Why Going Green in a Blue Economy Can Be a Smart Investment

While the real estate market is slow and high energy prices are challenging everything from the way we heat our homes to the way we get around, it might make sense to bring a green approach to a tough economic environment.

If you want to save money with energy-conscious moves inside and outside the house, replace your current automobile with a hybrid, or add some greener features to your existing home to make it more attractive for sale when times improve, why not check these options:

Hybrid automobiles: While 2008 models of the Toyota Prius – probably the best-known gas/electric hybrid automobile on the market – no longer provides a tax credit, there are still a number of foreign and domestic hybrid models that do. For those models and their credit amounts, go to the IRS Web site at http://www.irs.gov/irs/article/0,,id=176409,00.html.

Residential energy credits: A bill is currently before the U.S. Senate to renew or revise many of the tax credits offered to taxpayers in tax year 2007. Be on the lookout for any news of passage on this bill, and use the following tax year 2007 credits as a point of reference:

• Exterior windows (regular and storm) and skylights: Up to 10 percent of cost or $200.
• Exterior doors (including storm doors): Up to 10 percent of cost up to $500.
• Metal roofs: Up to 10 percent of cost up to $500.
• Home insulation that meets current International Energy Conservation Code (IECC) requirements: Up to 10 percent of cost up to $500.
• Qualified heating and air conditioning systems as well as heat pumps: Up to $200.
• Qualified gas, oil, propane furnaces or hot water boilers: Up to $150.
• Qualified circulating fans: Up to $50.
• Qualified gas, oil or propane water heaters as well as heat pump water heaters: Up to $300.
• Qualified Solar Energy Water Heaters as well as photovoltaic systems that provide electricity for the residence: Up to 30 percent of the cost or $2,000.
• Qualified fuel cells (natural gas-propelled generators): 30 percent of the cost up to $1,000 per kilowatt of power that can be produced.
  

Try compact fluorescent bulbs: While you may have to do a bit of comparison shopping to find the best bulbs for the light you need, check out compact fluorescent bulbs (CFLs) which are coming down a bit in price ($2-$3 per bulb in 2007 compared to $9-$25 in 1999) and improving in quality. A typical incandescent bulb lasts 1,000 hours, while a CFL lasts 3,000 hours on average, according to Consumer Reports.

Get a programmable thermostat: During work or other hours in the day when you’re away from home– get a thermostat that you can program to raise and lower the temperature of your home to cut your heating and cooling bills. (Obviously keep temperatures livable for pets while you’re away.)

Adjust your water heater: A simple lowering of the thermostat on your hot water heater from 145 to 120 degrees isn’t going to be very noticeable, and it could save you more than $20 a year on a gas heater and $50 a year on an electric one.

Change the way you drive: Driving slower can improve the mileage on any car, so stay at the speed limit. If you have to idle for a lengthy amount of time at a train crossing or in a holding area to pick up someone in the airport, turn off the engine until it’s time to go. Lastly, do a better job planning the use of your car – try and work necessary errands into a commute so you won’t have to drive as much after work or on weekends. And if you have teens driving alone, tell them they have to practice the same behavior if they want car privileges – do an odometer check if you have to.

Do alternate transportation one or more days a week: If you have the ability to walk, bike, carpool or take public transportation to work or for after-work transportation, make a commitment to do it at least once a week. It will not only save you money, but the exercise options may help you improve your health and possibly lower the costs of your health insurance and doctors’ fees related to fitness-based health issues.


May 2008 — This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by, a local member of FPA.

Why a Business Owner’s Exit Plan Is So Important

There are plenty of days when we want to “take that job and shove it.” But what happens when we’re sick of a job we’ve created for ourselves in a business we’ve founded?

The idea is to make a plan that allows you to get out before you tire of your company or before you are overwhelmed by personal, industrial or economic factors that force you to sell, transfer or close a company. This is called an exit plan.

Everyone glamorizes creating a business as a way to completely control one’s own destiny. But it’s ironic how many businesses go on day-to-day without any thought to a proper ending. An exit plan is not only a set of mental notes about how one should pack up and move on. It is a way to focus an owner’s thinking about:

• A family legacy – should a business be passed on to family or associates, or should it simply be sold or closed?
• The owner’s own career goals – does an owner want to do this for the rest of his or her life, or should they make way for other professional or personal directions?
• The creation of wealth – too many people think of a business as a job and a paycheck instead of a creator of wealth that can support one or more generations of a family. A paycheck supports short-term goals; wealth is accumulated money that can either be invested smartly in the business or outside the business to support philanthropy, or family and personal goals.
• A retirement strategy that allows an owner to do everything they’ve dreamed after they quit.

