Answers to the Major Concerns That Affect Your Finances

"What is your rock-bottom price?" This is one of the first questions a real estate broker will ask when you want to sell your home. Then, the broker usually will list the house for several thousand dollars above that price and hope for the best. Months later, if it remains unsold, the realtor will ask you to drop the price to attract new buyers.

Hugh F. Doherty, DDS, CFP

Use a Price Range To Sell Your Home Faster

"What is your rock-bottom price?" This is one of the first questions a real estate broker will ask when you want to sell your home. Then, the broker usually will list the house for several thousand dollars above that price and hope for the best. Months later, if it remains unsold, the realtor will ask you to drop the price to attract new buyers.

Some brokers have developed a marketing strategy that does not set a price at all. Instead, they establish a range, such as $280,000 to $340,000, for a house that the seller would like to unload at $300,000. While some potential buyers bid at the bottom of the range or below it, most bid within the range. The idea is to set a parameter for negotiations early on in the selling process to attract more potential buyers. The result is faster sales at satisfying prices, often near the midpoint of the asking range. This method generates more home seekers and more buyers, and has cut the average selling time for a house from 138 days (with the traditional fixed-price method) to 35-36 days.

When Should You Dissolve Your P.C.?

If a doctor will be retiring in three years, would it be wise to dissolve his professional corporation now? The answer is no. He would lose some key advantages. If another doctor will be practicing with him before he retires, the corporation will protect him from liability for his negligence. Also, the P.C. allows you to continue deducting 100 percent of your health-insurance premiums.

Liquidating now could mean a double tax. The P.C. will owe tax on the sale proceeds, and you will owe tax when the proceeds are passed on to you. By leaving your P.C. intact until after you retire, you will be able to set up a deferred compensation plan: Once the practice has collected your accounts receivable, it can make a final payment to you that is deductible to the corporation.

Try E-Banking

Is it finally time to get wired? Our assessment, after studying electronic banking, is yes. E-banking has come far enough to make it worthwhile. Cost is now on your side. If you already own a computer with a modem, the hardware is free. The bank`s monthly fee for the service typically will be cost-competitive with postage stamps-and a lot easier and more convenient-if you pay 16 or more bills per month. Often, the fee is waived.

What about software and communication charges? These depend on how you connect. One way, suitable for someone not already paying for an on-line or Internet service, is to get software like "Managing Your Money" or Intuit`s "Quicken" from a bank that lets you connect via a local telephone call.

Another method, used by more than 300,000 customers, is to pay $20 to $40 for a personal-finance program like "Quicken." Then, subscribe to a bill-paying service like "CheckFree." It will work in combination with "Quicken" to keep track of your balances.

What these systems have in common is: 1.) a connection to your checking account; 2.) a password and encryption system to protect your money from thieves; 3.) an arrangement with some important payees like Visa, MasterCard and Sears to receive money electronically; and 4.) a procedure for mailing checks (usually at no additional fee to you) to the many payees who are not equipped to receive electronic payments. Thus, you can relay payments to credit card companies, department stores, even your gardener or teenage baby-sitter. You also can use the software to check balances and transfer money between accounts.

Using Pension Contributions To Buy Life Insurance

A doctor wanted to buy some whole-life coverage through his pension plan. He was told that some of the premium would be tax-deductible. His concern: the tax implications.

Only the part of the premium attributable to term-insurance protection-not the cash-value portion-is taxed as current income. The amount is not based on the actual premium paid, but on an IRS table that relates cost to age-$4.42 per $1,000 at age 40, $9.22 per $1,000 at age 50, etc. Suppose you are 50 and have a $100,000 policy, with a cash value of $30,000 at year-end. The difference is $70,000, so your taxable income would be 70 times $9.22, or $645.40.

Despite the possible tax savings, I strongly urge doctors not to use pension-plan funds to buy life insurance. The increase in cash value often is not that great. If you terminate your plan, you will not be able to roll the policy into an IRA without owing tax.

Service Contracts Are a Waste of Money

. . . unless you plan to use a product heavily. If you take care of your equipment, you will need few or no repairs. Service-contract costs over an appliance`s life span are four to seven times as high as repair costs predicted by industry-wide standards. Retailers push the "extended warranties" because they are profitable for them. If a product is so unreliable that you need a service contract, buy a different product.

Hugh F. Doherty, DDS, CFP, is a national lecturer and CFO of Doctor`s Financial Network and financial advisor to the health-care profession. For personal financial consultations and information about Florida workshops, call (800) 544-9653.

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