Economic News a Reason for Holiday Cheer!

The media thrives on negative news, especially the financial media. Fortunately, not all of the economic news is doom and gloom. To boost your holiday cheer, here are some fun facts signaling that the economic recovery may be underway.

Pending Home Sales Jump to Nearly Six-Year High

The National Association of Realtors reported that the pending home sales index rose 5.2% in October. Importantly, that number is from when the results of the presidential election were unknown. Pending home sales are defined as a signed sales contract, so actual closing is usually one to two months later.

• This is the highest level of activity since March 2007.
• The Midwest led the country with a 15.6% increase.

In further good news, the excess supply of homes that built up before the housing crises has finally thinned out.

• Previously occupied home sales inventory is at a 10-year low.
• New home sales inventory is near the lowest level since 1963.

U.S. Business Spending Plans Improve

"Planned U.S. business spending increased in October by the most in five months." [Tweet this]

A major gauge of planned U.S. business spending increased in October by the most in five months. While the growth was modest, it may signal a slow recovery.

• Orders for non-defense capital goods excluding aircraft rose 1.7%.

Consumer Confidence Hits a Four-Year High

Consumers are growing increasingly optimistic about the job market and economic recovery.

• The Conference Board Index of Consumer Attitudes rose to 73.7, its highest level since February 2008.

Home Prices Boast Biggest Rise in Over Two Years

A combination of record-low mortgage interest rates, an improving job market, a five-year low in home foreclosures, and a tighter supply of both new and previously owned homes led to home prices posting the biggest percentage gain in more than two years.

• The closely watched S&P/Case-Shiller Index rose 3.6% in the third quarter.
• We recently saw the second straight quarter of year-over-year improvement.
• Single-family home prices rose for the eighth straight month in September, based on an index of 20 major metropolitan areas.

So shake off the doom and gloom and celebrate the holiday cheer. Optimism is an important psychological element in any economic recovery. Now that you know the facts you can do your share and spread the good word. Happy Holidays!

About Bruce J. Berno, CFP^®
Bruce J. Berno, CFP^® is the founder of Berno Financial Management, Inc. a fee-only comprehensive personal financial planning and investment advisory firm headquartered in Cincinnati, Ohio. Since 1993, Berno Financial Management has been helping individuals and families achieve financial peace of mind. For more information about Berno Financial Management, visit http://www.bernofinmgt.com.

What It Takes to Join the 1%

How much do you need to make to be in the top 10% earners in the U.S.? What about the top 1%?

The top 1% is a politically vilified group, but they may not be who you think they are. So, who are the 1%? What is the price of membership in this club? Could you be in the top 10%? Finally, do the rich pay their share of taxes?

Who Is In the Top 10%?

"The top 10% had at least $116,623 of adjusted gross income" [Tweet this]

Let's start with the top 10%, because more people belong to that group than you may expect. Based on 2010 income tax returns using adjusted gross income (basically the number at the bottom of page 1 of your Form 1040, before exemptions and deductions):

• The top 10% had at least $116,623 of adjusted gross income (AGI).
• The top 10% includes 45% of the total AGI.
• The top 10% paid 70.6% of the total income tax burden.

The bottom 90% of taxpayers paid less than 30% of the total national income tax.
The bottom 50% of taxpayers paid 2.36% of the total federal income tax revenues.

• The top 5% had at least $161,579 of AGI.
• The top 5% includes 34% of the total AGI.
• The top 5% paid 59.1% of the total income tax burden.

Now, a drum roll for the top 1%:

• The top 1% had at least $369,691 of AGI.
• The top 1% includes 19% of the total AGI.
• The top 1% paid 37.4% of the total income tax burden.

Now you know what it takes to "join the club."

Income equality and tax fairness are challenging dilemmas. Be well informed and draw your own conclusions as the debate continues over the fiscal cliff and other economic policy issues.

