern Woodmen magazine. Winter 2013.

HAPPY 100TH TO THE INCOME TAX

Without much fanfare, the tax system as we now know it will celebrate its 100th anniversary later this year. On October 3, 1913, the 16th Amendment was ratified, and the current tax system was born. The top tax rate was 7%. Within five years, the tax rate jumped to 7.7% to help fund World War I. With the onset of the Great Depression in the 1920's, the tax rate experienced a substantial increase from 1.5% to as high as 25%. During World War II we saw our highest income tax rates. In 1944 and 1945, the lowest tax bracket started at 23% and capped at 94% for income over $200,000. The 1960's saw the top tax rate drop from its highest level of 91% in 1963 to 70% by 1965. During Reagan's presidency in the 1980's he instituted a series of changes that eventually dropped the top tax rate to 28%. Currently, Obama brought back the top rate of 39.6% from the Clinton era.

While the income tax as we know it was not ratified until 1913, the first income tax was assessed by Lincoln to help finance the Civil War. It was at this time that the Office of Commissioner of Internal Revenue was created. The Lincoln income tax assessment was 3% of income between $600 and $10,000 and 5% on income higher than $10,000. At the same time, the Confederacy also enacted a progressive income tax by 1863 in order to raise cash they needed to support their own wartime efforts. After the civil war, the income tax lapsed with tariffs generally supporting governmental programs. In 1894, the government attempted to bring back an income tax: however, the U.S. Supreme Court struck it down. While the public was willing to reinstate an income tax targeting the wealthy, there was reluctance on the part of the Taft administration to challenge the Supreme Court decision. Therefore, in 1909 Taft introduced passage of a corporate income tax and a constitutional amendment bringing back the individual income tax. While the Taft administration never expected the amendment would garner the needed support from 36 states, it was approved over the next four years by 37 states. There was broad public support for the tax system as only a small number of wealthy individuals were subject to the tax. However, that would all change when the number of American taxpayers jumped from 4 million in 1939 to 43 million in 1945. This was dubbed by historians as a time when we went from a "class tax to a mass tax.” More and more loopholes were built into the income tax system to reduce the tax liability, which also added to the complexity of the income tax code. While the tax code has grown from 400 pages at its inception to the more than 73,000 pages of the current tax code, the IRS has also increased its workforce from 64,000 employees in 1966 to over 95,000 employees in 2011.

The cost to maintain this workforce is approximately 51 cents of every $100 of taxes collected.

By the numbers:

1913: the income tax raised $28 million from 357,598 filers

2012: the IRS collected $1.4 trillion from 146 million filers

Currently, there is increasing pressure to eliminate the progressive tax system that we now have to a simple, flat tax. However, in 1913 Congress rejected the original plans for a flat income tax and established the progressive tax system currently in place. The original intent was to only tax the wealthy that constituted about one percent of the public taxpayers.Source: "Happy 100th to the Income Tax”.The Federal Tax Alert. NSTP. June 2013

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HONEST ADVICE

RELIABLE SERVICE

These are not just words, they are the hallmarks of how we run our business.

In today's world, financial advice needs to include taxes, insurance, investment advice, retirement planning, estate planning, and more. At Green Financial Group, we bring that all together in one location.

If you are satisfied with the service that we have provided for you, share that information with your family and friends. If you are not satisfied, let us know what we can do better.

Although the information contained herein is gathered from sources we believe reliable, it is in no way guaranteed by Green Financial Group, Modern Woodmen of America, or MWAFinancial Services, Inc.This material is for your information only and is not a recommendation or offer to sell any security. An offer can be made only by prospectus Securities and advisory services offered through MWA Financial Services, Inc., a wholly owned subsidiary of Modern Woodmen of America. Member: FINRASIPC