ASK AN EXPERT: Personal Finance

News 13, the Morning News and scnow.com are committed to helping you make ends meet. Along those lines, we will be bringing you a regular series of online question and answer chats called Ask An Expert.

This week, we feature Myrtle Beach financial advisor and Wall Street veteran Mark Perry.

Simply click here to submit your question and check back often to find the answers you need.

(This chat is no longer active, however we will offer another opportunity to have your questions answered soon.)

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2:38 p.m.
QUESTION:What forms or documents should your FA provide for end of year tax accounting purposes?Mine told me I had no loss, but don't I need a 1099 with interest, or gains and loss or something,as we closed out the account and transfered the money to another bank. Teresa, Myrtle Beach

MARK:All financial institutions report interest, dividends, and securities sales on Form 1099 and ancillary forms. I'm not sure when you moved your account, but as long as their was 2008 activity of any kind, a 1099 is generated from that Custodian, Trustee, Broker-Dealer, or Clearing firm.

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1:57 p.m.
QUESTION: With my income tax return, would I be better served to pay off a small amout of credit card debt or open a saving account (emergency fund)? Cynthia, Lamar

MARK: It all depends on what the cost of money is in your credit card. In general, I would eliminate the credit card first, then save debt-free.
There is something to be said about piece-of-mind and being debt-free.
Remember, if you can handily exceed in after tax-return on an investment of said funds vs. the cost of money, or this case the credit card, then one can rationalize borrowing or owing to invest those funds. This is called leverage and this is actually the time to employ leverage if not already having done so, despite the economy "de-leveraging"
Example: I would borrow cheap money all day @ 7% or less if I could achieve an after-tax return of say 12% or better. This is essentially what a Bank does to derive revenue. Borrow cheaper and lend (invest) at much higher returns given everything else equal to earn an interest spread or profit.

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1 p.m.
QUESTION: My question is what do you do about trying to seek capital for an idea that only needs finance and capital to complete the step of bringing the idea to fruition and to a reality and completing the paper work and possilbe hoping that it will be a great project, where do I go to get the help needed for a small product developer and I have done everything possible,and I went to the highest part of the executive branch of government. Tabatha, Marlboro County

MARK: The first place to turn to is The Small Business Administration to try and qualify for a Small Business Loan. You’ll need a business Plan and to follow the step-by-step instructions to secure funding. Other than that, seek an “angel” investor or private investor. Getting financing is extremely difficult and all the more challenging in this environment. You need to go to Google and “GOOGLE” venture capital, startup business, seed capital, and guerrilla financing to name just a few. Hope this helps.

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11:28 a.m.
QUESTION: Three years ago I purchased a home, financing it 100%. I have a $105,000 mortgage (80% of total cost) at 6%, and a $25,000 mortgage (20% of total cost) at 7.25%. I would like to refinance them both and consolidate them into one loan. I do not have 20% to put down, however both my wife and I have good paying jobs that are secure. Is it possible to do this refinance? Terry

MARK: This is a good question and perhaps one that every property owner is asking now. The short answer is this. You can definitely lower your overall rate and payments (maybe high 4’s for 30-year fixed mortgage), but the problem is a cash down payment. I would talk to both lenders directly to discuss very same question to see if they will work with you to keep your business. They want you paying and not to abandon you property leaving them with another foreclosed property and capital loss. Better they make less money than lose big on the loan. This is the time to negotiate. Everything is on the table and negotiable.
Talk to other mortgage experts and find a financing alternative that may fit your circumstances.

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11:24 a.m.
QUESTION: With the state of the economy and the financial "world", is this the time to make changes to 401K contributions. For example, with investments consistently not performing, are folks better off decreasing their personal contributions to utilize those funds now instead of "tomorrow"? Mike, Lamar

MARK: Thanks for that excellent question. Not only is this the time to NOT decrease contributions, but rather to step it up and INCREASE contributions. Systematic investing like 401-k’s are ultimately judged on performance or the lowest average buy price. As prices drop your same contribution buys more units and thus lowers the overall average cost. Think of a stock that gets lower and lower and each month you are able to buy more additional shares with the same absolute dollar investment. If you increase your monthly dollar investment you buy even more shares cheaply and lower your average price still lower.
As Warren Buffet always says, “I am happiest in a down market because I can buy America’s best Companies cheaper”. The world is on sale now so “stock up”. High markets or asset prices are only meaningful when you are getting out or exiting positions. This is retirement money here and you are in the accumulation phase. You want “low” prices now and as long as possible to accumulate more units cheaper (lower average cost). Only later do we want high or higher prices when we move from “accumulation” to “distribution”.

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10:57 a.m.
QUESTION: I've gotten to the point i can't stomach looking at my 401k. What should i be doing as far as allocating - stocks, bonds? And what about perentage, how much cash should i be contributing right now? Edward M., Myrtle Beach

MARK: Great question and join the Club. This is a critical time to re-evaluate your asset allocation and investment performance given the unprecedented asset declines and massive changes in the economic landscape and capital markets.
You need to consult with a professional for objectivity and qualified expert advice. Your asset allocation or Equity/Fixed Income mix is a function of your age, personal risk tolerance, and numerous personal and financial circumstances all unique to you. There is no one size fits all here.
Generally you want to increase your Equity exposure here and of that Equity component, increase the International vs. Domestic
(dollar-denominated) holdings with emphasis on the Pacific Basin, China, and India. On the fixed income side, move all funds from US Treasuries into Corporates, High Yield & Convertibles, and Municipals. Add or increase exposure to Commodities and alternative asset classes for diversification, inflation risk, and dollar depreciation.
As Warren Buffet says, "buy when others are fearful and sell when others are greedy". All capital assets are on sale and this could be the buying opportunity of a generation. This is the time to be aggressive. I hope this helps.

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10:41 a.m.
QUESTION: I don't want to contribute to the downward spiral of the economy, but I've see a need to cut my spending to improve my personal cash position. Is there a way I can both increase my savings and support the local economy? Brit R., Florence

MARK: Your primary concern should be your personal balance sheet and cash flow and not contributing to the local economy. That will take care of itself. You are correct to be defensive in your spending and preserve capital. No one knows how pronounced or deep this recession will be. Better to plan for a "worse case scenario". Find other ways to be supportive in your local community that do not entail financial resources on your part. I hope this helps.

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