About Bruce J. Berno, CFP^®
Bruce J. Berno, CFP^® is the founder of Berno Financial Management, Inc. a fee-only comprehensive personal financial planning and investment advisory firm headquartered in Cincinnati, Ohio. Since 1993, Berno Financial Management has been helping individuals and families achieve financial peace of mind. For more information about Berno Financial Management, visit http://www.bernofinmgt.com.

New Retirement Plan Limits for 2013

The 2013 retirement plan contribution limits have been announced. Whether your retirement is around the corner or a long way off, now is the time to start planning and thinking about how you might be able to take advantage of next year's higher retirement plan contribution limits!

2013 Retirement Contribution Plan Limits

$17,500	Employee 401(k) and 403(b) elective deferrals, an increase of $500.
$5,500	Catch-up elective deferrals if age 50 or older—no change.
$51,000	Annual defined contribution plan limit, up $1,000.
$255,000	Annual compensation limit for defined contributions plans, up $5,000.
$115,000	Highly compensated employee threshold.
$12,000	SIMPLE plan deferral, up $500.
$113,700	Social Security tax wage base, up $3,600.

If these terms and concepts are Greek to you, it's time to consult your independent, fee-only financial planner! He or she can help you create a plan that takes full advantage of the retirement contribution options available to you.

About Bruce J. Berno, CFP^®
Bruce J. Berno, CFP^® is the founder of Berno Financial Management, Inc. a fee-only comprehensive personal financial planning and investment advisory firm headquartered in Cincinnati, Ohio. Since 1993, Berno Financial Management has been helping individuals and families achieve financial peace of mind. For more information about Berno Financial Management, visit http://www.bernofinmgt.com.

Alzheimer's Disease, Long-Term Care and More: Plan for the Unexpected in November

For you trivia lovers, November is:

• Alzheimer's Disease Awareness Month
• Long-Term Care Awareness Month
• National Family Caregivers Month

Certainly, no one really wants to dwell on Alzheimer's disease, long-term care or family caregiving, especially around the holidays. Unfortunately, while we don't want to think about these topics, we should.

You or someone you know may have had personal experience with one or more of these issues. These tough situations involve both financial and psychological considerations. Hurricane Sandy should remind us that advance planning is always beneficial and no planning at all leaves people most at risk.

So ask yourself:

• Have you and your siblings had a discussion about who would help take care of Mom or Dad if they develop Alzheimer's disease?
• Can you identify the most common early symptoms of Alzheimer's disease?
• Have you had discussions with your parents about how they would like to be cared for if and when the day comes when they can't live independently?
• Have you educated yourself about long-term care insurance? Do you know how benefits are triggered, what services are covered and what the costs are?
• Whether or not you choose to buy insurance, do you know the local care providers that you could call when you need advice?
• If you have a family member or friend who is a caregiver, is there anything you can do to help?

While we would rather feast on turkey and watch football at Thanksgiving, starting a conversation while the family is together may make you all more thankful in the long run.

About Bruce J. Berno, CFP^®
Bruce J. Berno, CFP^® is the founder of Berno Financial Management, Inc. a fee-only comprehensive personal financial planning and investment advisory firm headquartered in Cincinnati, Ohio. Since 1993, Berno Financial Management has been helping individuals and families achieve financial peace of mind. For more information about Berno Financial Management, visit http://www.bernofinmgt.com.

Presidential Election Holds Scant Impact on Private Business Views of 2013

The Cincinnati Enquirer recently published the results of the Deloitte Cincinnati USA 100 Top Privately Held Businesses Survey.

Many positive elements were identified in the survey. Most importantly, sales and employment levels both hit records in 2011, signaling a recovery from the Great Recession.

Private business owners reveal rising optimism for 2013:

• Nearly 80% expect gross sales/revenues to increase.
• Nearly 70% expect pre-tax profit to increase.
• Over 65% expect their number of employees to increase and less than 10% forecast a decrease in the number of employees.

The November election was the focus of specific questions in the survey. The responses show that the election is clearly not a dominant factor in the business outlook.

