Bloggy Business Today

Despite the walk of business that you are involved in, chances are that you’ve been paying close attention to the evolution of the credit crunch in the United States and the efforts that the Fed has undergone in an attempt to alleviate some of the conditions that have been created as a result of the crunch. It’s just simply good business to be kept up to date on something that affects the economy at such a deep level, but at the same time the news seems to be nothing but depressing.

The latest thing the Federal Reserve has been doing is unfreezing bank funding markets in order to alleviate the cost of borrowing. However, that has not been helping matters that much as a recent report suggests that the cost of borrowing over the last quarter rose by almost a third of a percentage. That is not good news for people that are on variable rate mortgages because it means that not only are they going to be paying more money in interest charges for the same loan, but they are also doing it at a time when economic growth is stifled and upward mobility vis-à-vis take home wages is down. That is not a good combination for anyone and in an economic system like the US where the entire system is based in some way or another on the continual expansion of credit, it is not surprising that such bad conditions have been created.

The Federal Reserve will need to step up their efforts in the unfreezing process, or things might get worse in the near future.

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As far as filing your taxes properly this month, many of us will have our share of tax rebates due to erroneous computations or overpayment from the previous months. But while others are trying to settle their tax obligations, would you be looking forward to a tax rebate?

Normally, you will answer this with a simple “Of Course!” But mind you, these tax rebates are not reimbursed immediately. There is due process and if you are the impatient type, chances are you may not even wait for your tax rebate to fall right into your waiting hands.

(Source) Yahoo Finance

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This is the first in an ongoing series about simplifying economic and investment principles for your everyday business needs.

One of the best ways to increase employee morale and attract high quality candidates to your company is by offering an employee benefit package. Though employee benefits vary from business to business, most packages include some combination of medical insurance (health, dental and vision) and a retirement plan. The most commonly used retirement plan is a 401(k) plan.

But what exactly is a 401(k) plan?

The phrase”401(k)” refers to the section of the IRS code from whence it originated. First available in 1981, a 401(k) plan typically offers an assortment of mutual fund investments that employees can use to earmark a portion of their income toward retirement.

It is a common misconception that a 401(k) plan is an investment itself. It is not. The 401(k) is the piggy bank you put your hard-earned money into. To use another analogy, the 401(k) is the aquarium, not the fish. It facilitates your ability to save on a regular basis.

There are many benefits to investing in a 401(k). First, the savings are done a pre-tax basis. This means that for tax purposes, you are reducing your adjustable gross income (AGI) by the amount of your contributions. This will allow you to reduce your tax liability year in and year out.

Second, many employers make a matching contribution up to a certain percentage. This is a powerful benefit as essentially your employer is adding “free money” to your retirement portfolio. After a certain number of years with a company, you are “vested” and the money is yours to keep should you change jobs.

Third, your retirement savings will grow tax deferred until you begin withdrawing your savings during retirement. For those of you who are in your 20s or 30s, your investments will grow for several years without triggering any tax consequences.

Lastly, one of the main benefits of a 401k is choice. The plans offered by many companies include conservative mutual fund choices (money markets and bond funds), moderate (blue-chip income stock funds) and more aggressive choices (small cap and international funds).

Do yourself and your future a favor in 2008. Take the time to speak with your Human Resources contact and learn about the power of your tax-deferred investment savings.

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