Monthly Archives: January 2017

Tax Beneficial Accounts

Personal Finances

One of the most proactive ways you can protect your personal finances is to take advantage of tax beneficial accounts. Though these accounts are typically tied to retirement savings, this is not always the case. At Putnam Bank we want to help you make the most of your money by explaining these account options:

Health Savings Account (HSA): Currently tied to your insurance provider, this account allows you to save pre-tax income in an interest bearing account. The funds within this account can be rolled over annually, and are meant to help supplement the cost of various medical and childcare needs. However, there are limits on how much you can save for this account, the 2017 limit for an individual is $3,400 per year, and $6,750 for a family. You can access these funds using a debit card or written check to cover qualifying expenses outside of your insurance offerings. Another great perk of this account is that it can be invested. Work with a financial adviser to invest in mutual funds, stocks, and bonds to help your money mature, and grow your funds even more.

Work Sponsored Retirement Account (401k): Many companies now offer this account as a corporate benefit. By automatically withdrawing pre-tax dollars from your monthly income, you are able to save for retirement before you even receive your paycheck. The funds you contribute, along with those matched by the company, can then be invested into a variety of options, pushing your money to continue multiplying. Since these funds are meant to act as a retirement savings, any early withdrawals have a 10 percent penalty in addition to the income taxes due. However, once you reach age 59 ½, you can begin taking regular distributions from this employer-sponsored plan.

Individual Retirement Account (IRA): This is a great example of a non-work sponsored retirement account. Generally offered in two versions, the Roth IRA and the Traditional IRA, both offer various tax incentives so you get the best bang for your buck. Each account has a contribution limit of $5,500 a year, or $6,500 for those age 50 or better.

  • In a Traditional IRA you contribute pre-tax dollars into an interest bearing account, which can then be invested into an array of opportunities to expand growth. If you remove funds from this account prior to age 59 ½ you will incur a 10 percent early-withdrawal penalty along with paying State and Federal taxes. At age 70 ½, the account requires you to begin taking minimum distributions. This retirement savings option is open to anyone, with no immediate requirements.
  • With a Roth IRA there is no age requirement for distributions, and after five years, you can withdraw as much as you like up to the total amount of contributions. The only amount you cannot withdraw is the interest earned after contributions. The main tax benefit with a Roth IRA, opposed to the Traditional IRA, is that contributions are post-tax dollars, but distributions bear no tax. This means if you are at a higher tax bracket upon retirement, you do not have to pay additional taxes to withdraw those funds, potentially keeping more of your savings. This account option does have an income limit, which disqualifies single filers whose adjusted gross income is more than $132,000, and $194,000 for joint filers.

Start maximizing your money and look into your account options today! Our experienced team will answer any questions you have, and help you choose the best account to get the most value out of your long-term savings.

Fix-Up Your Budget

Budgeting

HGTV’s latest hit show, Fixer Upper, has fans and home buyers looking for new ways to save and restore old homes. While Chip and Joanna have become experts in home renovation, they’re not too shabby when it comes to finances either. Using their home building skills and our banking knowledge we offer these top tips to help fix up your budget in 2017:

  • Build a Strong Foundation

Just as a home cannot stand without a solid base, neither can your personal finances. To begin building the foundation to your finances, it is imperative to start a monthly budget. This system can help you organize how much money is coming in and out each and every month, allowing you to allocate funds for both spending and saving.

  • Make the Most of the Unexpected

Shiplap has become a household world thanks to Joanna’s love of this Texas home material. Often covered up by sheet rock, it is always a great find to add something special to the house. Similarly, should you uncover any income that you weren’t expecting, we suggest making the most of it by contributing to your IRA or other savings fund.

  • Take Advantage of Open Space

It seems every time Joanna finds a wall in a home project, you hear the words, “Open space.” By constructing areas that are connected instead of separated, she’s uncovered a way to not only make a home more welcoming but your spending too. Add this concept into your budget, and enjoy the feeling of flexibility in your monthly allocations. If your household remains stocked from bulk ordering, or your entertainment is your kiddos for a month, embrace those savings and shift your spending to another room of the house.

  • Always Take Free Advice

Chip and Joanna offer endless tips and tricks to their home flipping business. Always full of great ideas, and sage advice, these two make a consistent effort to give their viewers a leg up on their next home project. Similarly, our team at Putnam Bank wants to help you work to achieve your next financial goal! Whether it’s saving for your first home, purchasing a new vehicle, or setting a plan for your retirement, we’d love to offer our experience to help make your financial dream a reality.

 
Whether you watch Fixer Upper every week or are just starting this addicting series, we hope you keep your eyes peeled for other great financial tips. You may find more money management advice than you’d think!

10 Steps to Opening Your Own Business

Small Business

Creating the foundation of your next enterprise can be a challenging process. For everything from ideas to permits, it takes a lot to get a new business up and running. At Putnam Bank we would like to help you make your dream a reality, and offer these ten steps to opening your avant-garde operation:

 

  1. Write a business plan. Creating the sound reasoning behind what you want to do and how you want to do it, represents the building blocks to a good business. There are many tutorials to help you develop a plan and to accompany them, we recommend researching information for each section of the document.
  2. Select the best location. Location can make or break a business. In conjunction with your plan’s market research, we suggest scouting out the best potential locations. Adding this element to your proposal can help you create the optimal visualization when describing your concept.
  3. Build a marketing strategy. Great service and great promotion go hand in hand. Unfortunately the old adage, “If you build it they will come,” no longer applies. Now, in order to get clients through the door, you’ll need a structured and continual marketing plan to ensure customers in your area are aware of your business.
  4. Plan your finances. These not only refer to the funds you need to open your business, but also the additional costs to help support the initial years of operation. This extra capital will help ensure your business doesn’t topple while building its ongoing customer base.
  5. Meet with a commercial lender. Once you have the core of your business planned and calculated, it’s time to meet with a small business lender to evaluate your risk. He or she may require a percentage down, or that certain criteria are met before loan signing.
  6. Fulfill any requirements. Whether it’s saving additional funds, offering up collateral, or obtaining designated permits, it is best practice to meet and exceed the requirements that your lender has suggested, in order to maximize your lending potential.
  7. Close on a business loan. After securing the funds for your business, be certain they’re placed within a business account, instead of a personal one. To help ensure your funds are separated, we also recommend creating an LLC for your business prior to opening.
  8. Purchase or lease space. Using the money you’ve budgeted, move forward with purchasing or leasing the space for your new enterprise. After space has been secured you’ll need to acquire equipment and supplies from another portion of your predetermined budget.
  9. Structure and hire your team. Another old saying goes, “If you take care of your employees, they will take care of your customers.” This is a great adage to stick by, as more often than not, people are what makes a business successful. Decide your role within the company, and then craft detailed job descriptions for the rest of your potential employees. Start building your team with the best people for the job, and add further help as needed.
  10. Open and continually promote. The big day has arrived and the doors are officially open. Continue to keep them open through constant and innovative marketing efforts. By pushing your products and services to the public you can ensure that they’re aware of your offerings and consider your business a valued option.

 

We look forward to meeting with you about your next corporate venture. If you have any questions on how to complete the steps above or have additional inquiries on commercial lending, please don’t hesitate to reach out.