Owners of the Top 100 businesses were asked to answer "agree," "disagree" or "neither" to the following questions:

• "In terms of demand for our products, the outcome of the election will have little or no effect." Nearly 60% answered "agreed" or "neither."
• "Regardless of the winner, the U.S. economy will probably improve after the uncertainty surrounding the election ends." Nearly 70% answered "agreed" or "neither."
• "Clarity and certainty are more important than which party captures the White House." Nearly 70% answered "agreed" or "neither."
• "We are putting off significant business decisions until after the election." Only 25% agreed.

This optimism is important because, even though private businesses are not included in public stock market valuations, they are major drivers of employment and economic activity.

The next time you think there isn't any good news in the economy, stop and think again!

About Bruce J. Berno, CFP^®
Bruce J. Berno, CFP^® is the founder of Berno Financial Management, Inc. a fee-only comprehensive personal financial planning and investment advisory firm headquartered in Cincinnati, Ohio. Since 1993, Berno Financial Management has been helping individuals and families achieve financial peace of mind. For more information about Berno Financial Management, visit http://www.bernofinmgt.com.

In October, Think Fire Prevention

October is upon us and Fire Prevention Week is October 7 to 13.

Why is a financial planner writing about Fire Prevention Week? Consistent with our theme of "let's manage what we can control, not what we can't control," there are basic preventative steps to take for fire prevention and safety.

"Have Two Ways Out" is the Fire Prevention Week theme for 2012, which should be easy for Cincinnatians to remember with our three-way, four-way and five-way chili! If you accomplish only one thing this year, have two ways out of every room in your house. This may include having a foldable escape ladder for the second floor of your house.

Here are a few other basic fire safety tips:

• Change your smoke detector batteries when you change your clock for the end of daylight savings time.
• Replace your smoke detectors when they are 10 years old. The detection sensitivity drops with age, even if they still function.
• Kitchen fires are a high-risk source in your home. Have a fire extinguisher in your kitchen and know how to use it.
• Clean your dryer vent at least once a year, all the way from the dryer to the exit source.
• Have an outside meeting spot for your family, such as the mailbox if it is by the street or a neighbor's tree.

If you do only one thing to improve fire safety this year, it will be a step in the right direction. Don't let a fire be an opportunity to test your healthcare power of attorney form or last will and testament. See, there is always a financial planning connection!

About Bruce J. Berno, CFP^®
Bruce J. Berno, CFP^® is the founder of Berno Financial Management, Inc. a fee-only comprehensive personal financial planning and investment advisory firm headquartered in Cincinnati, Ohio. Since 1993, Berno Financial Management has been helping individuals and families achieve financial peace of mind. For more information about Berno Financial Management, visit http://www.bernofinmgt.com.

International Investing: The Big Picture

The face of international investing is changing.

There is no connection between where a company is headquartered and where it makes its money.

Using an example cited in The Wall Street Journal, Novartis AG is headquartered in Switzerland and Johnson & Johnson is based in the U.S., but they're both global healthcare companies. Johnson & Johnson generates 52% of its sales outside the United States. Novartis generates 67% of its sales outside the United States.

Most U.S. companies make the majority of their profits on foreign soil. According to Ned Davis Research, as of December 31, 2011, 52.6% of pretax profits for companies in the Standard & Poor's 500 index came from outside the U.S.

Of the roughly 14,000 companies that went public over the past decade, more than 90% of them are outside the United States.

Conclusion: We live in an increasingly global world where one cannot be insulated from international economic events. The best growth opportunities exist on a truly global basis. As with all investment themes, a long-term perspective and patience is required for success.

About Bruce J. Berno, CFP^®
Bruce J. Berno, CFP^® is the founder of Berno Financial Management, Inc. a fee-only comprehensive personal financial planning and investment advisory firm headquartered in Cincinnati, Ohio. Since 1993, Berno Financial Management has been helping individuals and families achieve financial peace of mind. For more information about Berno Financial Management, visit http://www.bernofinmgt.com.