An exit plan isn’t born in a day. In fact, many financial experts in investment, tax and estate planning disciplines think it’s wise for business owners to come up with an exit plan when they start a company if possible, and if not, within 3-5 years of the date they’d like to exit. A CERTIFIED FINANCIAL PLANNER™ professional with specific expertise in working with business owners could be a helpful partner in helping you determine the following:

• How many more years do I want to run this business?
• What’s the optimal way to get rid of the business when I’m ready to go?
• Do I want to sell it, transfer it to family or associates or just close it down?
• What if I got a fantastic offer on the business tomorrow? What would I do?
• If I sold my business, how would I protect myself from a personal and business tax standpoint?
• How do I communicate my wishes and ideas with my spouse, kids and other family members with a stake in the business?
• What about my employees, clients and customers?
• How do I protect them if I die or decide to leave?
• How much money do I want in my life after my business, and what would I do with it?
• What should I do to make my business as valuable as possible?
• How do I plan the tax implications of my actions toward the end?
• If I have investors, how do I make them happy as I leave?
• Are there any specific accomplishments I want this business to make before I leave?
  

An exit plan allows you to not only to change your own employment, but to help you change your whole career if you choose. No one has to stay in the same industry – or company – for life, and with an exit plan, you can leave open the possibility for an endpoint that will allow you to travel, do philanthropy or any number of new activities in business or other walks of life.

The financial planning aspect of the exit plan will align your monetary needs with your career or post-career needs. Your exit plan can do whatever you want it to. Some entrepreneurs build sabbatical time and other arrangements for study and learning into the timeframe leading up to their exit to help them refresh their minds and decide what their next career or vocation will be.

The bottom line is that it’s never really too early to start thinking of an exit plan for a business you’ve formed. Today, smart entrepreneurs start asking themselves those questions as they’re organizing and forming companies. Get some good advice to start that discussion.

May 2008 — This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by, a local member of FPA.

Q&A: Consider Making an Estate Check-Up a Multi-Generational Family Matter

Questionable estate planning has gotten some recent attention with the sudden death of actor Heath Ledger. The 27-year-old actor died suddenly this year with an older will that provided only for his parents and other immediate family – he never revised those documents to accommodate his young daughter or the child’s mother.

Though Ledger’s parents told the media that the daughter and mother would be fairly provided for, that’s not the same thing as a solid estate plan that leaves nothing to chance. And if Ledger’s death offers a lesson, estate planning should be done at the earliest point in your life that you start to gather assets and responsibility for others.

In estate matters, it’s a good rule of thumb to review your plans every three years or whenever there’s a material change in your family’s lifestyle – a marriage, a divorce, a remarriage, the birth of children, the loss of an immediate family member or a major rise or fall in assets. Those are the biggies.

For individuals and couples with elderly parents and/or young kids starting out on their own, it might be smart to do a multi-generational estate checkup at the same time. Why? Because in families with significant assets or other pressing financial issues involving businesses or dependents, each generation’s wishes for the dispersal of shared or personal assets should be documented legally and shared with all the relevant parties.

Q: What are some of the multigenerational issues in estate planning?
A: In some families, this may mean the future of a multigenerational family business, perhaps one of the most complex estate issues any family will face. In others, the assets may consist mainly of cash, property and other investments, but similar problems can occur when all the parties aren’t on the same page about who will get what.

Q: What kind of problems can be prevented by multigenerational estate planning?
A: It’s important to realize that estate planning isn’t just about splitting up money – it’s also about disaster planning. If a family hasn’t planned for business succession, it’s possible that other damaging secrets may emerge like problems in the business or significant debt the family might be liable for. Also, the sudden death or lengthy incapacitation of the head of a family may turn chaotic without proper health care or financial directives to manage the person’s illness or the money and business issues that follow.
Multi-generational estate planning may not be the easiest thing in the world to accomplish given how families communicate – or don’t communicate – about money. But such dialogue might be the smartest thing any family does together.

Q: How does an estate plan support a family legacy?
A: Proper discussion, documentation and review of a family’s assets – with the participation of the right legal, tax and financial planning advisers – can keep more of those assets in the family and working to the family’s wishes. In the case of a family business, generations of family members have built careers there or might otherwise be depending on that income to live. Yet a business might not even be at the heart of an issue – families may also have foundations or other charitable activities they’ve supported for years with a certain mission that those in charge don’t want changed. More than a few families have imploded in ugly legal squabbles over these situations and more. The results can be lengthy legal battles with damaging tax consequences, a potentially unfair split of assets among relatives or simple mismanagement of those assets going forward.

Q: How can estate planning fail?
A: Bad estate planning can happen in the wealthiest of families. It’s not unheard of in the richest of families for the matriarchs and patriarchs to die or become incapacitated without proper wills or directives for their heirs. Every adult family member – young or old -- should commit to the creation of such documents and as appropriate have them written in a way that doesn’t shipwreck the family fortune or mission, no matter how big or small it is.

Q: What should be done about non-married family?
A: The Ledger situation is a good illustration of the potential for estate problems when couples are not legally married. That’s why multi-generational planning should also address estate and child custody arrangements for unmarried heterosexual or gay couples who might or might not have done the appropriate legal planning necessary to secure the estates of their current or past partners and their heirs. At the very least, all family members should understand the need for such planning to avoid conflict later. As non-traditional families become more common, families need to be open to that discussion.



May 2008 — This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by, a local member of FPA.